Thought Banana
Big Dawgs Gotta Bark
Welcome to the beginning of the real fun. We know how thrilling the build-up of earnings szn has been so far, but yesterday, the true giants finally got started.
And by true giants, we obviously, of course, mean the companies that run the vast majority of our lives, and specifically yesterday, Microsoft and Google.
That’s $3.3tn in combined market cap dropping at once right there, so without further ado, let’s give our tech overlords even more of our attention.
Microsoft: Investors were psyched in the after hours session on Microsoft’s numbers, and after taking a glance yourself, you’ll understand why. Both earnings and revenue topped estimates, while key segments fared far better than expected, too.
The world’s 2nd largest company by market cap delivered $2.45/sh on revenue of $52.86bn against expectations of $2.23/sh on $51.02bn, per Refinitiv. Needless to say, shares gained over 8% before the close of late trading.
That’s 9% and 7% growth for the bottom and top lines, respectively, driven primarily by key segments like Azure, growing 27% on the year and basically right in line with consensus views. And despite the overwhelming levels of cringe on the platform, LinkedIn is absolutely killing it as usual – almost like it’s a mandatory service for anyone that wants to earn money.
Microsoft’s Processing and Business Process segment surged 11% to over $17.5bn, with a lot of help from ARPU growth across the segment as a whole. Meanwhile, the More Personal Computing department, including Xbox, Windows, and Bing (which, with 100mn users, actually matters now, I guess?) fell 9% but still beat expectations.
The real focus was Satya Nadella and the rest of management’s addiction to the term AI. It’s as if they are rolling out the red carpet for themselves as the leader in the technology, especially with their dominant stake and control in OpenAI. Can’t wait to see how that goes.
Google: Moving on to the world’s 4th largest market cap company, and speaking of AI, let’s ask Google how they’re doing.
Pretty damn good, it turns out. EPS of $1.17 on Nice top line figures of $69.79bn handsomely beat the $1.07/sh on an almost-nice $68.9bn in sales expected. Traders weren’t hopping on the Alphabet train as quickly as you might expect. Shares gained only about 1.67% aftermarket.
But it’s the first report in a year where the company beat quarterly expectations for both revenue and earnings, and we were starting to feel bad tbh. YouTube, in particular, has been killing it, bringing in $6.69bn, but at the same time, a miss in Google Cloud revenue could be seen as a gut punch.
Since AWS dangled its meat on the market, every big tech player has tried to get into the cloud game. This miss vs. Microsoft’s essentially in-line reading could explain part of the difference in late session moves.
Search revenue rose, but not exactly by a lot, which could as well be adding to fears of a little guy called ChatGPT stealing its traffic. And then, there’s the elephant in the room of Samsung’s alleged threat to switch its default search provider away from Google to Bing, a real kick in both the financial and reputational nuts.
All in all, big tech is still just big tech-ing their way through what has been an unpredictable year from the macro front. When all of us use their products every day, as you probably are in order to read this, it can’t really be too much of a surprise.
The big question: How much of an existential threat to Google are ChatGPT and LLMs in general? How does Microsoft’s ownership in OpenAI stack up against Google and DeepMind?
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