Second Wave – More Big Tech Earnings
The second wave of big tech earnings did not disappoint, with one of them arguably matching the success of the previous two. Back on Tuesday, Microsoft, and Google both reported stellar earnings that gave us insight into the AI competition between the two companies and the strength of the cloud space in a week vital for the tech sector. Those two businesses powered the NASDAQ to the green lands, but there was more to come.
After the market closed on Wednesday, Meta reported their first quarter results, and they sure didn’t disappoint. They outpaced expectations on practically every financial metric with earnings per share sitting at $2.20 and revenue at $28.65 billion, and there are many things to unpack. Meta has gone through some of the largest waves of cost-cutting, releasing many employees, and they are guiding for nearly $10 billion in expenses to be reduced. One of the major wins Meta had been with Instagram Reels, a new feature they released that is like other forms of short content. According to the company, users are spending 24 percent more time on Instagram because of Reels, proving to be a major success in the social media realm. Meta also said that their AI work is driving efficiency, but they also had to take some losses in the Metaverse area with Reality Labs losing $13.7 billion last year, that number continuing to increase.
Meta powered the markets, while the quiet one on the day was Amazon, which is rather surprising. Amazon had a great quarter, reporting earnings per share of 31 cents and net sales increasing by 9 percent to $127.36 billion, both figures beating expectations. It got even better as Amazon posted a profit of $3.2 billion in the quarter, outpacing analyst expectations by almost 50 percent, and the new ad business grew by 21 percent. Sales finally picked up after a post-pandemic slowdown, but there were downsides to this earnings report that took away from all the good. AWS, the cloud unit of Amazon that has led to its prosperity, saw revenue growth decelerate in April, and overall revenue grew by 16 percent during the first quarter. This, compared to the 37 percent growth rate last year during this time, concerned investors as AWS slowing down further would likely hurt the company in future quarters. Additionally, it is interesting to see how cloud powered Microsoft and Google’s earnings, while leading to the demise of Amazon.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.