Beat and a miss
Tech earnings are beginning to pour in and the market is watching. That’s because the largest tech companies in the S&P 500 (SP500), like the Magnificent 7, have been responsible for the majority of the index’s 11% YTD advance, which stalled in September and is still looking for its next catalyst. Meta Platforms (META) and Amazon (AMZN) are also set to report results this week, but the festivities kicked off in AH trading on Tuesday with two of the biggest players in the industry.
The beat: Microsoft (MSFT) climbed 3.9% to $343/share after posting fiscal first-quarter results that topped expectations, aided by strong growth in its Azure cloud business. Enthusiasm also continues to build for the company’s new artificial intelligence products, like the coming AI-powered assistant for Microsoft 365 called “Copilot.” Opening the books a bit deeper, heavy investment in AI was seen in capital expenditures, which soared 70% Y/Y to a record $11.2B, while Microsoft’s cloud computing services may further benefit from the coming revolution. Microsoft in charts
The miss? Shares of Alphabet (GOOGL) fell 6.1% AH to $130/share despite the company handily topping earnings expectations with its best revenue growth in five quarters. One big area traders focused on, especially in the wake of Microsoft’s earnings, was the expansion of Google’s cloud division, whose servers power the firm’s AI programs. Sales growth there slowed to 22% last quarter, coming in below expectations of 26%, which is troublesome for a company looking to get a bigger slice of the AI pie as its Search and Advertising businesses mature. Alphabet in charts
SA commentary: “Robust performances in the Search and YouTube businesses are likely being overshadowed by a sharp deceleration in Google Cloud and management’s guidance for capex spending,” wrote Investing Group Leader Ahan Vashi, who added that in light of the post-Q3 selloff, GOOGL stock now looks fairly valued. “Assuming a base case P/FCF (exit) multiple of ~20x for 2027-28, Alphabet’s stock could rise from $130 to $252.6 per share at a CAGR rate of 14.21% over the next five years.” (9 comments)
Right-to-repair
Apple (AAPL) has backed the Biden administration’s push for a U.S. right-to-repair bill, as the iPhone giant shifts its stance after years of complaints over the high costs of fixing its devices. It has also committed to make the components, tools and documentation needed for fixing its hardware available to independent repair shops and consumers nationwide. Apple is already required to do so in California, which passed its Right to Repair Act earlier this month, but a national right-to-repair law, in which Apple sees “real value,” will likely push other companies to follow suit. The bill is expected to help American consumers save $49.6B annually. (6 comments)
Addictive algorithms
Meta Platforms (META) has been sued by California and more than two dozen U.S. states, which allege that Instagram and Facebook exploit young people for profit and feed them addictive content. “In seeking to maximize financial gains, Meta has repeatedly misled the public about the substantial dangers of its social media platforms,” the lawsuit claimed. New York Attorney General Letitia James blamed Meta and other social media firms for children and teenagers suffering from “record levels of poor mental health.” Meta, Snap (SNAP), TikTok and Google (GOOG, GOOGL) are all facing hundreds of similar lawsuits. Note that Meta will post its Q3 results after the bell today. (119 comments)
Drivers needed
General Motors’ (GM) Cruise is pausing its self-driving operations in San Francisco, after California ordered it to remove such cars from state roads, citing safety concerns. The state’s Department of Motor Vehicles, which previously directed Cruise to cut its robotaxi fleet by 50%, also suspended the firm’s driverless testing permits. The development follows a series of accidents involving Cruise cars, which had already prompted an investigation by the National Highway Traffic Safety Administration. The heightened scrutiny will likely add pressure on GM, which is also facing roadblocks in its electric-vehicle plans due to the UAW strike that was just expanded to its Texas assembly plant. (24 comments)
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