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Investors who were unnerved yesterday morning ended up sleeping easy, thanks to some better-than-expected financials from major tech companies.
What happened: It’s earnings season, baby! And Thursday brought a batch of reports from tech companies that all surprised analysts (mostly in a good way).
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Alphabet grew revenue across divisions. That, plus plans for its first dividend, sent its stock up by 11.9% after hours.
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Microsoft earnings and profit were propelled by cloud services, which grew by 31% from demand for AI computing. Shares got a 4.5% bump.
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Snap shrunk its net loss as its ad business began to rebound, with infrastructure costs expected to fall further as the year goes on. Shares spiked by 23.4%.
- Intel’s stock slipped, however, on a worse-than-expected forecast and warnings by its CEO that investors should focus on long-term potential.
Catch-up: Analysts got antsy after Meta reported on Wednesday and triggered a minor tech stock sell-off. While Meta also beat earnings expectations, its stock plunged based on a plan to spend more on AI development, which could take years to pay off.
Why it matters: The latest crop of earnings gives a pretty clear picture of where the market’s head is at. Investors want to see profit now, or at least lower costs, instead of spending on more speculative growth down the line.
- Spotify is a good example. It raised prices and cut marketing costs, which led to record profits but slower user growth — its stock surged when it announced results on Tuesday.
Zoom out: Alphabet will keep capital expenditures at roughly US$12 billion quarterly, which investors can stomach because it is building out servers and data centres — something other companies are spending all of that AI money on to access. Microsoft also plans to increase expenses on cloud capacity to bring in AI revenue being left on the table.
What’s next: Eyes are on Amazon, Apple, Samsung, and AMD, all of which will report their earnings next week.