Since earnings season is upon us, many major companies have reported their earnings. Of particular prominence has been the earnings of the tech industry and how AI has seemingly inflated the value of some of these tech firms, some of which are featured below.
Alphabet’s earnings narrowly beat expectations for revenue and net income, with revenue of $84.74 billion and a profit of $23.6 billion. These figures were up 13.6% and 28.6% respectively from last year, but investors seemed to be concerned as Alphabet’s stock nonetheless dropped 5% in response to earnings. Two major reasons for the drop are the high capital spending for AI and the weaker than expected YouTube revenue. Capital spending, which has grown due to AI, grew from $12 billion last quarter and $7 billion last year to $13.2 billion this quarter. This high level of spending caused concern for some investors, who were spooked by this high level of spending and the lack of apparent return so far. Additionally, the 18% growth in ad sales for YouTube was lower than anticipated, further unnerving investors. Overall though, Alphabet’s earnings show it’s in a good position, with growth across the globe and its industries despite investor anxieties.
Microsoft had a similar story with revenue increasing 15% from a year to $64.7 billion and profit increasing 10% to reach $22 billion, with both of these figures just beating expectations by a hair. Of note was cloud revenue growth, up 21% from last year and reaching $36.8 billion. Despite this generally positive growth, the stock fell around 8% after the earnings report, largely due to concerns about high AI spending and disappointment Microsoft didn’t perform better.
Amazon suffered an even worse earnings report though as it fell around 9% when its earnings were released due to a miss on revenue, where it grew 10% from last year to reach $148.0 billion but was short on expectations of $148.7 billion. However, Amazon’s net income significantly beat expectations of $13.4 billion, up around 100% from last year’s net income. Cloud and advertising revenue grew significantly at 19% and 20%, but the latter was still short of expectations. However, with slowing overall revenue growth and $16.4 billion spent on AI, up 58% from last year and above rivals like Microsoft and Alphabet, caution caused investors to sell Amazon’s stock.
Unlike its peers though, Meta’s earnings report went rather well. It beat expectations and saw revenue increase 22% year over year to reach $39.1 billion. Net income was up 73% at $13.5 billion. Meta also had similarly high amounts of investment in AI, spending $8.5 billion on AI, 33% higher than last year. Insightfully, CEO Mark Zuckerberg stated that “I’d rather build capacity before it is needed rather than too late”. Unlike the aforementioned companies though, Meta’s stock rose around 2% following its earnings call.
Although a very different company than the ones mentioned before, Intel‘s earnings report is worth mentioning, partially because its stock slid 20% following the earnings. Intel missed expectations for revenue and net income, falling 1% annually in revenue and net income went from a $1.48 billion profit last year to a $1.61 billion loss. Additionally, Intel announced it would be laying off 15% of its workforce, compounding its stock’s decline.