US earnings: what we have learnt from big tech earnings so far

[MongiIG]

Apple, Amazon, Alphabet, Meta and Microsoft results have highlighted the growing importance of AI integration.

 

Source: Bloomberg

 

Shares Amazon Meta Platforms Microsoft Apple Inc. Artificial intelligence

Written by: Shaun Murison | Senior Market Analyst, Johannesburg

 

Publication date: Wednesday 07 February 2024 16:53

Key Takeaways:

• Meta Platforms, Inc. (META) and Amazon.com, Inc. (AMZN) have surpassed market expectations with their quarterly earnings and outlooks
• Microsoft Corporation (MSFT) has posted its strongest revenue growth since 2022, thanks in part to the impressive performance of its Azure AI services, which continue to attract new customers.
• Apple Inc. (AAPL) has returned to revenue growth despite challenges in the Chinese market, while Tesla, Inc. (TSLA) faces concerns about the sustainability of its growth and the impact of price cuts on profit margins.
• Alphabet's enterprise cloud and workspace services have seen substantial adoption, but its ad revenue has not met expectations.

The current US reporting season has seen recent earnings releases from some of the biggest names in technology, namely: Apple, Amazon, Alphabet, Tesla, Meta and Microsoft. These companies make up six of the ‘magnificent seven’ tech shares, with the seventh (NVIDIA) still to report.

Meta, Microsoft and Amazon results impress

Meta Platforms, Inc. (META) and Amazon.com, Inc. (AMZN) have set a high bar with their quarterly earnings and outlooks surpassing market expectations. Meta has seen a substantial uplift in profitability, announcing its maiden dividend, a move that signals confidence in its long-term revenue streams. This comes on the heels of Meta incorporating advanced AI into its algorithms, enhancing ad targeting across its suite of social apps, which has led to increased ad impressions and a higher price per ad.

Microsoft Corporation (MSFT) has also been a standout, posting its strongest revenue growth since 2022. The tech behemoth's success is partially attributed to the impressive performance of its Azure AI services, which continue to attract new customers.

The enterprise business segments of these tech giants have been particularly robust, with corporate customers investing in cloud services, software platforms, and devices to enhance their operations. Microsoft and Amazon have benefited from their cloud offerings, with AWS experiencing a 13% growth in revenue and Microsoft's cloud business growing by 20%.

Apple and Tesla economic cautions

Despite a mixed global economic outlook, Apple Inc. (AAPL) has managed to return to revenue growth, although it has faced challenges in the Chinese market. Meanwhile, Tesla, Inc. (TSLA) has been a topic of intense debate, with concerns about the sustainability of its growth in the face of potential declines in electric vehicle demand and the impact of price cuts on profit margins.

Alphabet Ad revenue under pressure

Alphabet's enterprise cloud and workspace services have seen substantial adoption, although its ad revenue has not met expectations. Nonetheless, Alphabet's commitment to AI innovation remains steadfast, as evidenced by the development of its new AI model, "Gemini."

AI integration helping drive revenue

Similarly, to Microsoft’s’ success of its Azure AI services, Alphabet Inc. (GOOGL), through its subsidiaries Google Workspace and Google Cloud, and Amazon with its Amazon Web Services (AWS), have made significant strides by integrating AI-powered services, which have been instrumental in driving revenue.

The ongoing AI revolution is reshaping the tech landscape, with Meta, Microsoft, Amazon, Apple, Alphabet and NVIDIA at the forefront. Their strategic investments in AI have not only enhanced their product offerings but have also led to more efficient operations and new revenue opportunities. However, these companies may face more regulatory challenges regarding their AI and cloud partnerships.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.