Microsoft, Google and Snap report strong quarterly results, IBM and Intel less so
Microsoft and Google see AI investments bearing fruit
Five big tech companies announced their quarterly financial results on Thursday with a jump in fortunes for Microsoft, Google and Snap, while those of IBM and Intel were more mixed.
Microsoft
Microsoft's overall revenue exceeded analysts' expectations, with earnings per share of $2.94 and revenue of $61.86 billion. The tech giant's income was $21.9 billion, up 20% year-over-year.
The company's Intelligent Cloud business saw revenues surging by 21% to $26.71 billion.
Microsoft's acquisition of gaming company Activision Blizzard boosted gaming revenue, but hardware revenues decreased due to poor Xbox sales. Productivity and business software grew by 12% year-on-year, while takings in More Personal Computing grew by 17% year-on-year, driven by the Activision Blizzard acquisition.
The company's huge investments in AI seem also to be bearing fruit. CEO Satya Nadella said Azure has gained market share adding that approximately 60% of Fortune 500 companies are now using Copilot.
Microsoft's successes with AI success pushed its market capitalisation above $3 trillion this year, surpassing the value of Apple.
Google is also seeing success in AI with parent company Alphabet growing by 11.5%, close to a market valuation of $2 trillion, dishing out dividends to investors and rewarding investors, announcing a $70 billion stock buyback plan.
Alphabet earned $23.66 billion, or $1.89 per share, a 57% increase year-on-year
"We are incredibly well set up, given the innovation path we are on," Alphabet chief executive Sundar Pichai said in an analyst call.
Revenues from Google's cloud computing were up by 28% from last year to $9.57billion.
However, not everyone was delighted at the tech titans' cloud fortunes.
Mark Boost, CEO of UK cloud company Civo, said, "Big Tech is strangling the cloud market. So, today's results showing accelerated earnings and growth, shouldn't come as a shock to anyone.
"The valuation shared today should be a warning call to regulators looking at the current state of the cloud market. It's clear that the hyperscalers are benefitting from anti-competitive practices."
Snap
Social media firm Snap's quarterly results beat analysts' estimates, sending its shares soaring. Revenues were up 21% year-on-year to $1.19 billion, driven by changes to its advertising platform.
Global daily active users and average revenue per user also exceeded forecasts. The company's "Other Revenue" category, primarily driven by Snapchat+ subscribers, which now number nine million, increased by 194%. Derek Andersen, Snap's finance chief, attributed this growth to a "much more robust brand environment" across all regions.
IBM
IBM's results were more mixed.
The company reported quarterly results that fell below Wall Street's expectations, with revenue of $14.5 billion, up 3% but slightly missing the expected $14.6 billion.
The software business segment earned in $5.9 billion, an increase of about 6% year-on-year. However, IBM's consulting business faced challenges, with revenue growth impacted by discretionary spending reductions and large-scale digital transformations, according to CFO Jim Kavanaugh.
The company announced a $6.4 billion acquisition of HashiCorp which chairman and CEO, Arvind Krishna, described as a strategic move that will enhance the company's hybrid cloud offerings. IBM also highlighted the growth of its Watsonx and GenAI, which has surpassed $1 billion since Watsonx's launch, as reported by CRN.
The infrastructure business remained flat at $3.1 billion. Meanwhile, IBM's company's transaction processing business grew by 4% year-over-year, and its storage business experienced strong double-digit growth due to AI-related demand. IBM expects software growth to be slightly above the high end of its mid-single-digit model.
Intel
Intel reported revenue of $12.7 billion for the quarter, up 9% but slightly below analysts' expectations. The company's forecast for the second quarter of 2024 also fell short of analysts' estimates, with expected revenue of $12.5 billion - $13.5 billion instead of $13.6 billion.
Intel's client computing revenue, including desktop/notebook components, achieved expectations, with a 31% increase year-over-year. However, the company's datacentre and AI revenues rose just 5% to $3 billion, well below the anticipated $3.3 billion. Meanwhile, foundry business revenue decreased by 10% year-on-year.
Intel's shares have underperformed the sector, with a 30% decline year-to-date, and its outlook for the second quarter has disappointed analysts.
However, CFO David Zinsner said he expects to see improvements looking beyond the second quarter, owing to increased demand for servers and AI enhanced PCs. But on an analyst call he said 2024 has been a "heavy year for start-up costs for us."
"That puts a little added pressure on gross margins," he added.
Meta
Meta's results, announced a little earlier, saw $36 billion of revenue, beating the consensus estimate of $35.5 billion.
Nevertheless Meta's stock fell as much as 17% in after-hours trading having previously gained a 39% in 2024, as investors worried the company is pouring too much money into the metaverse and AI.