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6/7

It was a busy week of earnings for the world’s biggest tech companies. For investors wondering just how long these firms will continue to deliver growth, the week hinted at some answers.

Alphabet ($GOOGL) kicked things off last Tuesday with an EPS of US$2.12 vs the expected US$1.85. New CFO Anat Ashkenazi acknowledged that Google search remains the largest contributor to revenue, bringing in US$49.4b of a total US$88.27b. This dependence means the DOJ’s plans to potentially break the tech giant up could have very real consequences for its future outlook.

Still, the biggest win for Alphabet was its cloud revenue, which rose nearly 35% YoY to US$11.35b for the quarter. That’s the fastest growth rate in eight quarters, and it was driven almost entirely by, you guessed it, AI – which by the way is writing more than 25% of Alphabet’s new code.

Microsoft ($MSFT) and Meta ($META) were next to report, but despite both companies posting better-than-expected earnings, their story was less convincing. Microsoft posted an EPS of US$3.30 on revenue of US$65.59b, and its Intelligent Cloud business was a big driver of growth. But its forward guidance on cloud and AI segments was lower than Wall Street would have liked, leading to the stock’s worst decline in two years. 

Management does expect that Azure growth will accelerate in H2, but where it stands against the competition  – and whether the extra spend on infrastructure is justified – remains to be seen. 

That was also the case for Meta, which warned of higher capex in 2025. It’s likely what sent the stock price tumbling in after-hours trade, despite the company reporting an EPS of US$6.03 vs the forecast US$5.25. Meta’s advertising revenue, which accounts for a whopping 98.3% of its total US$40.59b in the quarter, was up 18.7% YoY. More than a million advertisers are using Meta’s generative AI advertising tools. 

Investors aren’t sure Meta’s AI bet will pay off, but it sounds better than the struggling Reality Labs unit. It reported another operating loss of US$4.4b in the quarter, amounting to US$58b since 2020. For some, Meta’s smart glasses aren’t the smartest investment.

Amazon’s ($AMZN) earnings report was also laden with AI sizzle. The firm posted an earnings beat of US$1.43 per share on revenue of US$158.88b, and profit was up 55% YoY to US$15.3b. But its capex surged too – 81% YoY to US$22.62b – as the firm invests in infrastructure and equipment, including Nvidia ($NVDA) GPUs.

AWS is growing slower than its competitors, but there’s still more demand for the cloud computing unit than Amazon can fulfill at capacity. CFO Andy Jassy expects to spend US$75b on operating expenses for AWS/AI infrastructure in 2024. As he put it, generative AI is an ‘unusually large, maybe once-in-a-lifetime type of opportunity.’ 

Apple ($AAPL) rounded out the week with an earnings beat of US$1.64 per share with revenue of US$94.93b. Expectedly, strong iPhone sales contributed to nearly half of Apple's total sales, while other products and services also grew but fell short of estimates. And if you thought your tax bill was painful, Apple paid a one-time tax charge of US$10.2b in back taxes to Ireland – this brought net income down to US$14.73b.

While Apple was a bit late to the AI party, its forward guidance related to the Apple Intelligence suite is promising. AI systems for iPhones and Macs are being rolled out this week, and according to CEO Tim Cook, the quick pace of iOS 18.1 adoption is a sign of demand to come.

Tesla’s ($TSLA) earnings report the week prior gave investors enough to be excited about. But last week’s big tech earnings, and the mixed stock price reactions, hold a clue for the most anticipated one yet: Nvidia is scheduled to report on the 20th. If AI is still very much driving the growth narrative, Nvidia is positioned to add fuel to that fire.


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