Author丨Juny
Editor丨Sea waist
题图丨Midjourney
Starting this week, the earnings season that has affected global markets is here again.
With the Fed's interest rate cut expectations fading and AI speculation stabilizing, the U.S. stock market ushered in the largest pullback in recent times last week, with the combined market value of the "Big Seven" evaporating by more than $950 billion, setting a record for the largest weekly decline in history. Many people believe that the crazy growth of the tech giants in the past year has peaked, and they are generally pessimistic about their performance this time.
However, judging from the report cards handed over by Tesla, Meta, Microsoft and Google this week, the hard power of the tech giants seems to be stronger than everyone thinks, and at the same time, AI is also happening, or "ambushing" more influence on their respective businesses.
Google comprehensively crushed expectations, and its after-hours market value exceeded 2 trillion
In the past six months, the market has been silent about Google. From the absolute leader in the field of artificial intelligence being overtaken by OpenAI, to the highly-anticipated Gemini model being ridiculed by netizens, to the recent rapid rise of AI search stars such as Perplexity, which has launched an impact on its pillar business...... Google, which is considered to be suffering from the disease of a large company, has even rumored that the management will be replaced.
But today, Google's after-hours release of its first-quarter earnings report can be said to have swept away the haze of the past few months, which has greatly boosted the market's confidence in it. According to the financial report data, Google's revenue in the first quarter was 80.54 billion US dollars, which not only exceeded market expectations of 79.04 billion US dollars, but also recorded the fastest growth rate since the beginning of 2022 with a year-on-year growth of 15%. Earnings per share were $1.89, beating consensus estimates by 25%.
图片来自App economy insights
From the perspective of sub-business, Google did not lag behind this time. Among them, the most critical advertising business does not seem to be affected by similar AI products in the slightest, recording revenue of $61.66 billion, up 13% year-on-year, much higher than the expected value of $60.18 billion. YouTube's ad revenue returned to positive territory, beating market expectations with $8.09 billion.
In addition, Google Cloud continued its 28% growth, fueled by generative AI, recording $9.57 billion in revenue, higher than expectations of $9.37 billion. At present, Google Cloud has gradually developed into Google's second business growth curve, and its operating profit has more than quadrupled to $900 million from $190 million in the same period last year, which also helps to diversify the business risk of Google Ads' dominance.
It is worth noting that this time Google also announced the company's first dividend since its establishment, approving the payment of a cash dividend of 20 cents per share to shareholders of record as of June 10 on June 17, indicating that it will "continue to pay quarterly cash dividends in the future". A $70 billion share buyback program was also announced. Under the dual effect of brilliant results and dividend news, Google's stock price soared after hours, once soaring nearly 16%, and its market value increased by $300 billion, breaking through the 2 trillion market value mark.
In terms of AI, although there have been repeated setbacks, it has not slowed down the pace of Google's investment in AI. In the first quarter, Google's capital expenditures were $12 billion, $1.7 billion more than expected. Within Google, in order to serve the development of AI, the integration and adjustment of departments are also being carried out in a big way. Last week, Google announced a restructuring of its finance department to devote more resources to AI, while Google Research's AI model development team will be integrated into Google DeepMind to further accelerate AI development.
With the blessing of AI, Microsoft is "as stable as Mount Tai"
Also releasing its earnings report after trading on the same day today is Microsoft. If you want to describe Microsoft's performance in one word, it is - stable.
As the first tech giant to attempt to commercialize generative AI, the market performance of Microsoft's AI products in the quarter did not disappoint investors and successfully drove the overall growth of Microsoft's performance.
According to financial data, Microsoft's total revenue in the first quarter was $61.86 billion, higher than the market expectation of $60.87 billion, a year-on-year increase of 17%. Adjusted earnings per share came in at $2.94, beating the consensus of $2.82 and up 20% year-over-year. From the perspective of sub-business, Microsoft once again reaped a quarter of positive growth across the board.
Among them, the cloud business, which has attracted much attention, performed strongly. The Intelligent Cloud business unit, which includes Azure public cloud, Windows server, speech recognition software Nuance and GitHub, posted first-quarter revenue of $26.7 billion, up 21% year-over-year. This is not only higher than market expectations, but also higher than Microsoft's 18% guidance for the previous quarter.
In particular, the steady increase in the growth rate of Azure in recent quarters clearly reflects the role of AI in promoting Microsoft's cloud business. Azure's 31% growth in the quarter was much higher than the market's previous 28.6% expectation, and Microsoft also made it clear in the call that 7 percentage points of Azure's growth was related to AI.
Azure not only provides cloud services for ChatGPT, but more and more companies are also adopting Azure AI services to develop their own information aggregation and document writing capabilities. Nadella said that more than 65% of Fortune 500 companies are currently using Azure's open AI services.
The picture is from CNBC, and the copyright belongs to the original author
In addition to the cloud business, another focus is on the performance of Microsoft Copilot. Last November, Microsoft officially launched the Microsoft 365 Copilot generative AI assistant to its commercial customers for $30 per month or $360 per year, marking Copilot's first full sales quarter.
According to the financial report, Office 365 revenue increased by 15% in the quarter, and the productivity and business process division, which includes Office productivity software, LinkedIn, and Dynamics customer relationship management software, generated $19.57 billion in revenue, an increase of about 12%. Microsoft says that GitHub Copilot code generation tools now have 1.8 million paid subscribers.
For Microsoft, the positive business impact of Copilot may have just begun. At the end of March, Microsoft officially integrated artificial intelligence into PCs for the first time, and the newly released Surface Pro 10 and Surface Laptop 6 products were equipped with dedicated Copilot AI buttons for the first time. Microsoft refers to the two new devices as AI PCs, and in addition, Microsoft announced that Copilot will be integrated into Windows and Microsoft 365 to provide users with personalized intelligent assistance. It's not hard to predict that Copilot will soon bring more business revenue to Microsoft.
In addition to the above businesses that are strongly related to AI, Microsoft's other sub-businesses have also performed very well. Personal computing revenue, which includes Windows operating systems, Surface PCs, video games, and search, was $15.58 billion, up about 18% and above market expectations of $15.08 billion. Among them, affected by the successful acquisition of Activision Blizzard, Xbox's content and services revenue continued to soar by 62%. In addition, device manufacturers saw an 11% jump in Windows license sales.
Microsoft has been performing very well in recent quarters, and its investment in AI and business transformation are on track. And since the beginning of this quarter, the market has also begun to see a more obvious return on Microsoft's investment in AI. After today's earnings report, Microsoft's stock price rose more than 6% at one point.
The power of "painting cakes": Tesla and Meta have risen and fallen
Before Microsoft and Google, Tesla and Meta also handed in their results this week. In these two companies, we can see that expectations seem to be more important to the current market than actual results.
Tesla had been in a state of flux ahead of Tuesday's earnings report, with its stock price falling nearly 20% in a week, and even the free and open FDS trial didn't save it. The reason behind this is that everyone is too pessimistic about Tesla's recent performance.
And this concern is not groundless, in fact, Tesla's earnings performance this quarter is indeed very bad. According to the financial report data, in the first quarter of 2024, Tesla's revenue fell 9% year-on-year to $21.3 billion, which is not only the third consecutive quarter that Tesla has fallen below market expectations, but also the first year-on-year decline in four years, and the largest decline since 2012. Net profit fell 55% year-on-year to $1.13 billion, well below market expectations of $1.9 billion.
In addition, capital expenditures rose sharply by 34%, resulting in negative free cash flow of $2.5 billion in the first quarter, which was also the first time Tesla's cash flow was negative since 2020. In terms of sales, Tesla delivered 387,000 vehicles, down 9% year-on-year, including 370,000 Model 3/Y deliveries, down 10% year-on-year, and although deliveries of other models, including the Cybertruck, increased by 58%, only 17,000 units.
Image courtesy of Yahoo Finance
But it is such a financial report, Tesla rose for two days in a row after its release, with a cumulative increase of more than 18% and a market value of nearly 100 billion US dollars. Why? Because Musk knows too well what the market wants, and is too good at "drawing pies".
During the earnings call, Musk said that Tesla has updated its product line for future vehicles, and cheaper new models may be unveiled in early 2025 or even late 2024. In addition, he also said that Tesla's Robotaxi network will also arrive soon, and the company's internal engineering has been completed, which will become a new business line for Tesla in the future, and Tesla will even grow into a $10 trillion company with a market value of taxi business.
As for the significant increase in capital outflows, Musk's answer also made investors very satisfied. Musk said that Tesla is investing heavily in core AI infrastructure, and he also stressed that Tesla should be considered an artificial intelligence (AI) or robotics company, not a car company. Not only will FDS soon bring huge returns to Tesla, Musk has even come up with a concept of "Tesla's AWS", which aims to run AI models using the unused computing power of millions of idle Tesla cars as distributed computing nodes.
Meta, which issued its financial report a day later than Tesla, took a completely opposite script to Tesla this time.
Judging from the results of the financial report, Meta is definitely excellent this time. In terms of revenue, profit and core advertising revenue, Meta has outperformed market expectations. The 27% year-over-year increase in revenue in the first quarter was not only the fifth consecutive quarter of positive growth, but also the highest quarterly growth rate since 2021. In addition, net profit surged 117% year-on-year, and revenue from core advertising business increased by 26.8% year-on-year, all reflecting Meta's current extremely stable business state.
图片来自App economy insights
But at the earnings conference, Zuckerberg's words frightened investors. Zuckerberg said that in order to accelerate the construction of AI infrastructure, Meta expects capital spending for the whole of this year to increase from the previous forecast of $30 billion to $35 billion to $40 billion, and capital expenditure will increase significantly in the next few years, and said very honestly that this investment may not see a return in the short term. In addition to burning money on AI, Meta said it will also continue to burn money on the metaverse. But the reality is that the Reality Labs division lost $3.85 billion on revenue of just $440 million in the quarter, while the division's total loss has exceeded $45 billion since the end of 2020.
To add insult to injury, Meta also gave a less optimistic outlook in addition to the huge increase in spending with no return on sight. Meta expects second-quarter revenue to be in a median range of $37.75 billion, below the consensus of $38.2 billion. At the same time, Meta will no longer disclose key indicators such as daily active users, monthly active users and average revenue per user from this quarter, and will instead focus on the year-on-year percentage change in ad impressions, which has further raised investors' concerns.
As a result, even though Meta's earnings report completely exceeded market expectations, its stock price still fell by more than 15% in after-hours trading. Netizens have expressed their suggestion that Zuckerberg find Musk to learn the "art of speaking".
Overall, the current four giants have performed relatively solidly in the first quarter, and the growth of technology companies is not over. While they are entrenched in different fields, what the major companies have in common is an unwavering and significant investment in AI. As a result, the market will be more focused on whether AI will bring them enough expected returns in the future, compared to the usual financial metrics of the past.