At present, investors in the U.S. stock market are highly nervous, because the earnings reports of some technology giants are being intensively disclosed, and a slight unsatisfactory earnings report or performance guidance may trigger a sell-off, which in turn affects the entire market trading atmosphere. For example, Meta, the company plummeted 10.6% after the disclosure of its earnings report, and its market value evaporated by more than $130 billion, equivalent to about 1 trillion yuan, in a single day.
However, there is also good news for US stocks today. The latest earnings reports of Google and Microsoft have exceeded market expectations. In the pre-market of U.S. stocks on Friday, Google rose 12% and Microsoft rose more than 4%. As of Thursday's close, Google and Microsoft had market capitalizations of $1.94 trillion and $2.97 trillion respectively, equivalent to about 14 trillion yuan and 21.5 trillion yuan, respectively, totaling 35.5 trillion yuan.
Some analysts pointed out that the financial reports of Google and Microsoft exceeded expectations, verifying the high prosperity of the AI industry. Today, the AI sector in the A-share market broke out across the board, with indices such as AI computing power, ChatGPT, and Sora all rising by more than 4%. In addition, SenseTime, a Hong Kong AI concept stock, rose 43%, up 105% this week.
35 trillion assets, boiling!
Google's performance "exploded"
After the U.S. stock market on Thursday, Google's parent company Alphabet disclosed a better-than-expected earnings report and announced the company's first-ever dividend plan. Google also said it intends to buy back no more than $70 billion in shares. Spurred on by the above news, Google's stock price rose 12% in the pre-market on Friday, adding more than $220 billion in market capitalization, which may push the company's total market value to more than $2 trillion.
In the early morning of April 26, Beijing time, Alphabet released its financial report for the first quarter of fiscal year 2024 ended March 31. According to the data, Alphabet's total revenue in the first quarter was $80.539 billion, a year-on-year increase of 15%, higher than analysts' expectations of $78.57 billion, and the company's revenue growth was the fastest quarter since the beginning of 2022. Net profit for the first quarter was $23.662 billion, an increase of 57% compared with $15.051 billion in the same period last year. EPS came in at $1.89 versus the consensus of $1.53.
In terms of business, in the first quarter, Google's advertising business increased from $54.548 billion last year to $61.659 billion. The revenue of the company's largest business unit, Google Search, increased by 14% year-on-year to US$46.156 billion from US$40.359 billion in the same period last year, and the advertising revenue of its video website YouTube increased to US$8.090 billion from US$6.693 billion in the same period last year, a year-on-year increase of 21%.
In the first quarter, the revenue of Google Cloud, which is highly correlated with AI, was $9.574 billion, a year-on-year increase of more than 28%, exceeding market expectations, and analysts had expected Google Cloud business revenue of $9.35 billion. The above data shows that the company is starting to make a profit in the process of investing a lot of money to catch up with Amazon Cloud and Microsoft Azure, and the big investment in AI is finally paying off.
Alphabet CEO Pichai said in the earnings report, "The first-quarter results reflect strong performance across search, YouTube and cloud. Our Gemini era is well underway, and the entire company is gaining momentum. Our leadership in AI research and infrastructure, as well as our global product footprint, position us well-positioned for the next wave of AI innovation. ”
Separately, during the earnings call, Pichai said he had made a preliminary confirmation that the company could use artificial intelligence to extend its search capabilities, citing applications in the United States and the United Kingdom. He also said that in the coming quarters, the company can simultaneously manage spending and generate revenue through AI tools. Pichai said the company has a clear path to monetize AI breakthroughs through advertising, cloud services and subscription plans. He also noted that the integration of AI tools into Google search can help users ask more complex and descriptive questions.
In addition, to show the company's confidence in its financial position, Google announced that it will pay out its first-ever dividend on June 17 this year, including $0.20 per share of Class A, Class B and C shares of record as of June 10, 2024, and said that the company "plans to pay quarterly cash dividends going forward." Google also said that its board of directors has authorized additional buybacks of up to $70 billion in Class A and C shares.
After the earnings report, investment bank Wade Bush raised Google's stock price target from $175 to $205, and Jeffrey also raised Google's price target from $180 to $200.
Microsoft's earnings report is also bright
In the early hours of this morning, Beijing time, Microsoft also disclosed its results for the third fiscal quarter ended March 31, 2024, blowing away a lot of dark clouds around artificial intelligence.
In the fiscal third quarter, Microsoft's revenue was $61.858 billion, up 17% year-over-year, higher than the consensus of $60.9 billion, net profit of $21.9 billion, up 20% year-over-year, above the consensus of $20.6 billion, and diluted earnings per share of $2.94, up 20% year-over-year, above the consensus of $2.63. Microsoft expects revenue to be between $63.5 billion and $64.5 billion in the next fiscal quarter.
In terms of business, Microsoft's intelligent cloud business revenue was US$26.708 billion, a year-on-year increase of 21%, higher than the growth rate of the previous four fiscal quarters, and higher than the market expectation of US$26.25 billion. Among them, Azure and other cloud revenue increased by 31% year-on-year, and Microsoft said that 7% of the growth was driven by demand for AI, compared with 6% in the previous fiscal quarter. The operating profit of the intelligent cloud business was $12,513 million, compared to $9,476 million in the same period last year.
Productivity & Business Process segment revenue was $19,570 million, up 12% from $17,516 million in the year-ago quarter, higher than the consensus of $19,540 million, and operating profit was $10,143 million, up from $8,639 million in the year-ago quarter.
Revenue in the personal computing segment, including gaming, was $15.6 billion, up 17% year-over-year, higher than the consensus of $15.07 billion. Among them, Xbox content and services revenue increased by 62% year-on-year, of which Microsoft attributed 61% to Activision Blizzard, which was acquired in October last year, Windows operating system revenue increased by 11%, device revenue decreased by 17%, and search and news advertising services revenue increased by 12% year-on-year.
The company's capital expenditure rose to $14 billion in the fiscal third quarter from $11.5 billion in the previous quarter, nearly $1 billion higher than analysts' expectations of $13.14 billion, as Microsoft continued to invest more in artificial intelligence. Microsoft shares rose in after-hours trading as third-quarter profit and revenue growth masked higher-than-expected capital expenditures.
Looking ahead, Microsoft expects revenue in the fiscal fourth quarter to be in the range of $63.5 billion to $64.5 billion, slightly below analysts' expectations of $64.5 billion. The company also expects gross margin of 42.3%, higher than analysts' expectations of 41.5%.
"It's important that you can see healthy growth in all parts of Azure, both non-AI and AI services," said Hood, Microsoft's chief financial officer...... While the company is still in the early stages of development in terms of long-term AI monetization, we are pleased with our performance. ”
Microsoft expects its capital expenditures to increase significantly on a quarter-by-quarter basis, mainly driven by cloud computing and AI infrastructure investments, and the company expects capital expenditures in fiscal 2025 to be higher than in fiscal 2024, Hood said. Hood stressed that this portion of spending in the year ahead "depends on demand and adoption of our services," and the company expects its operating margin to decline by just 1%.
Dan Morgan, senior portfolio manager at investment firm Synovus Trust Co., said: "Microsoft's generative AI-related revenue has become a key share price driver. When it comes to AI, Microsoft does dominate. ”
Jeremy Goldman, senior analyst at Emarketer, said Microsoft's AI-powered earnings show that doubling down on innovation is paying off. He was referring to Microsoft's early moves in generative AI, such as its large investment in OpenAI, the maker of ChatGPT.
Microsoft's strategic partnership with OpenAI, which has built on it to launch a series of generative AI tools, sent Microsoft's stock price soaring and helped Microsoft take the crown of the world's most valuable company from Apple this year. As of Thursday's close, Microsoft's latest market capitalization was $2,965 billion, and Apple's market capitalization was $2,623.4 billion.
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