Daily Brief: Microsoft And Alphabet Post Strong Results, But Investors Are A Hard-To-Please Bunch

Daily Brief: Microsoft And Alphabet Post Strong Results, But Investors Are A Hard-To-Please Bunch

over 2 years ago3 mins

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Microsoft and Google-parent Alphabet reported better-than-expected quarterly earnings late on Tuesday, even if they’d like to request permission to make a few tweaks.

What does this mean?

Microsoft went into this update having beaten analysts’ expectations for the previous 10 quarters, and the company’s hot streak continued last quarter. That was partly down to its cloud computing business, which is still benefiting from the working-from-home trend and whose revenue climbed by 36% versus the same time last year. Its productivity segment – which includes workplace staples Office 365 and LinkedIn – likewise stepped up to post a 22% uptick in revenue.

Not one to be left behind, Alphabet reported that its cloud and advertising business revenues were up by a better-than-expected 45% and 43% respectively. The latter is especially encouraging: it proves that advertisers are still willing to spend money on winning new customers – surprising at a time when shortages are making increased demand hard to meet.

Stocks
Source: The Wall Street Journal, FactSet

Why should I care?

For markets: Don’t get too comfy.

Investors practically see it as a given that tech companies like Microsoft and Alphabet will beat analysts’ estimates these days. They’re so hard to please, in fact, that 85% of tech companies that have beaten analysts’ profit forecasts this earnings season have seen their stocks drop by an average of 2.4% the day after their updates, according to Bloomberg. So the fact that Alphabet’s stock initially fell and Microsoft’s stayed flat might not bode well for them either…

Zooming out: FAANGs are getting bitten.

Investors are starting to worry that the aforementioned supply chain issues could impact Big Tech’s growth – and, by extension, their valuations – in the longer term, as could workforce shortages. Hedge funds are among the skeptics: new data shows that they now have less money invested in the “FAANGs” – Facebook, Apple, Amazon, Netflix, and Alphabet – than they have done at any point in the last two years.

FAANGs

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UPS Reported Expectation-Beating Results, Just In Time To Start Delivering Christmas Joy

UPS image

UPS reported better-than-expected quarterly results on Tuesday, and the American logistics company is just about ready to deliver tens of thousands of workers to a better tomorrow.

What does this mean?

The boom in deliveries still seems to be going strong in the wake of the various lockdowns, and UPS hasn’t let the day go unseized: the company’s been upping its prices, as well as shifting its focus to its more profitable business customers. And while rival FedEx admitted last month that it’s struggling to find drivers, UPS – which offers the highest wages in the industry – has remained relatively unscathed by the labor shortages. All that might explain why the company’s profit was up by a better-than-expected 23% compared to the same time last year, and why investors sent its shares up 7%.

UPS stock
Source: Google Finance

Why should I care?

The bigger picture: UPS is planning its Christmas shopping.

UPS is confident the good news will keep coming: the company upped its profit forecast for this quarter. In fact, it’s expecting the all-important festive season to be so busy that it’s planning to hire 100,000 more workers to meet increased holiday demand. No surprises, then, that it just upped its full-year spending plan too…

Zooming out: Buy now, grow later.

Buy-now-pay-later companies are doing equally well out of the ecommerce boom too, which might be why Square and PayPal recently got in on the action by buying Afterpay and Paidy respectively. And it was Stripe’s turn on Tuesday, announcing that it’d struck a deal to partner with Sweden’s Klarna. It should be a win-win: it’ll allow Stripe – Silicon Valley’s most valuable private company – to boost its sales by offering online merchants more flexible ways of taking payments, and Klarna to exponentially increase the number of sellers it can reach.

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