Amazon delivered earnings per share that were far below analysts’ expectations causing the stock to drop by more than 5% in extended trading. The e-commerce behemoth saw sales in North America that fell short of analysts’ estimates. Amazon’s revenue outlook for the holiday season also failed to impress.
However, the company’s cloud computing business, Amazon Web Services, remains a strong growth driver indicating that Amazon’s investments do pay off. Operating margin for AWS increased to 31.6%, up from 29.9% in the previous quarter.
The overall sentiment around Amazon’s cloud business is positive. Pacific Crest Securities expects the segment's revenue to climb by around 60% annually in 2016 and 2017. "The shift to cloud is still early enough that multiple vendors can continue to grab new business while maintaining high growth trajectories," the firm said in a research note.
Despite noticeable gains in revenue and monthly active users the social media company continues to be a loss-making business, experiencing a GAAP net loss of $103 million, or $0.15 a share.
Jack Dorsey, Twitter's CEO, reassured investors that he has a clear plan on how to drive future growth in audience and engagement. Part of this plan involves improving core service as well as laying off 9% of the company’s global workforce within the sales, partnerships, and marketing teams.
Dorsey seems confident that Twitter is positioned for long-term growth but, from my experience, when “restructuring” comes into play it’s not always a good sign. Plus, rumors of several technology and media companies showing interest in buying Twitter raises major question marks over its future.
Google parent Alphabet saw quarterly earnings and revenue that beat analysts’ expectations with mobile and video ad businesses as well as Google Cloud being the key growth drivers.
The technology titan also authorized a more than $7 billion stock buyback. It was the second ever stock buyback in the company’s history following last year’s $5 billion stock purchase. As Michael Graham , senior internet analyst at Canaccord Genuity, told CNBC “people are looking for more balanced return profile out of Google now: a little bit of growth, a little bit of margin, and a little bit of capital return”.
And with £80 billion in cash and securities in its balance sheet, Google is able to offer just that: a balanced return.
In its last earnings release as an independent company, LinkedIn smashed all expectations. The professional social network’s Q2 results came on the heels of a recent deal to be bought out by software giant Microsoft. LinkedIn experienced double-digit growth rates across all three of its segments (talent solutions, marketing solutions, and premium subscriptions) while scoring an overall revenue growth rate of 31% y-o-y.
Joining forces with Microsoft could prove to be beneficial both ways. Microsoft’s global scale could drive LinkedIn to expand its reach and get ahead of the enterprise software services game. As far as Microsoft is concerned, all it has to do is play its cards right when integrating with LinkedIn. LinkedIn growth prospects look favorable. Especially, the latest move to tap into the video space with the launch of a new app for creating 30-second video footage is likely to boost engagement - something LinkedIn has been struggling with. This app is open to a select group of “Influencers” who post content regularly and have a significant following. Down the line, if the format expands to the general user base, video-based advertising revenue could see a considerable hike.
The reason why I am confident about Microsoft’s future is its cloud division, which more than makes up for the company’s money-losing phone business, and Nadella, a CEO who knows what he’s talking about. All you need to stay ahead of the game is a good product and a man with a plan. Nadella’s plan seems to be working.
Microsoft reported quarterly earnings and revenue that beat analysts' expectations, as Azure, its key cloud product and direct competitor to Amazon’s Web Services, saw revenue grow by a whopping 102%. Over the past few years, all the big tech names, including Microsoft, Google, and Amazon, have been investing heavily in the cloud computing business - a major driver of growth.
Demand for cloud services will remain strong over the medium term as more and more businesses are looking to shift their workloads to public clouds. Microsoft is establishing a strong foothold in the cloud computing market, but will it be able to come out on top? On another note, the latest deal to buy LinkedIn raised many questions. It will be interesting to see how Microsoft is going to integrate the social media platform’s rich array of data into Office. Lots to ponder.
Amazon switched the flip on all those who used to complain about the company spending its way to losses. The online retailer reported a third straight quarter of record profit, proving to the world that good investments do pay off. Over the past year, the stock went through the roof.
The software part of the equation makes up for most of Amazon’s profits. Amazon Web Services, the company’s cloud-computing platform, came out on top as the most profitable business – a very positive sign since these days it’s all about the cloud.
I am confident that the sky is the limit when it comes to this company for two main reasons: Prime and AWS. These two businesses are highly competitive and are dominating the field. On top of that global opportunities will enable Amazon to continue to expand margins. Things are looking good.
Twitter failed to impress investors after posting a disappointing sales guidance for the third quarter. To kick-start revenue growth going forward, the social media company is betting on “a long-term shift away from desktop video to premium mobile environments". Twitter is confident it is "well-positioned to benefit from that shift." However, the issue here is that while that shift in the advertising industry toward video ads is actually happening, Twitter is not experiencing a hike in advertising budgets. To unlock advertising budgets the emphasis should be put on boosting engagement and cashing in on positive engagement trends. The deal with the National Basketball Association and CBS to stream exclusive content could enable Twitter to deliver better results next quarter. There is a small window of opportunity before advertisers move on to competitors and Twitter should be proactive. Also, effort should be put on improving user and investor sentiment. Confidence in the stock these days is not that strong.
LinkedIn did well this quarter. Upbeat forward outlook, top and bottom line results that beat analysts’ estimates put a huge smile on investors’ face. The amount of engagement of existing and new users is higher than ever and LinkedIn’s mobile app has a lot to do with it. For the quarter, major engagement metrics were up by staggering rates: viral actions by more than 80%, daily shares by nearly 40%, and traffic to third-party publishers by 150%. "...As a result of our new mobile experience, members are increasing their activity on LinkedIn, helping drive strong levels of engagement across the platform", Jeff Weiner, LinkedIn CEO, said in the company's Thursday release. For a digital networking platform, engagement is the key to success on so many levels. LinkedIn’s mobile app is driving growth for the company and could possibly create more opportunities for its Marketing Solutions unit. Let’s hope LinkedIn keeps up the good work.
Amazon's first-quarter earnings on Thursday crushed expectations across the board. From where I stand, the highlight of the report was the amazingly profitable rate its cloud computing business continues to perform. The fast-growing AWS segment provides storage services to the likes of Netflix, Instagram, General Electric, and Spotify, to name just a few. AWS revenue was up 64% from the same period a year ago and operating income was up by a whopping 170%.
Cloud computing offers immense opportunities for tech players. As I’ve mentioned in the past, Amazon is playing its cards right and seems to be winning the cloud game. It’s turning AWS into a profit machine. This unit made up more than 50% of the company’s profit for the quarter while its profit margin stood at 28%. The sky is the limit.
Facebook managed to deliver a stellar quarterly report at a time when other tech companies are making excuse after excuse for their not-up-to-par results. Investors could not be any happier. User base and engagement keep growing while mobile advertising is turning into a cash cow for the social media behemoth.
I can’t think of anything that could cast a shadow over Facebook’s amazing performance that made analysts go bananas raising their price target for the company. Facebook is generating a lot of cash each passing quarter and is making investment after investment. The social media leader ended the quarter with $1.85 billion in free cash flow - aka the “real” cash a company generates - and zero debt.
Yet, to rain on Facebook’s parade as I love playing devil’s advocate, I’d like to remind you the good old saying by Warren Buffett: be fearful when others are greedy and greedy when others are fearful. Just saying…
Though times ahead for the social media network. Twitter’s stagnant user growth puts off investors thinking that Twitter might have lost its mojo. With only 5 million new active users per month the burning question in everyone’s mind is “will the turnaround efforts pay off”?
To kick-start its flat user growth, Twitter has over the past months introduced a new user interface and put more emphasis on its live video offerings. Several initiatives, such as a new CEO, a television ad campaign, the launch of Moments and the integration of Periscope into its timeline were aimed at making Twitter more relevant and broadening its audience. Given this quarter’s disappointing numbers, changes to the core service have failed to make a tremendous difference.
On top of that, when it comes to live video Facebook is hot on Twitter's heels launching a similar product and investing heavily in this space. Twitter is no longer alone in the live-streaming game meaning that it might soon lose whatever competitive advantage it holds. Twitter needs to go big or go home.
It was the grim guidance that caused the stock to drop like a rock. For the quarter, the job networking media company beat analysts’ estimates on both the top and bottom line showing a strong momentum. Not to mention, the user base is growing at a steady pace.
Even so, this user build-up derives partly from tapping into new markets, including China. The social media network makes the bulk of its income from its premium features. Job seekers and recruiters are paying for extra services to optimize career search and placement. But companies around the world have started to feel the pinch of the mayhem going on in China and the resulting spillover effects. I guess, they are not very keen on welcoming new personnel on board these days. Macroeconomic headwinds are going to cause trouble for many international players this year, not just LinkedIn.
Investors may not be in the mood to hear LinkedIn’s excuses as to why it is not going to live up to their expectations. Yet, I do believe that the market overreacted on the news. CFO Steve Sordello pointed out that the poor guidance reflects "continued pressure" in international markets from "current global economic conditions." This may sound like an excuse but there is some truth to his words. Patience is required along with a critical eye on how LinkedIn is going to handle this "pressure".
Whenever you hear the words “strategic plan” being repeated more than 6 times during a single conference call, you know that something is not right. Well, at least there is a plan.
Yahoo is, obviously, losing its mojo. And cutting its workforce is not going to make any difference. By all means, restructuring is the key to holding a healthy business. But even hearing the word restructuring coming out of mouth makes me frown. When a business has reached a point where restructuring is the only way to drive future growth, you know it is in trouble. And when that company is as big as Yahoo, the added publicity and pressure is not making things any easier.
Yahoo needs to be more relevant or become relevant again. With so many cool platforms and limitless innovations out there, Yahoo is having a tough time keeping up with its peers. It needs fresh ideas. Cool ideas. I would invest in a new, cool idea right here and now - not in the prospect of growth based on a “strategic plan” and without having any assurance about whether this plan is going to work or not.
Microsoft experienced a decline in both the top and bottom line but still managed to top analysts’ expectations. What’s more, the software and hardware company reported deferred revenue - sales booked but not yet recorded - of $25 billion. That’s around $2 billion over the average estimate, meaning that 2016 could be a strong year for Microsoft.
One continuing drag comes from Microsoft’s not-up-to-par smartphones, which continue to disappoint. This business needs a serious overhaul or Microsoft has to make up its mind that it can’t compete with its peers in this field. Repeated efforts to claim a bigger share in the phone market have proven to be fruitless...Which leads us to the conclusion that it’s all about the cloud. Microsoft continues to move away from relying on Windows for money. Its cloud and server offerings are doing well and are making up for any losses with Windows - this is a positive sign for the company and its future.
Amazon delivered the largest quarterly profit in its 20-year history. That only, should have sent the stock through the roof. Yet, Amazon shares dropped like a rock following the earnings release as investors fretted about thin margins and increased operating costs.
Shipping is undoubtedly one of Amazon’s biggest weapons, but it might end up being its Achilles heel. Amazon is rolling out one-hour and same-day delivery in a growing number of cities, on top of plans for 30-minute delivery by drone. These projects cost money and the return on these investments might take quite some time . Operating costs jumped by 20% compared to last year while, for the quarter, shipping costs climbed by as much as 37%.
Even so, Amazon investors should have figured it out so far. If you can’t handle medium-term hiccups then steer clear of this company. This internet retailer is all about long-term investing. And long-term investing requires patience.
During the third quarter and while Google was busy exploring novel technological frontiers, the number of paid clicks dropped like a rock knocking quarterly profits. Over the past couple of months, Google has been implementing some changes that put a lid on "lower quality" paid clicks, Chief Financial Officer Patrick Pichette pointed out during a conference call. On the other side, these changes resulted in improved pricing for those clicks on mobile devices, Pichette added. Moreover, lately, Google has been experimenting with a "non-mobile friendly" icon - a new feature in mobile search results, which indicates when a search result links to a website that is not optimized for mobile. It appears that Google is chasing mobile-advertising gains in earnest - a move that bodes well for its future plans.