While Alphabet, the parent company of Google, underperformed, Microsoft surprised investors by reporting better-than-expected quarterly results late on Tuesday. Nevertheless, investors compared the two companies favorably.
What does this mean?
Microsoft's previous report earlier this year disappointed analysts, but the tech giant sure made up for that last quarter: its hot cloud computing business made 20% more revenue compared to the same time last year, and its business productivity segment, which includes Office 365 and LinkedIn, grew 9%. Add to it Microsoft's PC segment's stronger-than-anticipated performance, and its revenue and profit easily above forecasts. However, despite the fact that cloud revenue actually expanded more slowly than anticipated, pessimistic analysts still drove the company's shares down 2%.
And while Alphabet was able to increase the revenue from its cloud segment by an impressive 38% last quarter, its crucial ad business, which includes YouTube and Google and accounts for the majority of its revenue, only increased by a meager 3%, seemingly following Snap's ominous lead from the previous week. Following Alphabet's revenue and profit disappointments, dissatisfied investors subsequently drove its stock down 6%.
Why should I care?
This week, earnings from the remaining Big Tech companies, including Meta, Apple, and Amazon, are expected. The performance of the group, which comprises over half of the Nasdaq's tech-heavy market, might determine the index's future course. If the unfavorable reactions to Microsoft and Alphabet are any indication, the index, which has fallen over 30% this year and lost almost $6 trillion in value, may still fall lower.
In a recession, growth is more difficult to achieve, therefore astute analysts will anticipate cost-cutting and efficiency-boosting measures from the tech industry. That might entail getting comfortable with blockchain technology. As you can see, while fans may get giddy at the decentralized potential of this technology to change the world, businesses appear to be concentrating on more conventional applications. According to a Bloomberg study of tech executives, the benefits of blockchain for accelerating transactions, enhancing supply chains, and reducing costs excite them the most. How alluring...
Keep reading for our next story...
HSBC Beat Expectations, But Its Stock Still Fell
The largest bank in Europe, HSBC, released better-than-anticipated quarterly results on Tuesday.
What does this mean?
For the rest of us, higher interest rates may spell doom for our mortgages, but for companies like HSBC, the recent increases are like Christmas coming early. The company's net interest income, which is calculated as lending income less interest paid on deposits, reached a staggering $8.6 billion in the most recent quarter, marking the greatest third quarter in more than eight years. However, there was some sand among the presents: the bank set aside $1.1 billion, or nearly a third more than experts had predicted, to cover costs in the event that customers defaulted on their payments. Pre-tax earnings increased a respectable 18% over the same period last year to reach $6.5 billion, but the company's robust net interest income still won the day.
Source: HSBC
Why should I care?
HSBC’s shares fell 4% when the report went live, and a few factors could be to blame. First off, that hefty $1.1-billion rainy day fund will have investors all het up about potential trouble ahead. Secondly, it’s starting to seem likely that share buybacks won’t make a comeback until the second half of 2023 at the earliest. And completing the troubling trifecta, HSBC’s well-regarded CFO is leaving without much of an explanation, something which could mean there’s trouble a-brew in the bank.
Source: Barron’s
When the information went public, HSBC's shares dropped 4%, and there may be a few causes for this. The hefty $1.1 billion rainy day fund will firstly have investors on edge about probable turmoil ahead. Second, it's beginning to look like share buybacks won't start up again until the very least the second half of 2023. And to top it all off, the respected CFO of HSBC is quitting without giving much of a reason, which could indicate that trouble is brewing within the firm.
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