U.S. Big Tech third quarter earnings announcement
Alphabet sees strong cloud sales
Stock price rises 6% in after-hours trading
Snap, owned by Google, also rebounds rapidly.
AMD data center sales soar
Games decreased by 69% and stock prices fell.
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As U.S. information technology (IT) companies, which had raised concerns about overinvestment in artificial intelligence (AI), released third-quarter results, there were mixed emotions in related stocks.
Although it is common that major companies’ AI-related sales have increased, the market is paying attention to the overall sales flow and next quarter’s performance targets (guidance).
In the New York stock market on the 29th (local time), the stock price of Google’s parent company, Alphabet, rose 1.78% from the previous day, and then rose by about 6% in after-hours trading as the company’s good third-quarter results were revealed after the market closed.
Alphabet’s stock price has risen 23% so far this year, slightly lower than the Nasdaq 100 index’s growth rate (24%) over the same period. This is because criticisms about excessive investment in AI, intensifying AI competition with Microsoft and Amazon, and the risk of forced corporate division due to an anti-trust lawsuit filed by the U.S. Department of Justice have been highlighted. However, Alphabet appears to be outpacing the performance of the Nasdaq 100 index as of the announcement of its third quarter earnings thanks to the expansion of its cloud business.
Sundar Pichai, CEO of Alphabet, said at the performance briefing that day, “Our intensive investment in AI is bearing fruit,” adding, “Our AI service portfolio is attracting new customers centered on our cloud business while expanding existing transactions.” “We are leading the search business and will connect generative AI Gemini as a revenue generator,” he said.
Alphabet’s third quarter sales and earnings per share (EPS) recorded $88.27 billion and $2.12, respectively, exceeding the average Wall Street expectations (sales of $86.3 billion and EPS of $1.85) based on LSEG. In particular, sales increased by 15% compared to the third quarter of last year. This is the result of Google Cloud sales reaching $11.35 billion, a whopping 35% increase compared to the third quarter of last year, and YouTube advertising and Google advertising sales also increasing by 12% and 10%, respectively.
Following Alphabet’s performance, Microsoft and Amazon stock prices also rose by more than 1% each in after-hours trading on this day. Microsoft and Amazon announce quarterly earnings on the 30th and 31st, respectively.
Meanwhile, Snap, an American social media company that partnered with Alphabet for AI services, also announced a $500 million share buyback in addition to its good performance after the market closed on the 29th, causing its stock price to jump nearly 10% in after-hours trading.
Snap attracted the market’s attention by joining hands with Alphabet last September, saying that Google’s Gemini was more effective than OpenAI and Microsoft’s ChatGPT to run its own AI chatbot.
Snap reported revenue of $1.37 billion and a net loss of $0.09 per share in the third quarter, which was better than average Wall Street expectations ($1.36 billion in revenue and a net loss of $0.14 per share).
“Our performance shows that our AI and augmented reality (AR) businesses have long-term growth opportunities,” said Snap CEO Evan Spiegel. “Daily active users (DAU) and average revenue per user are each up 9% compared to last year. “It increased by 6%, and this is related to the strong performance of other businesses, including AI-applied advertising and increased sales of the 5th generation AR glasses spectacles,” he explained.
Investors are paying attention to the fact that despite Snap’s net loss, EBITDA recorded $132 million, up 229% from the third quarter of last year. EBITDA is a profitability indicator that shows a company’s ability to generate cash earned through business activities. This refers to profit before deducting interest, corporate taxes, and depreciation.
Meanwhile, at the same time, AMD’s stock price fell nearly 8% in after-hours trading as the quarterly results announced after the market closed were ambiguous and the fourth quarter business target was assessed as being below expectations.
AMD’s third quarter sales were $6.8 billion and EPS was $0.92, which is broadly similar to the average of experts’ expectations based on FactSet (sales of $6.71 billion, EPS of $0.92). Data center sales increased by 122% compared to the third quarter of last year, and although client PC sales increased by 29%, game-related sales decreased by 69%.
[김인오 기자]
