The 2024 Q2 earnings season picks up considerable steam this week, with a notably busy reporting docket. Many companies are set to announce their financial results, including cloud computing giants such as Microsoft MSFT and Amazon AMZN.
For both companies, their cloud performance has often influenced their stock movements post-earnings. The recent financial report from Alphabet GOOGL, another key player in the cloud industry, provided valuable insights into what we can anticipate from Microsoft and Amazon. Let’s dive deeper.
Alphabet’s Strong Showing
Alphabet’s latest quarterly earnings report was quite positive. The company achieved a remarkable 31% growth in earnings per share, coupled with a nearly 14% increase in sales. These figures outperformed market expectations, continuing Alphabet’s trend of consistent quarterly success.
In particular, the cloud segment demonstrated significant growth, with revenues reaching $10.3 billion, marking a nearly 30% surge compared to the previous year and setting a new quarterly record. Moreover, Google Cloud’s operating income witnessed a substantial rise, reaching $900 million, a significant uptick from $191 million in the corresponding period last year.
While the overall results were positive, some concerns about AI CapEx created a bit of uncertainty, causing some downward pressure on Alphabet’s stock post-release. Despite this, Alphabet has been consistently surpassing cloud revenue expectations, as illustrated below.
Microsoft’s Continued Cloud Success
Microsoft pleasantly surprised investors with a robust 23% year-over-year growth in cloud revenue in its most recent report, showing a stable performance following a period of slowing growth rates. Expectations for earnings and revenue have remained steady over the past few months, with an anticipated 8% increase in earnings per share on a 14% revenue growth.
The company has consistently outperformed consensus cloud revenue estimates, with the projected $28.7 billion indicating a substantial 20% climb compared to the same period last year.
Amazon’s Cloud Strength
In its previous financial period, Amazon Web Services (AWS) delivered impressive results, with net sales of $25 billion reflecting a 17% year-over-year growth, ending a streak of lower-than-expected figures. For the upcoming financial release, the consensus estimate for Cloud revenue stands at $25.9 billion, indicating a solid 17.2% increase year-over-year.
Even though earnings and revenue expectations have been somewhat subdued, significant growth is anticipated, with a projected 63% increase in earnings per share on a 10% rise in sales. Improved operational efficiency and cost management have significantly enhanced profitability, leading to notable margin expansion.
It’s important to note that the accompanying chart reflects data on a trailing twelve-month basis.
Key Takeaways
This week, several major cloud players, including Amazon AMZN and Microsoft MSFT, will be sharing their financial updates. Alphabet GOOGL recently showcased positive cloud growth, setting a favorable tone for the industry.
Investors will closely monitor the year-over-year growth rates posted by these cloud giants, as any slowdown could trigger concerns. Conversely, better-than-expected growth rates could lead to a positive market response post-earnings, although other metrics will also be significant factors.