Google’s surprise announcement

Hey Superheroes,

Markets have been eventful these last few days and we aren’t surprised – four of the Magnificent Seven companies reported this week!

We covered Tesla on our social media, so today’s Spotlight will be shone on the other three.

Google to pay cash dividend for the first time

First Meta, now Google. If there’s a trend among the tech behemoths this year, it’s shocking the world with a never-before cash dividend.

And fair enough for them too. Google had a hefty cash balance by the end of Q1 2024.

👏 It’s been a good year so far

Here’s how Alphabet (Google) performed last quarter compared to analyst expectations:

• Revenue: $78.7b expected vs $80.5b actual (↑2.34%)
• Earnings per share: $1.50 vs $1.89 (↑25.6%)
• Advertising revenue: $60.4b vs $61.7b (↑2.2%)
• Cloud-computing revenue: $9.4b vs $9.57b (↑1.8%)

Aside from topping analyst estimates across the board, Alphabet also recorded double-digit growth in these key numbers.

Ad revenue grew by 13% year-on-year, YouTube ad revenue by 21% and cloud-computing revenue by 28%. And most importantly, net income grew 61%.

🎁 Time to reward investors

And now for the first time in its 26-year history, Google is paying out a cash dividend. For the record it had US$108b cash in its balance sheet at the end of Q1.

Its first quarterly dividend will be 20c a share which is roughly a 0.5% yield. While relatively modest, Google also announced a new US$70b share buyback – marking the fourth consecutive year of buybacks. 

Google shares surged by over 11% in the after-hours market following the release.

Microsoft’s AI and cloud investments are paying off

It’s been a while now since Microsoft began pouring money into the cloud and AI… and it looks like it’s starting to pay off.

Microsoft CEO Satya Nadella shared earlier today that the number of Azure’s (Microsoft’s cloud computing segment) $100m+ deals increased by over 80% year-on-year. Its $10m+ deals more than doubled over the same time frame.

🖥️ The world’s largest company

Here’s how Microsoft performed in Q1 2024 compared to analyst estimates:

• Revenue: $60.9b expected vs $61.8b actual (↑1.60%)
• Earnings per share: $2.84 vs $2.94 (↑3.40%)

Azure’s revenue grew by 31% in the last year, with 7% of that growth attributed to AI. Microsoft expects capital expenditure to increase this year thanks to further investments into cloud and AI infrastructure.

Microsoft shares are up over 4% in the after-hours market.

Investors unnerved by Meta’s spending plan

Meta Platforms’ Q1 2024 numbers may have beaten analyst expectations, but nonetheless its shares slumped following Mark Zuckerberg’s earning call.

Perhaps that’s to be expected though… given that Mark talked a lot about how much Meta has been spending on a non-profitable segment.

💸 Reality Labs’ hard reality

Highlighting Meta’s Reality Labs, Mark basically said that it might take a “multiyear investment cycle” until the segment scales enough to be profitable. Reality Labs is its segment focused on the Metaverse, AI and VR.

Since 2020, the segment’s cumulative losses have totaled over $45b. 

Meta shares fell over 10% overnight as investors digested Mark Zuckerberg’s words from the previous day. 

In addition to the news, Meta has not provided guidance on whether it plans to pay out a dividend for the quarter.

🔦  Some other things we’re shining the Spotlight on:

• RUBRIK DEBUTS ON NYSE: Rubrik (NYSE:RBRK), a data management software producer backed by Microsoft, debuted on the NYSE overnight. The stock is up over 15% on its first day following its highly-subscribed IPO.
• SCOTT SIGNS OFF: Atlassian’s co-CEO, Scott Farquhar, announced his decision to step down today to focus on family. Despite the news coming alongside strong earnings, Atlassian shares are down over 6% in the after-hours market.
• IMPECCABLE OR UNFORTUNATE TIMING?: A $17.6m payday by two Kogan.com executives, gained by selling stock options back to Kogan, is now being questioned. The transaction happened just three weeks before Kogan announced lacklustre earnings that sent its share price down over 26% in a day.

That’s all for this week’s Spotlight! 

Apple and Amazon are among those reporting next week. All eyes will be on the next Fed Funds Rate decision to be released on Thursday (AEST). 

Keep up to date by following us on Instagram, @superheroau!