Month: July 2024

In a recent note, Wedbush analysts expressed strong confidence in Microsoft’s (NASDAQ:MSFT) latest performance, particularly emphasizing the significance of the company’s “validation moment for AI.”

According to Wedbush, the investor world was keenly awaiting Microsoft’s results, and the conference call, coupled with FY25 guidance, did not disappoint.

CEO Satya Nadella and CFO Amy Hood highlighted a robust commercial bookings growth in the June quarter, with Azure’s growth expected to “accelerate in the second half” from a 29% baseline.

This commentary, according to Wedbush, underscores the broader AI revolution within the tech world, providing the validation that the market was seeking.

Wedbush maintains an Outperform rating and a $550 price target on Microsoft.

The analysts emphasized that the most critical takeaway from the conference call was Redmond’s discussion on AI monetization trends, which are anticipated to accelerate in FY25 as more enterprise customers adopt Azure, Copilot, and AI solutions for their operations.

The firm explains that while the quarterly results were solid but not extraordinary, the Street is digesting the very optimistic outlook on AI deployments.

The growth of Copilot users and the foundation of a strong Intelligent Cloud segment were seen as key highlights.

Wedbush said the broader tech sector takeaway is clear: “[The] AI monetization story is real, AI capex is building out a new IT infrastructure for the next 15 years.”

Wedbush’s note concludes with a bullish sentiment, stating, “Nothing from this quarter or conference call makes us less bullish in our AI thesis.”

The firm adds that the validation from CEO Nadella and Microsoft adds significant credibility to the AI revolution story, reinforcing that this AI revenue opportunity is indeed happening and solidifying Microsoft’s position as a leader in this transformative space.

Investing.com – Microsoft shares slipped after its fourth-quarter cloud revenue growth fell short of Wall Street estimates even as the tech giant ramped up spending on investments to boost growth.

Microsoft Corporation (NASDAQ:MSFT) fell around 1.7% after the market opening bell on Wednesday.

The company announced earnings per share of $2.95 on revenue of $64.7 billion. Analysts polled by Investing.com anticipated EPS of $2.94 on revenue of $64.38B.

Azure, Microsoft’s cloud business grew 29%, missing analyst estimates of 30.2%. That also marked a slowdown from 31% growth seen in Q3. Azure is widely viewed as a barometer for AI demand. AI-related growth accounted for about 8% of Azure’s total growth, up from 7% in Q3.

Signs of slowing cloud growth come even as Microsoft continues to ramp up investments, with capital spending jumping to $19B in Q4, up from $14B in Q3, and nearly double the $10.7B seen in Q4 a year ago. 

Commercial bookings jumped 17% year-over-year and came in significantly ahead of expectations.

Despite the miss, analysts at Jefferies reiterated a Top Pick rating on MSFT, saying the company “remains in pole position for the AI marathon.”

“Positively, MSFT expects Azure’s growth to accelerate in 2H as more capacity comes online to serve AI demand,” they noted.

Separately, Guggenheim analysts said Microsoft’s expectations of Azure reacceleration three quarters from now “seems to have calmed investor concerns after hours.”

However, investors “should ask themselves a simple question: How can they trust management to predict what will happen 6-12 months from now if they have trouble forecasting the next 0-2 months,” the investment firm added, reiterating a Neutral rating on Microsoft stock. 

Revenue in productivity and business processes rose 11% to $20.3B as official commercial products and cloud services revenue climbed 12%. Revenue in more personal computing was up 3% to $11 billion, with Windows revenue up 7%.

“Shares traded lower after hours following Intelligent Cloud segment revenue missing consensus, as Azure growth decelerated 1 point, missing buyside expectations and coming in at the low end of guidance,” RBC said in a note following the results.

Meanwhile, in their own post-earnings note, Citi analysts said MSFT’s Q4 print “offered something for everyone.” 

“The smaller beat and softer guide imply slight negative near-term estimate revision trends, which could weigh on shares tomorrow, but we believe the weakness will be short-lived with leading indicators offering confidence in a 2H acceleration in Azure, and a margin outlook(-100 bps) that looks conservative,” they added.

The Wall Street firm trimmed its Microsoft stock price target from $520 to $500 to account for near-term headwinds. 

Yasin Ebrahim contributed to this report. 

Investing.com–The S&P 500 notched its biggest gain since February on Wednesday, as the Federal Reserve kept rates unchanged, though signaled that it that potential cut in September was on the table. 

At 16:00 ET (20:00 GMT), the S&P 500 Futures gained 1.5%, and Nasdaq 100 Futures climbed 2.6%, the Dow Jones Futures rose 99 points, or 0.2%. 

Fed gives nod to inflation progress after keeping rates steady 

The Federal Reserve left interest rates unchanged Wednesday, but acknowledged recent progress on inflation and cooling in the labor market, stoking investor hopes that the central bank could begin cutting rates sooner rather than later.

“We think that the time [for a rate cut] is approaching … if we do get the data that we hope we can, then a reduction in our policy rate could be on the table in September,” Fed chairman Jerome Powell said Wednesday in the press conference that followed the policy decision.  

Futures are almost fully pricing for a quarter-point easing in September, with a small chance of a reduction of 50 basis points, and have 66 basis points of easing priced in by Christmas.

AMD leads chip, tech stocks higher offsetting Microsoft stumble

Advanced Micro Devices Inc (NASDAQ:AMD) gained 5% after the chipmaker reported better-than-expected Q2 results, underpinned by record data center revenue as customers including Meta and Microsoft continued to ramp up orders.  

“The tone on data center GPU was very solid, especially around customer breadth as we think both OCI and META are now ramping strongly alongside MSFT – w/shipments starting shortly to TSLA and very strong momentum with enterprises,” UBS said in a note.

As well AMD results, sentiment on chips were boosted by surge in ASML Holding NV (AS:ASML) ADR (NASDAQ:ASML) after Reuters reported that the dutch chip equipment maker and other allies in Japan and South Korea could likely be excluded from U.S. ban on chipmaking equipment to China. 

NVIDIA Corporation (NASDAQ:NVDA) jumped nearly 13% and Qualcomm Incorporated (NASDAQ:QCOM) jumped 8%.

Microsoft (NASDAQ:MSFT) stock cut some losses to fall 1% after its fourth-quarter cloud revenue growth missed expectations. 

While the firm’s overall earnings just edged past estimates for the June quarter, revenue from Azure, the company’s cloud business, grew 29%, missing estimates of 30.2% and also slowing from the 31% rise in the prior quarter. This came even as investment in AI saw capital expenditure surge by $5 billion in the quarter. 

Meta Platforms (NASDAQ:META) becomes the latest of the mega-cap tech giants to release quarterly results this week, after the close.

Meta, which owns and operates Facebook, Instagram, Threads, and WhatsApp, among other products and services, is expected to report a 20% rise in quarterly revenue.

Starbucks earnings meet expectations, T-Mobile, Match Group surprise on earnings stage

Starbucks (NASDAQ:SBUX) stock rose nearly 3% after the coffee chain met expectations for quarterly profit, even as its global sales declined on persistent weakness in consumer spending in its top markets of the U.S. and China.

T-Mobile US (NASDAQ:TMUS) stock rose 4% after the telecoms giant after the telecoms company raised its full-year forecast for monthly bill-paying phone subscriber additions as more customers opted for its discounted unlimited plans that include streaming perks.

Pinterest (NYSE:PINS) stock fell more than 14% after the social media service offered a softer-than-expected outlook for its third quarter, despite achieving a record 522 million global monthly active users, marking a 12% increase from the previous year.

Match Group (NASDAQ:MTCH) stock soared 13% after the online dating service recorded a second-quarter revenue beat and announced plans to lay off about 6% of its staff to cut costs.

(Peter Nurse, Ambar Warrick contributed to this article.)

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Investing.com — The Federal Reserve left interest rates unchanged Wednesday, but acknowledged recent progress on inflation and cooling in the labor market, stoking investor hopes that the central bank could begin cutting rates sooner rather than later.

The Federal Open Market Committee, the FOMC, kept its benchmark ratein a range of 5.25% to 5.5%.

The Fed has kept rates unchanged over the past year as it assessed incoming data to guide policy decisions. Recent reports showing progress on inflation and easing tightness in the labor market suggest that the Fed’s restrictive policies are working following a slew of bumpy inflation data earlier this year.  

The most recent measure of core personal consumption expenditure, or PCE, index, the Fed’s preferred inflation gauge, showed inflation remain steady at 2.6% in the 12 months through June, and is moving toward the central bank’s 2% target.

“Inflation has eased over the past year but remains somewhat elevated,” the Fed said Wednesday in its July policy statement. That marked a subtle change from June, when the Fed noted that inflation had eased but remained “elevated.” 

In a sign the cooling in the labor market is now on the Fed’s radar, the Fed said the committee is “attentive to the risks to both sides of its dual mandate,” signaling a shift from June when the focus remained solely on “inflation risks.”

“The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance, the Fed added.

Still, despite the recent progress, the Fed believes it still needs “greater confidence” that inflation is moving toward 2%.

Many are betting, however, that economic data in the coming weeks would help shift the Fed toward a first cut. A September rate cut is now almost fully priced in, according to Investing.com’s Fed Rate Monitor Tool.  

In the press conference that followed the meeting, Powell said no decision had been made about future meetings including September, but signaled that the committee is moving closer toward rate cuts should the data continue to show progress on inflation and cooling in the labor market.  

“We think that the time [for a rate cut] is approaching … if we do get the data that we hope we can, then a reduction in our policy rate could be on the table in September,” Powell said.

The fed chief also pushed back against concerns that delaying rate cuts risks falling behind the curve and stoking a hard landing.  

“We have a lot of room to respond if we were to see weakness,” Powell added. “That’s not what we’re seeing.”