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Chairs of Alphabet just soaring in the after hours right now, Carol Hire after the company reported earnings up as we speak, another thirteen point six percent in the after hours right now. This after declaring a dividend, boosting a buyback, authorizing repurchase of up to an additional seventy billion dollars and shares. First quarter ad revenue coming out above expectations first quarter, also declared it cash dividend of twenty cents per share.
All right, so let's get to it. James chalk Mak so much to talk about. He's partnering technology analyst at Clockwise Capital. He joins us from Miami. First of all, Alphabet feels like I can't find anything wrong here. Walk us through. Is this just kind of firing and all cylinders and if you will, and then just throwing on a dividend and then throwing on an additional buyback.
Yeah, First, thanks for having me. You know, for Alphabet, this was a tough one. You know, we had the meta earnings last night, you know, uncertainty as it relates to the sustainability of the top line growth metrics, and obviously Alphabet via Google had, you know, uncertainties around their search business, and at the same time you had this growth and capex spend. You know, is that going to translate over? So you know, we were kind of debating
what to do and going into the quarter. We actually rotated a portion of our Microsoft position to triple up our Alphabet position. But thankfully that worked out. But I tried to see you for Google. Yah, well yeah they're both out, so yeah, I mean it worked out.
So why did you do it? What was it that you saw, James in the in the Alphabet story that you said you wanted to do that.
Well, the main thing was the relative valuations. I mean, the expectations for Microsoft were exceedingly hot and the expectations for Alphabet were exceedingly low. And you look at one t trading at twenty two times earnings and the other ones at thirty five times earnings, So you know what kind of the risk reward is. And especially we had some sense of how things might trade if they came in on a bear because kind of narrative given how Meta traded. So it really just boils down to that.
But the fact that Microsoft was able to exceed those nose bleed expectations in the testament to the trends and the force of trends that we're seeing in the in the shift of the cloud and AAI. More broadly, Hey, I just want.
To get your thoughts on Snap, because the company you've been covering for years.
I would love to ask about that there through.
The good and the bad well. And the reason I'm asking is because shares are up, wow, surging as we speak by more than twenty percent, twenty five percent at this point. This is after the company reported.
They are down thirty here today they are.
That's important context, Chris. The company is seeing second quarter revenue from one point two to three billion to one point twenty six billion versus estimates of one point two one billion dollars. As Carol mentioned, it's been a brutal year so far for Snap. How are you reading into these results? And do you still you don't own Snap anymore? Do you?
No? No? Not for a long time. You know with Snap, you know, they were supposed to be the camera company and transformed into you know, it's exactly what they were initially, you know, just messaging in some content initiatives. But at the end of the day, you know, I think it's really really hard for these niche platforms to scale in the manner in which is necessary to provide differentiation to advertisers and the return objectives and return enhancements on the
on that ad spend. So I think that the disparity between these niche platforms like a Snap versus the likes of Alphabet and Meta will only increase from here. The caveat being that you have companies like Pinterest, which we used to own but sold, you know, just given the fact that they hit our target. You know, I have more opportunities because of the engagement that they've bring that is likely to grow over time versus you know, stick to more static rates, which is from the likes of Snap.
All right, we've got to go back to Google. Forgive me Alphabet. I keep calling it Google, but I mean your first alphabet. I know, I know, up twelve and a half percent here, folks, in the aftermarket, this stock heading into it had about a twelve percent gain on the year here in twenty twenty four. The stock was
up almost sixty percent last year. But you know, when when you look at Alphabet James, and you look at its business lines and its roles and it's play, whether it's AI, whether it's still advertising in a big way. You know, our own man Deep Singh saying, you know, this company is all about engagement. That's kind of so valuable, and that's going to be valuable certainly in terms of machine learning and jen Ai. This is really important stuff.
I mean, how do you think about you know, Alphabet in kind of its future growth trajectory and kind of where it goes from here. I mean, these are this is a pretty impressive report, but it's also right appeasing investors of saying we're going to throw some cash back to.
You absolutely, I mean any anything with respect to returning capital to shareholders or you know, getting religion on the cost side of their business and utilizing their cash flow for more constructive purposes rather than throwing it into black holes, which is the way that they have been operating for as long as I can remember that being said. I think that the future for Alphabet and Google, you know,
is still remains a question mark. We don't know, and I don't think anyone can definitively say what that search environment experience is going to look like in the future. You know, when if you look out five years down the road. Now. The good news is all of this stuff seems to be like coming at you fast right all the AI. It's over the Since January of twenty twenty three, it's been coming hard and fast. But the good news is on the on the behavioral aspect and
the consumer experience. You know, things have changed which GPT and whatnot, but things aren't changing that fast overnight, which affords Alphabet time to really figure things out, whether it's cannibalistic to their existing search business or not. You know, I think we have time. So I think extrapolating too much too soon is a risk, you know, so as long as they can they have the time, they might
figure it out. They may not, but they might. But I look into twenty twenty four and twenty twenty five, that's it.
Could Critics argue about Alphabet that declaring a dividend and boosting a share buyback potentially isn't the best use of money right now. Perhaps they should be investing more in AI. Perhaps they should be investing more and making sure this search product is bulletproof.
Yeah. I mean they're throwing off tremendous amounts of cash as it is, and they're investing a lot, and and you look at the margin disparity versus a meta you know, they have a lot of cushion there, so and they're investing, you know, strongly as well. So I don't think it's utually exclusive. So long as the ball continues to move forward, which is what we need to see, and we'll see what the color commentary is on the call, I think
it'll be okay. I think the longer term is one of the questions linger shorter term, it'll be fine, all right.
So let's go to Microsoft, because it's also the other big one that are one of the big ones. After the close, it's up about five percent here in the aftermarket this one. Sales and profit beat expectations on robust AI demand. That's the headline on our story. So quarterly sales and profit climbing more than projected, lifted by corporate demand for Microsoft's cloud and AI offerings. Revenue, as we said, up seventeen percent in the third quarter, sixty one point
nine billion profit two ninety four a share. Analyst on average estimated per share earnings of two point eight three two dollars and eighty three cents. Excuse me, on sales of sixty point nine billion, So again outperformance here, and we know that such an Adella has been really infusing all of Microsoft's entire product line with AI technology thanks
to its partner open Ai. So thoughts on Microsoft, what we got here in the quarter, what it tells you about their business today and going forward.
Yeah, what's most amazing to me is the fact that they're able to maintain the growth rates no matter how big their revenue base gets, and the fact that they're able to deliver the numbers that you just cited and do so in an efficient way where earnings are continuing to grow at the same rate, so it's not a there's no contra indicators on and you know, sales versus spending.
So I think that to me, the sustainability is the biggest and most impressive component of their operations, and most importantly, you know, broadly, I think you can extrapolate that the themes on the data center spend and the semiconductors like the NVIDIAs of the world, and the direction of corporate enterprise and their appetite for shifting from analog to digital is as strong as ever. So I think it's a very very good omen for a lot of these companies
and being at the center of it. Because you can make an analogy that you want in the first inning, third inning, or whatever. But I think the main thing is that the world is going to I think Sam Altman has this quote that he said, the technological changes that we've seen over the last five hundred years, No, the changes over the next fifty years will be greater than the technological changes over the next last five hundred, right,
you know. So that's the pace of change that we're talking and a lot of that's going to come in the first decade, and these companies are all at the epicenter of it.
Just what and point out Azure Microsoft's cloud computing unit revenue gaining thirty one percent in the quarter, above an average prediction of twenty nine percent, so picking up slightly from the thirty percent growth in the previous period. So you know that's a trend line if you're following it, right, you want to see I.
Mean, there's a chance we see both of the depending on what happens. There's a chance we see both Alphabet and Microsoft hit new records tomorrow in today's trade, depending on what happens. Okay, I want to talk James just a little bit about Microsoft's legacy here and the way that it's been able to shift and embrace AI. Where's the most important part of looking at Microsoft's growth moving forward.
I mean, I know, we obviously know Azure is incredibly important, but the company has made a huge, huge bet on AI with open Ai. Where do you start to see that investment and its relationship with open Ai manifest in earnings.
I think it's going to be, you know, exactly, you'll see it in the Azure business, but more broadly in the intelligent cloud segment. I mean, it just continued to trans on that front, but it's not just that segment. It's going to have It's going to feed into other parts of their business too, you know, on the subscription side of their software services and potentially even gaming, and you know, so there's there's a lot of levers I
think that will be pulled from that relationship. And as the world and the corporate enterprise continues to move in that direction, more data is going to feed into it, which is going to fuel even more efficiency with respect to the capabilities that they do. And you know, Copilot, you know, for instance, is just on the I don't want to use saying first end of that day, day two of its potential. So and there's a lot of
money to be paid there that you'll see that. I don't think it is being appreciated at all, virtually at all.
Right now, these are all different companies, but they're all working on AI, and to a certain extent, they're competing with each other when it comes to that technology. No question, uh. Given what we're seeing from shareholders in reaction to micros oft in alphabet today, and given what we saw today in the session from reaction from investors to meta platforms sending shares for their worst ten months, what did the
two companies that reported today get right? Or maybe a better way to ask is what did meta platforms get wrong?
What did meta platforms get wrong? I think what they got wrong was largely related to the management of the expectations. You know, there was no indication around the pace of investment that's necessary to sustain the kind of growth. I mean, they talk very qualitatively.
About this is a big opportunity ahead, you know, all the metaverse and YadA YadA, But you know, there was no pushback whatsoever on the questions and commentary with respect to you know, how we should expect the pace of investment to ramp to justify and capitalize on the trend that Zuckerberg talks about.
So I think it was more of an expectation versus reality in mismatch that probably could have been better managed.
All right, let's just remind everybody the bigger earnings after the close and those that have really outperformed here in showing some studying moves to the upside, Microsoft among them. That stock, as we mentioned, it is moving up just about four point four percent here in the aftermarket, and the company coming out sales and profit beating expectations, lifted by corporate demand for the software maker's cloud and AI offerings. We talked about Azure gaining revenue alone gaining thirty one
percent in the quarter that was above analyst expectations. Revenue in the third quarter overall up seventeen percent to sixty one point nine billion dollars. Profit was two dollars ninety
four cents a share. Analysts on average estimated per share earnings of two to eighty three, so below what they actually came in with, and the estimate for sales was sixty point so again really hitting out of the park when it comes to those estimates, and that is certainly one reason why you're seeing the stock or a big reason why you're seeing the stocks up. The stock of Microsoft, I should say up at the aftermarket.
Okay, let's worth let's repeat a little bit of what we saw from Alphabet the company's first quarter Google AD revenue coming in at sixty one point six six billion versus estimates of sixty point one eight billion, in the company author authorizing a repurchase of up to an additional seventy billion dollars worth of shares, also declaring a dividend,
a cash dividend of twenty cents per share. First quarter revenue excluding traffic acquisition costs sixty seven point five to nine billion, beating estimates of sixty six point oh seven billion.
To the downside, Intel shares are down more than eight percent here, biggest maker of PC processors. Lacklow luster forecast from the company for the current quarter, indicating it's really still struggling to kind of find its way back to the top, if you will. Sales in the second quarter
will be about thirteen billion. That compares with an average analyst estimate of thirteen point six billion a quarter to our data here at Bloomberg Profit Again, the outlook will be ten cents of share minus certain items versus a projection of twenty four cents, So that's a pretty big miss. We're talking with James chockmock partner and tech analyst ever at Clockwise Capital. James, is there's some underlying theme. We're
not through all the MAGS seven companies. We've got what Amazon next week?
Yeah, we've gotten video in a while, right, so.
We've got some other plays to get through. But is there any themes that you're finding, certainly for the investment community when it comes to especially these big tech names the mag seven often who haven't always been so magnificent as of late, what they're saying and kind of their impact on the overall market. Is there some big takeaway here for you?
I think the biggest takeaway is that the sellers of these data center services are the best place to be, you know, from Navidia to Dell. The server side, like we own VRT, which helps with the cooling system comfort systems, you know, so there's a lot of these companies that play into building out the companies that are selling to
the hyperscalers. I think will continue to be in a great position now that as far as the Max seven is concerned, I do think, you know, the market is still in a state of shoppiness and volatility, and I think that's going to last until we have better clarity on what the FED is going to do. And you saw the GDP numbers today, so there's there's mixed messages as to which direction macro is going versus tech and which one to prioritize, because if you've prioritize the economic cycle,
then that means valuations are at risk. If you prioritize the text cycle, that means that earnings are the focus. And right now we're in this world where some days valuations are in focus and other days earnings like today, So I think you just got to stay nimble at the end of the day.
Hey, James, last question thirty seconds. Here, I'm looking at time US Equity on the Bloomberg terminal. This is the clockwise Core Equity and Innovation ETF. It is up this year a whopping eighteen point three percent, out performing all the benchmarks. Amazon is your second biggest holding after T bills make accounting for five percent of the portfolio. We got Amazon coming up. Thirty second preview of Amazon.
Yeah. Amazon, it's it's the only of the mag seven that we feel that we haven't cut exposure to. You know, it's a five percent or give or take weight, and we're maintaining that. I think the data that you saw from Microsoft and today is the really to the cloud
is a very good omen. They're firing across all three other businesses, you know, on the on the grocery side, the retail side, the cloud side, and this is the first time in a while that you've seen everything going in the right direction and most especially on the margin. So you know, we like the risk loard here. You know, I think next year you could get the two twenty five. This year the upwards of two hundred, So you know, it's one that definitely keeping the portfolio for sure.
All Right, we're going to leave it on that note. Hey, James, thank you so much. James. Chuck Mack, partner and tech analyst at Clockwise Capital joining us on Zoom from Miami. A lot of names move in here in the aftermarket,