Reporting of IT corporations disappointed investors

On Wednesday night, three technology giants reported at once – Microsoft, Alphabet and AMD. And the shares of each of them began to decline after the publication of financial results. Despite the growth in revenue and generally predicted indicators, investors were disappointed with the results: they hoped that products based on artificial intelligence would begin to bring companies much more money and much faster than they actually did.

Microsoft shares have risen in price over the past 12 months by almost 70%, on January 11 it became the most valuable company in the world, surpassing Apple in market capitalization, and last week its value exceeded $3 trillion for the first time. Finally, on Tuesday, after trading closed on Nasdaq, the company published its financial statements for the fourth quarter of 2023 and all of last year.

At the end of the quarter, Microsoft’s net income reached $21.9 billion, an increase of 33% year-on-year—the corporation’s fastest profit growth rate since the third quarter of 2021. Revenue rose 18% to $62 billion, while analysts had expected growth of 16%. And sales of the cloud division are up 30% against expected growth of 27%.

But despite all these impressive results, the corporation’s shares did not soar in price, but fell slightly. During the presentation of the results, Microsoft CFO Aimee Wood said that artificial intelligence added 6% to revenue growth in the Azure cloud division, up from 3% in the previous quarter. Doubling that figure in just one quarter is “simply remarkable,” said UBS Group analyst Karl Kiersted. However, the company did not make predictions about how much AI will continue to influence Microsoft’s revenue. And investors who have poured so heavily into AI companies over the past year are eager to know what kind of returns they can expect in the future.

Revenue growth for the quarter reported and Alphabet, which owns Google. Its sales revenue growth accelerated for the fourth quarter in a row. This time it was 13% year on year, and the revenue itself was $86.3 billion. And net profit increased from $13.6 billion to $20.7 billion.

Nevertheless, the corporation’s shares fell by almost 6% in over-the-counter trading. Alphabet Chief Financial Officer Ruth Porat said artificial intelligence is increasingly contributing to the cloud division’s revenue growth. But unlike Microsoft, Alphabet did not provide specific data on the contribution of AI even for the last quarter, not to mention forecasts.

Meanwhile, the corporation is investing billions of dollars in the development of AI-based products, while massively laying off employees to reduce costs.

And Google’s advertising sales, the corporation’s main source of income, were not as large as analysts had hoped. At the end of the quarter, they grew by 11%, to $65.5 billion. Analysts expected revenue to reach $65.8 billion.

One of the largest microchip manufacturers in the world, Advanced Micro Devices (AMD), also failed to please investors. Despite the impressive results at the end of the quarter – revenue growth by 10%, to $6.17 billion and profit growth by almost 32 times, to $667 million – the company’s shares in over-the-counter trading fell by 7%. The reason for this is the disappointing forecast for investors for the first quarter of 2024.

AMD said it expects revenue in the first quarter of the year to be $5.4 billion. A year earlier, revenue was slightly more modest at $5.35 billion. However, analysts expected the company’s sales to grow much more significantly and reach $5.73 billion.

The main revenue generator for AMD was its data center and AI business.

Its revenue for the quarter grew by 38% year on year, and for the entire 2023 – by 7%, to $6.5 billion. However, the losses of other divisions of the company are too great for the AI ​​business to offset alone. The company significantly improved its own forecast for the entire 2024 for sales of chips developed for the needs of AI systems – from $2 billion to $3.5 billion. But this did not affect investor sentiment in any way.

Kirill Sarkhanyants