Huawei seeks growth in internet of things as phone business suffers

Huawei’s struggles amid U.S.-China trade tensions are driving it to seek opportunities in other smart devices, setting itself up against a raft of hardware makers at home and abroad.

The Chinese tech giant recorded sluggish revenue growth in 2020, climbing just 3.8% to 891.4 billion yuan ($136 billion), as its net profit grew 3.2% to 64.6 billion yuan. The results were in line with Huawei’s forecasts, the company said Wednesday at its annual report day in Shenzhen, a rare occasion to get a glimpse into the private entity’s financials.

To put the numbers in comparison, Huawei’s revenues were up 19% and 19.5% in 2019 and 2018, respectively.

The slowdown in 2020 was primarily due to a slump in Huawei’s overseas smartphone sales after U.S. export controls cut the firm off core chipsets and Google services critical to consumers. But the challenge has also sped up the firm’s pace to diversify and offset losses from its phone business.

For the past two years, Huawei’s has been ratcheting up efforts in a multitude of smart devices, including AR/VR headsets, tablets, laptops, TVs, smartwatches, speakers, headphones and in-car systems.

Huawei’s foray into the automotive industry has in particular attracted much limelight as the global smart vehicle industry booms. Reuters reported recently that Huawei would be producing its own branded cars, which the company denied. At today’s event, the firm’s rotating chairman Ken Hu reiterated that Huawei would play to its own strengths and only be supplying certain car components and services, such as the in-car operating system and smart cockpit. 

Huawei’s matrix of connected products is reminiscent of Xiaomi’s IoT strategy built around its smartphones and operating system, with the difference being that Huawei is also a telecom infrastructure supplier.

Despite moves by a few countries, such as the United Kingdom, to exclude Huawei from their 5G rollout plans, Huawei’s carrier segment in 2020 generated revenues on par with the year prior. The COVID-19 pandemic was a boon to the bsuiness, Hu said, which saw global demand in network solutions rise as people worked and learned from home.

Huawei’s IoT push has shown some early traction but competition is fierce. Smartwatches, it said, was one of its major revenue drivers from last year.

Globally, Apple held onto its leading position in wearables with 34.1% of the market in 2020, according to research firm IDC. Huawei ranked third at 9.8%, trailing its domestic rival Xiaomi which accounted for 11.4% of total shipments last year.

Overall, Huawei was leaning heavily on its home market to sustain growth in 2020. China accounted for 65.5% of its total revenues, growing by 15.4% year-over-year. Meanwhile, revenues fell 12.2% in Europe, the Middle East and Africa, was down 8.7% in the rest of Asia and down 24.5% in the Americas.

#asia, #china, #earnings, #huawei, #tc

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GameStop (the stock) and GameStop (the retailer) continue to be worlds apart

It may take more than one bad earnings report to pop this bubble...

Enlarge / It may take more than one bad earnings report to pop this bubble…

The last time GameStop announced its quarterly earnings, in early December, the stock market valued the video game retailer at about $1 billion. Following a worse-than-expected earnings report released Tuesday night, the company now has a market cap of just under $10 billion as of Wednesday morning.

Sure, that’s down roughly 18 percent from Tuesday’s closing price, and off roughly 44 percent from a January peak that saw the stock offering become a poster child for the retail investor-driven “meme stock” phenomenon. Still there’s not much in this week’s report to suggest that GameStop as a company is worth ten times as much as it was just three months ago, much less the higher valuations it briefly enjoyed in the interim.

Signs of a turnaround?

Overall, GameStop’s latest earnings report shows a company still struggling to turn itself around. For the full fiscal year, the company lost $215 million on net, improving on a net loss of just over $470 million the year prior. Net sales for the year were down over 21 percent, to $5.09 billion, a decline GameStop blamed in part on its “de-densification efforts” (i.e. closing nearly 700 stores). Even taking that move into account, though, sales for comparable stores were down 9.5 percent for the year.

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#earnings, #gamestop, #gaming-culture, #retail, #stock, #value

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Pinduoduo steals Alibaba’s crown with 788M annual active users

For the first time, Pinduoduo has surpassed Alibaba in annual active users, marking the Chinese e-commerce upstart’s meteoric rise over the course of five years.

The milestone also indicates Pinduoduo has overcome the early stereotype that it was an app for users in China’s less developed, low-tier cities. Pinduoduo made its name by removing intermediary distributors and selling cheap fruits and daily items, but it has gradually diversified its offerings to be all-encompassing, like heavily discounted iPhones.

The company went public on NASDAQ in 2018 and counts Tencent as a major shareholder and partner. It recorded 788 million annual active users in 2020, according to its Q4 earnings report that just came out. Alibaba lagged slightly behind at 779 million active users through the year.

In terms of monthly active users, though, Alibaba enjoyed a great lead at 902 million in December. Pinduoduo’s MAU of the month was 720 million.

Both companies still have room to grow as China had 989 million internet users as of 2020, according to a report from the country’s top cyberspace authority.

Alibaba, founded 21 years ago, was ahead of Pinduoduo in revenue by a wide margin, partly because of a larger transaction volume and a thriving cloud computing business. Alibaba ended the December quarter with 221 billion yuan or $33.88 billion in revenue, compared to Pinduoduo’s 26.55 billion yuan.

Farm produce remains at the core of Pinduoduo, which was founded by ex-Googler Colin Huang. Huang today stepped down as chairman of the company and will devote his time to research in the food and life sciences, which Pinduoduo believes could drive future growth of its “agriculture platform.”

Pinduoduo doesn’t just want to bring produce from farmers to urban consumers. In recent years, it has also thrown itself into agri-tech by piloting AI-powered farms and training farmers to be savvy online vendors. These strategies are in line with Beijing’s push to boost China’s rural economy, which affects the lives of hundreds of millions.

The e-commerce upstart has a big goal: selling $145 billion worth of agricultural products annually by 2025. It seems to be on track. The firm’s gross merchant volume, an e-commerce metric for transactions, from agricultural products doubled to more than 270 billion yuan or $41.5 billion in 2020. Its marketplace boasted 12 million farmers selling directly to consumers.

“Pinduoduo started with agricultural products,” says Chen Lei, current chairman and CEO at Pinduoduo, in a statement. “[W]e hope that Pinduoduo can one day become the largest grocer in the world.”

While selling grocery isn’t as lucrative as, say, electronics, it could be an effective way for user acquisition as the cost of trying out fruits sold on Pinduoduo is relatively low.

As the firm pursues its agricultural dream, it has yet to turn profitable. Pinduoduo’s net loss shrank to 1.38 billion yuan or $210.9 million in the quarter, compared with 1.75 billion yuan in the same quarter of 2019.

#asia, #china, #earnings, #ecommerce, #farming, #pinduoduo, #tc

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Snowflake latest enterprise company to feel Wall Street’s wrath after good quarter

Snowflake reported earnings this week, and the results look strong with revenue more than doubling year-over-year.

However, while the company’s fourth quarter revenue rose 117% to $190.5 million, it apparently wasn’t good enough for investors, who have sent the company’s stock tumbling since it reported Wednesday after the bell.

It was similar to the reaction that Salesforce received from Wall Street last week after it announced a positive earnings report. Snowflake’s stock closed down around 4% today, a recovery compared to its midday lows when it was off nearly 12%.

Why the declines? Wall Street’s reaction to earnings can lean more on what a company will do next more than its most recent results. But Snowflake’s guidance for its current quarter appeared strong as well, with a predicted $195 million to $200 million in revenue, numbers in line with analysts’ expectations.

Sounds good, right? Apparently being in line with analyst expectations isn’t good enough for investors for certain companies. You see, it didn’t exceed the stated expectations, so the results must be bad. I am not sure how meeting expectations is as good as a miss, but there you are.

It’s worth noting of course that tech stocks have taken a beating so far in 2021. And as my colleague Alex Wilhelm reported this morning, that trend only got worse this week. Consider that the tech-heavy Nasdaq is down 11.4% from its 52-week high, so perhaps investors are flogging everyone and Snowflake is merely caught up in the punishment.

Snowflake CEO Frank Slootman pointed out in the earnings call this week that Snowflake is well positioned, something proven by the fact that his company has removed the data limitations of on-prem infrastructure. The beauty of the cloud is limitless resources, and that forces the company to help customers manage consumption instead of usage, an evolution that works in Snowflake’s favor.

“The big change in paradigm is that historically in on-premise data centers, people have to manage capacity. And now they don’t manage capacity anymore, but they need to manage consumption. And that’s a new thing for — not for everybody but for most people — and people that are in the public cloud. I have gotten used to the notion of consumption obviously because it applies equally to the infrastructure clouds,” Slootman said in the earnings call.

Snowflake has to manage expectations, something that translated into a dozen customers paying $5 million or more per month to Snowflake. That’s a nice chunk of change by any measure. It’s also clear that while there is a clear tilt toward the cloud, the amount of data that has been moved there is still a small percentage of overall enterprise workloads, meaning there is lots of growth opportunity for Snowflake.

What’s more, Snowflake executives pointed out that there is a significant ramp up time for customers as they shift data into the Snowflake data lake, but before they push the consumption button. That means that as long as customers continue to move data onto Snowflake’s platform, they will pay more over time, even if it will take time for new clients to get started.

So why is Snowflake’s quarterly percentage growth not expanding? Well, as a company gets to the size of Snowflake, it gets harder to maintain those gaudy percentage growth numbers as the law of large numbers begins to kick in.

I’m not here to tell Wall Street investors how to do their job, anymore than I would expect them to tell me how to do mine. But when you look at the company’s overall financial picture, the amount of untapped cloud potential and the nature of Snowflake’s approach to billing, it’s hard not to be positive about this company’s outlook, regardless of the reaction of investors in the short term.

#cloud, #data-lakes, #earnings, #enterprise, #snowflake, #tc, #wall-street

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Salesforce delivers, Wall Street doubts as stock falls 6.3% post-earnings

Wall Street investors can be fickle beasts. Take Salesforce as an example. The CRM giant announced a $5.82 billion quarter when it reported earnings yesterday. Revenue was up 20% year over year. The company also reported $21.25 billion in total revenue for the just closed FY2021, up 24% YoY. If that wasn’t enough, it raised its FY2022 guidance (its upcoming fiscal year) to over $25 billion. What’s not to like?

You want higher quarterly revenue, Salesforce gave you higher revenue. You want high growth and solid projected revenue — check and check. In fact, it’s hard to find anything to complain about in the report. The company is performing and growing at a rate that is remarkable for an organization of its size and maturity — and it is expected to continue to perform and grow.

How did Wall Street react to this stellar report? It punished the stock with the price down over 6%, a pretty dismal day considering the company brought home such a promising report card.

2/6/21 Salesforce stock report with stock down 6.31%

Image Credits: Google

So what is going on here? It could be that investors simply don’t believe the growth is sustainable or that the company overpaid when it bought Slack at the end of last year for over $27 billion. It could be it’s just people overreacting to a cooling market this week. But if investors are looking for a high growth company, Salesforce is delivering that

While Slack was expensive, it reported revenue over $250 million yesterday, pushing it over the $1 billion run rate with more than 100 customers paying over $1 million in ARR. Those numbers will eventually get added to Salesforce’s bottom line.

Canaccord Genuity analyst David Hynes Jr wrote that he was baffled by investor’s reaction to this report. Like me, he saw a lot of positives. Yet Wall Street decided to focus on the negative, and see “the glass half empty” as he put it in his note to investors.

“The stock is clearly in the show-me camp, which means it’s likely to take another couple of quarters for investors to buy into the idea that fundamentals are actually quite solid here, and that Slack was opportunistic (and yes, pricey), but not an attempt to mask suddenly deteriorating growth,” Hynes wrote.

During the call with analysts yesterday, Brad Zelnick from Credit Suisse asked how well the company could accelerate out of the pandemic-induced economic malaise, and Gavin Patterson, Salesforce’s president and chief revenue officers says the company is ready whenever the world moves past the pandemic.

“And let me reassure you, we are building the capability in terms of the sales force. You’d be delighted to hear that we’re investing significantly in terms of our direct sales force to take advantage of that demand. And I’m very confident we’ll be able to meet it. So I think you’re hearing today a message from us all that the business is strong, the pipeline is strong and we’ve got confidence going into the year,”Patterson said.

While Salesforce execs were clearly pumped up yesterday with good reason, there’s still doubt out in investor land that manifested itself in the stock starting down and staying down all day. It will be as Hynes suggested up to Salesforce to keep proving them wrong. As long as they keep producing quarters like the one they had this week, they should be just fine, regardless of what the naysayers on Wall Street may be thinking today.

#cloud, #crm, #earnings, #enterprise, #marc-benioff, #saas, #salesforce, #stock-price

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Jumia co-CEO Jeremy Hodara talks African e-commerce, and his company’s path to profitability

This month, African e-commerce giant Jumia released its second full-year financials for Q4 and its fiscal year 2020. The results were mixed — active customers and gross profit increased, while orders and gross merchandise volume (GMV) fell.

A particular feature that has troubled the company since its inception in 2012 was also present, namely persistent adjusted EBITDA and operating losses. However, those metrics fell year over year, and the company, in a statement, said that it had demonstrated “meaningful progress on our path to profitability.”

The unevenness of Jumia’s business is also reflected in how its share price performed in the past year. In March 2020, the company hit rock bottom and traded at an all-time low of $2.15 after facing fraud allegations. But it hit an all-time high of $69.89 almost a year later this February. 

With the release of its financials, two things were top of TechCrunch’s mind: What made Jumia’s value swell by more than 3,000 percent in the last year, and will the e-commerce player’s unending losses end anytime soon?

I spoke with Jumia co-CEO Jeremy Hodara to get his insights on these two questions and on issues that have faced the company in the past.

Talking profitability with Jumia

This interview has edited for length and clarity.

TechCrunch: This time last year, Jumia was trading between $2 and $4. Now it’s within $40 to $50. What do you think has been the driving factor behind this?

Jeremy Hodara: What I think is really important about the stock rise is two things. First, in general, the world realized that there was a big paradigm shift in e-commerce and that e-commerce was the way to go for the future. This is something you can look at for every e-commerce company in the past 12 to 18 months. The second thing that happened is that we at Jumia have been very clear about the opportunities e-commerce represents in Africa. E-commerce is a real problem of access to consumption and has a strong value proposition to those who necessarily don’t fancy brick-and-mortar stores in Africa.

What we never really have proven is that you can build a profitable e-commerce business. However, I think that will change soon because what we’ve done quarter after quarter is to be disciplined to bring clarity that we’re going after a profitable business model and profitable growth. And as people understood and saw what we were doing, it also gave them more confidence about how exciting this opportunity is. In my opinion, what happened in the last 12 months was the combination of people understanding how important e-commerce is worldwide. Secondly, Jumia brought proof points that it was building a sustainable and profitable business model.

Would you say Andrew Left’s reversal in October and his decision to take long positions at Jumia also affected the share price?

Not really. Like I said earlier, I think it had to do with the story of e-commerce change for the future. That didn’t start in October; it started months before. Also, we being disciplined quarter after quarter to build what’s right started months before, so I can’t really comment if his decision affected our share price or if an investor’s negative or positive comments would change market sentiment towards our stock.

You’ve talked about how Jumia is trying to build a profitable business. But how’s it going to do that if the company reports losses quarter after quarter and year after year?

I think we’re on the right path, considering that our EBITDA losses reduced by 47 percent last quarter, and we’ll be trying to do so every quarter. We want to go about it by improving the efficiency of the business and opening new avenues for growth.

The most exciting thing about e-commerce is that first, you build large assets for your own use, but it becomes relevant for other stakeholders over time. For us, we have an application and website with very engaged visitors, and we’re exploring having third-party advertisers who place ads on the platform.

Our logistics service is also another way. We’re building tools and technology to equip our logistics partners and help them become more productive. This drives our costs per delivery down and is the type of benefit that comes with scaling. So I think there’s a path to profitability by opening the assets we’ve built for ourselves to benefit our ecosystem.

Jumia’s expenses dropped last year, but revenue also dropped despite a little increase in customer base. Aren’t those worrying signs?

On the revenue side, here’s how we should look at it. When you’re a marketplace, your revenue is the commission that you make from a transaction. So if you’re a seller on Jumia and sell something that costs $100 and your commission is 10 percent, your revenue inside the P&L of Jumia will be $10. If I buy a product from you at $90 and sell it to my consumer for $100, I’ll record $100 as the revenue.

That’s the insurance from the financial pinpoint between what you call the third-party and the first-party model. At the first-party model, you record as the revenue the value of the product. At the marketplace, you only record the commission. Jumia has, give or take, 10 percent of its business as the first-party model and 90 percent as the marketplace model. But that percentage changed over time, and when it did, you can see how the revenue went down.

So we don’t base our profitability on revenue. What is the right KPI for us is the gross profit as it shows the monetization of Jumia. It has been growing quarter after quarter, this time by 12% percent. Our active consumers growing 12 percent from 6.1 million in Q4 2019 to 6.8 million in Q4 2020 shows a disciplined growth towards profitability.

If there’s indeed a path to profitability, why did Jumia investors — Rocket Internet and MTN — exit the company? And does that put pressure on the company?

Oh, not at all. The fact that Jumia was able to gain support from the companies was a blessing, and they’ve come a long way with us. But like any investor after six to nine years, I think it was time for them to decide to leave the company, and I’ll say the company was lucky to have had them along our side from the beginning. Well, I can’t say for them, but for myself, I don’t think one can say that their leaving after so many years is a sign of distrust in our ability to become profitable.

One of the positives of your financials was JumiaPay. Does it tie into Jumia’s journey to being profitable?

JumiaPay is an amazing opportunity for us. Once you have a great commerce platform, you have a fantastic opportunity to build a great payments solution for your consumers. We can see that consumers are adopting it very fast, and I think this is because the platform also gives them access to other digital services where they top up their phone, pay bills and get loans. Also, it is a great payment method for consumers who want to prepay for services. And when you prepay for products, you make logistics more efficient and have more sales.

Sales remind me of the fraud issues in 2019 when some J-Force team members engaged in improper sales practices. What is Jumia doing to avoid situations like that?

It’s a lesson we’ve learnt, and we have put in the right compliance, the right internal control team to resolve such situations. I’ll say one of the reasons why we’re becoming one of the most professional organizations in Africa is because we now have these systems in place.

As an African company, how is Jumia addressing concerns around diversity, especially at top positions?

I think what’s really African with Jumia is who we are serving, our African sellers, our African consumers and our African team. In Nigeria, Juliet Anammah, who was the CEO of Jumia Nigeria, is now the chairperson of Jumia Group. I don’t know what constitutes an African or a non-African company, but what I can tell you is that our team is African, our consumers are African, and we’re selling on the continent every day. I think that’s what should make sense to our ecosystem.

#africa, #e-commerce, #earnings, #ecommerce, #jumia, #tc

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Zynga CEO says he’s on the lookout for more acquisitions

If you’re wondering why Zynga issued $875 million in convertible notes at the end of 2020, CEO Frank Gibeau said the company was fundraising to build up a “war chest” for more acquisitions.

“As you know, we’ve been a consolidator inside of this business for a while, and we’re going to continue to be on offense [looking for] great companies, great cultures, great teams that we can bring into Zynga,” Gibeau told me.

In the last year alone, Zynga acquired two game studios based in Istanbul —Peak Games for $1.8 billion and Rollic for $180 million (in the latter case, it only acquired 80% of the company initially).

“There are now four or five examples of us having done this successfully,” Gibeau said. “When we started, nobody was picking up our phone calls. Now when we call, we are a bit of a destination of choice for a lot of developers out there.”

Gibeau and I were speaking about Zynga’s fourth quarter earnings, in which the company reported all-time high revenue of $616 million and a net loss of $53 million (though another measure of profitability, adjusted EBITDA, was actually positive at $90 million). Daily active users were up 77% year over year, to 36 million, while monthly active users were up 103%, to 134 million.

Looking ahead, Zynga is forecasting revenue of $2.6 billion (a 32% year-over-year increase) and adjusted EBITDA of $450 million for 2021. And while another acquisition could significantly grow the business, Gibeau noted that the company’s forecasts have “no acquisitions assumed,” adding, “We’re in a great position, because we would prefer to do acquisitions in 2021, but we don’t have to do any deals.”

There are new games lined up for 2021, including Puzzle Combat, Farmville 3 and a Star Wars title. The company also plans to continue developing hyper-casual games, to develop more cross-platform games, to expand internationally and to continue building out its ad network — in fact, he suggested that Apple’s upcoming privacy changes could be good for Zynga.

“A lot of traditional marketing services are not going to be able to survive very well,” he said. “Because we’re a first-party data company — all the data we generate is coming to our services from our games — and because we’re at scale … IDFA is an opportunity for our company.”

#advertising-tech, #earnings, #frank-gibeau, #gaming, #media, #zynga

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Peloton will pump $100M into delivery logistics to ease supply concerns

This probably falls under “good problems,” in the grand scheme of things. After another record quarter, Peloton has announced that it will invest more than $100 million in air and ocean freight deliveries due to “longer-than-acceptable wait times for the delivery of our products.”

The fitness company is among those tech firms that have seen a tremendous rise in interest amid the pandemic. In fact, it seems these days that VCs can’t pump money into at-home fitness solutions quickly enough to appease their interest. 2020 was a banner year for home workout solutions, from LuluLemon’s $500 million acquisition of Mirror to new platforms from Apple and Samsung.

In all, Peloton pulled in $1.06 billion in revenue last quarter, marking a more than 200% increase, year over year. The numbers beat Wall Street expectations and are showing no sign of slowing, with another massive quarter expected for the connected fitness brand.

The market did balk slightly at Peloton’s admission that, “While this investment will dampen our near-term profitability, improving our member experience is our first priority.” Clearly this big spend on reducing supply bottlenecks is a longer-term play.

Of course, it remains to be seen how the company’s earnings will stabilize after the pandemic. I’d anticipate there will be some slowing for Peloton and other brands when vaccines make returning to gyms a more widescale phenomenon. Still, home workouts — like remote work — may well be an aspect that is fundamentally transformed even with COVID-19 in the rearview.

#connected-fitness, #earnings, #fitness, #hardware, #peloton

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Sony says semiconductor shortage makes increased PS5 production difficult

PlayStation 4 vs PlayStation 5 comparison pic, horizontal orientation

Enlarge (credit: Sam Machkovech)

Sony shipped 4.5 million PlayStation 5 consoles worldwide through the end of 2020, the company revealed in an earnings report Wednesday. The number is broadly comparable to the 4.5 million PS4 consoles shipped in that system’s 2013 holiday launch quarter. But potential PS5 customers shouldn’t expect the rate of production to increase, Sony said, despite widespread retail sellouts that have led to substantial secondhand markups.

“It is difficult for us to increase production of the PS5 amid the shortage of semiconductors and other components,” Sony CFO Hiroki Totoki said during a briefing accompanying the results. “We have not been able to fully meet the high level of demand from customers [but] we continue to do everything in our power to ship as many units as possible to customers who are waiting for a PS5.”

Overall, Sony’s Game and Network Services division saw its holiday quarter profits increase nearly 50 percent year over year. The company now forecasts the best fiscal year performance for the gaming division in company history, thanks in large part to an increase in PlayStation Plus subscriptions (which now sit at 47.4 million). A full 87 percent of PS5 owners so far subscribe to PlayStation Plus, Sony said, making those subscriptions key to the company’s profits going forward.

Read 7 remaining paragraphs | Comments

#earnings, #gaming-culture, #playstation, #profit, #ps5, #sony

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Alibaba Cloud turns profitable after 11 years

Alibaba Cloud, the cloud computing arm of Chinese e-commerce giant Alibaba, became profitable for the first time in the December quarter, the company announced in its earnings report.

The firm’s cloud unit achieved positive adjusted EBITA (earnings before interest, taxes, and amortization) during the quarter, after being in business since 2009. The milestone is in part a result of the “realization of economies of scale,” Alibaba said.

Alibaba Cloud, which incorporates everything from database, storage, big data analytics, security, machine learning to IoT services, has dominated China’s cloud infrastructure market for the past few years and its market share worldwide continues to grow. As of 2019, the cloud behemoth was the third-largest public cloud company (providing infrastructure-as-a-service) in the world with a 9% market, trailing behind Amazon and Microsoft, according to Gartner.

COVID-19 has been a boon to cloud and digital adoption around the world as the virus forces offline activities online. For instance, Alibaba notes in its earnings that demand for digitalization in the restaurant and service industry remains strong in the post-COVID period in China, a trend that benefits its food delivery and on-demand services app, Ele.me. The firm’s cloud revenue grew to $2.47 billion in the December quarter, primarily driven by “robust growth in revenue from customers in the internet and retail industries and the public sector.”

Commerce remained Alibaba’s largest revenue driver in the quarter accounting for nearly 70% of revenue, while cloud contributed 7%.

Tencent’s cloud segment is Alibaba Cloud’s closest rival. As of 2019, it had a 2.8% market globally, according to Gartner. The industry in China still has ample room for growth, as Alibaba executive vice-chairman Joe Tsai pointed out in an analyst call from last August.

“Based on the third-party studies that we’ve seen, the China cloud market is going to be somewhere in the $15 billion to $20 billion total size range, and the U.S. market is about eight times that. So the China market is still at a very early stage,” said Tsai.

“We feel very good, very comfortable to be in the China market and just being an environment of faster digitization and faster growth of usage of cloud from enterprises because we’re growing from such a smaller base, about one-eighth the base of that of the U.S. market.”

A key strategy to grow Alibaba Cloud is the integration of cloud into Alibaba’s enterprise chat app Dingtalk, which the company hopes can drive industries across the board onto cloud services. It’s a relationship that echoes that between Microsoft 365 and Azure, as president of Alibaba Cloud, Zhang Jianfeng, previously suggested in an interview.

“We don’t want to just provide cloud in terms of infrastructure services,” said Alibaba CEO Daniel Zhang in the August earnings call. “If we just do it as an infrastructure service, as SaaS services, then price competition is inevitable, and then all the cloud service is more like a commodity business. Today, Alibaba’s cloud is cloud plus intelligence services, and it’s about cloud plus the power of the data usage.”

#alibaba, #alibaba-cloud, #asia, #china, #cloud, #cloud-computing, #earnings, #tc

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Google Cloud lost $5.6B in 2020

Google continues to bet heavily on Google Cloud and while it is seeing accelerated revenue growth, its losses are also increasing. For the first time today, Google disclosed operating income/loss for its Google Cloud business unit in its quarterly earnings today. Google Cloud lost $5.6 billion in Google’s fiscal year 2020, which ended December 31. That’s on $13 billion of revenue.

While this may look a bit dire at first glance (cloud computing should be pretty profitable, after all), there’s different ways of looking at this. On the one hand, losses are mounting, up from $4.3 billion in 2018 and $4.6 billion in 2019, but revenue is also seeing strong growth, up from $5.8 billion in 2018 and $8.9 billion in 2019. What we’re seeing here, more than anything else, is Google investing heavily in its cloud business.

Google’s Cloud unit, led by its CEO Thomas Kurian, includes all of its cloud infrastructure and platform services, as well as Google Workspace (which you probably still refer to as G Suite). And that’s exactly where Google is making a lot of investments right now. Data centers, after all, don’t come cheap and Google Cloud launched four new regions in 2020 and started work on others. That’s on top of its investment in its core services and a number of acquisitions.

Image Credits: Google

“Our strong fourth quarter performance, with revenues of $56.9 billion, was driven by Search and YouTube, as consumer and business activity recovered from earlier in the year,” Ruth Porat, CFO of Google and Alphabet, said. “Google Cloud revenues were $13.1 billion for 2020, with significant ongoing momentum, and we remain focused on delivering value across the growth opportunities we see.”

For now, though, Google’s core business, which saw a strong rebound in its advertising business in the last quarter, is subsidizing its cloud expansion.

Meanwhile, over in Seattle, AWS today reported revenue of $12.74 billion in the last quarter alone and operating income of $3.56 billion. For 2020, AWS’s operating income was $13.5 billion.

#alphabet, #amazon-web-services, #artificial-intelligence, #aws, #ceo, #cfo, #cloud-computing, #cloud-infrastructure, #companies, #computing, #diane-greene, #earnings, #google, #google-cloud, #google-cloud-platform, #ruth-porat, #seattle, #thomas-kurian, #world-wide-web

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Jeff Bezos will no longer be CEO of Amazon as of later this year

Amazon founder and current CEO Jeff Bezos will be transitioning to Executive Chair of the company sometime in Q3 of this year, with current AWS CEO Andy Jassy taking over the top executive role at the commerce company. Amazon announced the news alongside its earnings results on Tuesday.

Amazon initially rose after-hours as the market digested both the company’s earnings and its CEO news. The company beat on both earnings per share, and revenues. That makes it hard to untangle the market’s response to its busy set of announcements. Update: Amazon shares have now dipped into negative territory as investors had more time to parse the company’s total collection of announcements.

Amazon crushed earnings-per-share and revenue expectations in Q4 2020. So, any investor worried about the exit of Bezos from the CEO chair were given some measure of of performance-based amelioration. Amazon’s quarter was its first to break the $100 billion mark, bringing in $125.6 billion in revenue against an anticipated $119.7 billion. And, the company’s $14.09 per share in earnings was nearly double an expected $7.23.

Jassy has been identified previously as the likely successor to Bezos, after leading Amazon Web Services (AWS) to the success it currently enjoys as a leader in the cloud computing space. AWS grew its revenues by 28% in the quarter, lower than its year-ago growth rate of 34%. AWS’s net revenues expanded from $9.95 in the year-ago Q4 to $12.74 billion during the fourth quarter of 2020. Operating income at AWS scaled as well, from $2.60 billion in Q4 2019 to $3.56 billion in the most recent quarter.

Notably Microsoft’s Azure business grew 50% in its most recent earnings period.

Bezos sent an email to Amazon employees, which the company also released publicly on its blog on Tuesday following the announcement. In the missive, he says that while he continues to “find [his] work meaningful and fun,” he wants to be able to devote proper time and attention to his “Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and [his] other passions.”

Developing…

#amazon, #amazon-web-services, #andy-jassy, #aws, #ceo, #computing, #earnings, #executive, #jeff-bezos, #tc, #technology

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Facebook predicts ‘significant’ obstacles to ad targeting and revenue in 2021

While Facebook’s fourth quarter earnings report included solid user and revenue numbers, the company sounded a note of caution for 2021.

In the “CFO outlook” section of the earnings release, Facebook said it anticipates facing “more significant advertising headwinds” this year.

“This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape,” the company wrote. “While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter.”

Facebook has already been waging a bit of a campaign against Apple’s upcoming privacy changes, which will require app developers to ask users for permission in order to use their IDFA identifiers for ad targeting — although the PR focus has been the impact on small businesses, not Facebook.

Facebook also highlighted two broad economic trends that it says it has benefited from during the pandemic: The “ongoing shift toward online commerce” and “the shift in consumer demand toward products and away from services.” But again, it took a cautious stance, writing that “a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth.”

As for those fourth quarter earnings earnings, Facebook reported $28.1 billion in revenue, of which $27.2 billion came from ads, with earnings per share of $3.88. Wall Street analysts had predicted EPS of $3.22 and revenue of $26.4 billon.

Facebook also reported an average of 1.84 billion daily active users and 2.8 billion monthly active users for the quarter, up 11% and 12% year over year, respectively.

“We had a strong end to the year as people and businesses continued to use our services during these challenging times,” said CEO Mark Zuckerberg in a statement. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community and help people just have fun.”

As of 4:45 p.m. EST, Facebook shares were up 0.7% in after-hours trading.

#advertising-tech, #earnings, #facebook, #mark-zuckerberg, #privacy

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Microsoft earnings: Xbox hardware sales shot up 86% with Series X/S

The Xbox Series X, which launched in November.

Enlarge / The Xbox Series X, which launched in November. (credit: Sam Machkovech)

Microsoft delivered its earnings report for Q2 2021 yesterday, and the company has continued its sprint of very strong quarters, again driven primarily by Azure and the cloud. But that same old story isn’t the only one here: the report also tells us a thing or two about the new Xbox’s performance, as well as Windows and Office.

Overall, Microsoft beat analyst expectations. The company’s top-level revenue grew 17 percent year over year, reaching $43.08 billion. Analysts had expected $40.18 billion. $14.6 billion of that was from the business segment Microsoft calls “Intelligent Cloud,” which most notably includes Azure but also some other professional services like GitHub.

Cloud wasn’t the only positive story, though. Personal Computing including Windows, Xbox, and Surface grew 15 percent compared to the previous year to just over $15 billion. That included an 86 percent increase in Xbox hardware sales, as well as a 40 percent increase in Xbox content and surfaces—the former of those includes the launch of the Xbox Series X/S consoles in November, and the latter includes Game Pass, which Microsoft has been pushing hard as a core value proposition for the Xbox game platform.

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#earnings, #microsoft, #microsoft-azure, #office, #satya-nadella, #tech, #windows, #xbox

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IBM transformation struggles continue with cloud and AI revenue down 4.5%

A couple of months ago at CNBC’s Transform conference, IBM CEO Arvind Krishna painted a picture of a company in the midst of a transformation. He said that he wanted to take advantage of IBM’s $34 billion 2018 Red Hat acquisition to help customers manage a growing hybrid cloud world, while using artificial intelligence to drive efficiency.

It seems like a sound enough approach. But instead of the new strategy acting as a big growth engine, IBM’s earnings today showed that its cloud and cognitive software revenues were down 4.5% to $6.8 billion. Meanwhile cognitive applications — where you find AI incomes — were flat.

If Krishna was looking for a silver lining, perhaps he could take solace in the fact that Red Hat itself performed well, with revenue up 18% compared to the year-ago period, according to the company. But overall the company’s revenue declined for the fourth straight quarter, leaving the executive in much the same position as his predecessor Ginni Rometty, who led IBM during 22 straight quarters of revenue losses.

Krishna laid out his strategy in November, telling CNBC, “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey.” So far the approach is simply not generating the growth Krishna expected.

The company is also in the midst of spinning out its legacy managed infrastructure services division, which, as Krishna said in the same November interview, should allow Big Blue to concentrate more on its new strategy. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” he said.

While it’s certainly too soon to say his transformation strategy has failed, the results aren’t there yet, and IBM’s falling top line has to be as frustrating to Krishna as it was to Rometty. If you guide the company toward more modern technologies and away from the legacy ones, at some point you should start seeing results, but so far that has not been the case for either leader.

Krishna continued to build on this vision at the end of last year by buying some additional pieces like cloud applications performance monitoring company Instana and hybrid cloud consulting firm Nordcloud. He did so to build a broader portfolio of hybrid cloud services to make IBM more of a one-stop shop for these services.

As retired NFL football coach Bill Parcells used to say, referring to his poorly performing teams, “you are what your record says you are.” Right now IBM’s record continues to trend in the wrong direction. While it’s making some gains with Red Hat leading the way, it’s simply not enough to offset the losses, and something needs to change.

#artificial-intelligence, #arvind-krishna, #cloud, #earnings, #enterprise, #hybrid-cloud, #ibm

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Netflix shares soar as it passes 200M paying subscribers

Netflix capped off a year of impressive streaming growth by adding 8.5 million net new paying subscribers during the fourth quarter.

That means the streaming giant now has a total of 204 million paying subscribers worldwide — net growth of 37 million new subscribers for the full year, up from 28 million net additions in 2019.

The company also reported that it brought in $6.64 billion in revenue and earnings per share of $1.19 during Q4, compared to analyst predictions of $6.63 billon in revenue and EPS of $1.39.

In response to the earnings report, Netflix shares were up 12.4% in after-hours trading (as of 4:43pm Eastern).

Looking ahead, Netflix projected that it will add 6.0 million new subscribers in the first quarter of 2021 — the same as its old forecast for Q4, and less than half the 15.8 million subscribers that Netflix added in Q1 2020 (right as lockdowns were beginning in the United States).

The company’s investor letter also highlights a number of hit titles from the quarter, projecting that 72 million households will “choose to watch” (watch at least two minutes of) “The Midnight Sky” in its first 28 days of release, while 68 million households chose to watch “Holidate.” It also said the most recent season of “The Crown” was its most popular yet, with more than 100 million households choosing to watch the show “since its initial launch.”

“In addition to titles with big viewership, we also aspire to have hits that become part of the cultural zeitgeist,” Netflix said. “In 2020 alone, we had ​’Tiger King,​’ ‘​Bridgerton​’ and ​’The Queen’s Gambit​.’ … In fact, Netflix series accounted for nine out of the 10 most searched shows globally in 2020, while our films represented two of the top 10.”

The company acknowledged growing competition from new(-ish) streaming services like Disney+, Peacock and HBO Max, but its user numbers still put it far ahead of any streaming competition — Disney+, for example, had 86.8 million subscribers as of early December (Disney’s service launched a little over a year ago and is still rolling out globally).

“Our strategy is simple: if we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment,” Netflix said. “This past year is a testament to this approach. Disney+ had a massive first year (87 million paid subscribers!) and we recorded the biggest year of paid membership growth in our history.”

eMarketer analyst Eric Haggstrom made a similar point in a statement:

Netflix ended 2020 on a high note, adding over 36 million subscribers and passing 200 million subscribers. Despite increasing competition from Disney and others, Netflix had its strongest year yet and will look to grow further in 2021, with a strong content release slate already planned. So far, Netflix has been a clear winner of the streaming wars.

#earnings, #media, #netflix, #streaming-media, #streaming-services

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Salesforce beats growth expectations, as investors digest the Slack acquisition

Today after the bell, Salesforce reported its third-quarter earnings for its fiscal 2021, a period that ended October 31, 2020. The CRM giant reported top-line revenue of $5.42 billion, up 20% from the year-ago period. Salesforce also had net income of $1.08 billion and earnings per share of $1.15.

Analysts had expected the company to earn $0.75 per share, off of revenues of $5.25 billion, according to Yahoo Finance.

Shares of Salesforce were off after-hours, falling around 3.6% at the time of writing. It was not clear if the company’s share price performance was due to its Q3 results, its raised Q4 guidance, or its new fiscal 2022 expectations, or the newly announced Slack deal.

As TechCrunch reported moments ago, Salesforce will buy Slack for $27.7 billion, in a cash and stock deal that was fully priced into shares of the smaller company, which dropped a little over a point on the news, having risen by nearly 50% since the deal’s existence first leaked.

Holders of Slack will be rewarded for their patience. Now it’s up to Salesforce leadership to prove that the huge buy will help boost the company’s growth.

Salesforce told investors today that it anticipates Q4 fiscal 2021 revenues of $5.665 billion to $5.675 billion, which works out to growth of around 17% from the year-ago period. The company also anticipates that it will grow around 17% in Q1 of its fiscal 2022.

But Salesforce expects to grow 21% in all of its fiscal 2022. How does it intend to accelerate? Its projections include Slack:

Full Year FY22 revenue guidance includes contributions from Slack Technologies, Inc. of approximately $600 million, net of purchase accounting, and assumes a closing date in late Q2 and Acumen Solutions, Inc. of approximately $150 million, net of purchase accounting, and assumes a closing date within Q2.

So, Salesforce investors, after two anticipated quarters of 17% growth coming up, your company will accelerate up to 21% growth for the next fiscal year. Is that worth $27.7 billion?

 

#earnings, #enterprise, #salesforce, #slack, #tc

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Lyft sees ride revenues recover by nearly 50% in just three months

Shares of Lyft are riding high, popping more than 7% in after-hours trading today after the American ride-hailing giant reported its Q3 earnings.

Lyft, which competes with Uber for rideshare, reported revenues of $499.7 million in third-quarter, a 48% drop from the $955.6 million in same year-ago period. That lackluster result is still a 47% improvement over last quarter when Lyft reported $339.3 million in revenue. That’s good?

Investors were heartened by the improvement and Lyft’s ability to beat analysts revenue expectations of $486.45 million. The company’s net loss of $1.46 per share was worse than expected, but investors appeared more bullish than bearish, buying up Lyft equity and boosting its value after the company’s earnings report.

Lyft’s quarter is a story of year-over-year declines and sequential-quarter gains. On that theme, the company’s active riders fell 44% compared to the year-ago quarter, and rose 44% compared to Q2 2020. Its revenue per active rider fell 7% compared to Q3 2019, but rose 2% from the sequentially-preceding period.

Like Uber, Lyft is enjoying patience from investors as it digs its way out from a ride-hailing market pummeled by COVID-19; Uber has enjoyed a delivery business and international operations to buffer its ride revenue declines. Lyft, which is focused on the U.S. market and lacks a delivery program like Uber, has been more impacted by the domestic market.

Rising COVID-19 cases and ratcheting lockdowns could threaten Lyft’s recovery. Still, its core economics are not falling to pieces despite the pandemic. In Q3 2020, Lyft’s contribution margin — a metric that is akin to an adjusted gross margin result — was 49.8%. In the year-ago quarter it was 50.1%.

Lyft will return as long ride volume recovers. Lyft’s next big hurdle is profitability. The company is still on track to achieve adjusted EBITDA profitability by the fourth quarter of 2021 ever with a slower recovery, Logan Green said during the company’s earnings call Tuesday, adding that Lyft is taking an extremely disciplined approach to increase its operating leverage.” Lyft is positioned to achieve that profitability goal with about 30% fewer rides than what was required when the originally issued its Q4 2021 profitability target last fall, Green said.

Lyft wrapped Q3 with $2.5 billion in cash and equivalents. Its operations have consumed $1.1 billion in cash so far this year, up around $156 million in the third quarter. At $50 million a month, Lyft has lots of room to get back to more pedestrian losses, and year-over-year growth.

#automotive, #earnings, #lyft, #tc, #uber

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Alibaba passes IBM in cloud infrastructure market with over $2B in revenue

When Alibaba entered the cloud infrastructure market in earnest in 2015 it had ambitious goals, and it has been growing steadily. Today, the Chinese ecommerce giant announced quarterly cloud revenue of $2.194 billion. With that number, it has passed IBM’s $1.65 billion revenue result (according to Synergy Research market share numbers), a significant milestone.

But while $2 billion is a large figure, it’s one worth keeping in perspective. For example, Amazon announced $11.6 billion in cloud infrastructure revenue for its most recent quarter, while Microsoft’s Azure came in second place with $5.9 billion.

Google Cloud has held onto third place, as it has for as long as we’ve been covering the cloud infrastructure market. In its most recent numbers, Synergy pegged Google at 9% market share, or approximately $2.9 billion in revenue.

While Alibaba is still a fair bit behind Google, today’s numbers puts the company firmly in fourth place now, well ahead of IBM. It’s doubtful it could catch Google anytime soon, especially as the company has become more focused under CEO Thomas Kurian, but it is still fairly remarkable that it managed to pass IBM, a stalwart of enterprise computing for decades, as a relative newcomer to the space.

The 60% growth represented a slight increase from the previous quarter’s 59%, but basically means it held steady, something that’s not easy to do as a company reaches a certain revenue plateau. In its earnings call today, Daniel Zhang, chairman and CEO at Alibaba Group said that in China, which remains the company’s primary market, digital transformation driven by the pandemic was a primary factor in keeping growth steady.

“Cloud is a fast-growing business. If you look at our revenue breakdown, obviously, cloud is enjoying a very, very fast growth. And what we see is that all the industries are in the process of digital transformation. And moving to the cloud is a very important step for the industries,” Zhang said in the call.

He believes eventually that most business will be done in the cloud, and the growth could continue for the medium term as there are still many companies who haven’t made the switch yet, but will do so over time.

#alibaba-group, #cloud, #cloud-infrastructure-market-share, #earnings, #enterprise, #tc

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Zynga reports record revenue and strong user growth while still losing $122M

Zynga’s revenue grew to a record $503 million (up 46% year-over-year) in the third quarter, with bookings of $628 million (up 59%), according to its latest earnings report. It also had its best mobile daily active user (31 million) and monthly active user (83 million) numbers in six years.

But things wasn’t all rosy: The company also reported a net loss of $122 million. That compares to net income of $230 million during the same period last year, though that was boosted by the sale of Zynga’s building in San Francisco. As of 4:44pm Eastern, shares were down 4.9% in after-hours trading.

Before earnings were released, CEO Frank Gibeau told me that although growth has become more normal after the pandemic caused “that huge jump” in usage during the late spring and early summer, “Engagement remains elevated and monetization remains elevated. Folks that discovered mobile gaming for the first time returned to it and kept doing it.”

The company predicted further growth in Q4, with revenue up 55% to $570 million. Gibeau said pointed to a “digital holiday” that could have big benefit in mobile gaming, with new mobile on the market, plus social distancing and lockdowns resulting in the fact that “a lot of folks aren’t going to be able to go to stores and buy gifts.”

During the third quarter, Zynga also closed its acquisition of Istanbul-based hyper-casual game publisher Rollic. Gibeau said the team is “fully integrated at this point from an operating standpoint,” but the company won’t start including Rollic in its user numbers until the next quarter.

“We are well-positioned for further M&A,” he added.

#earnings, #gaming, #media, #mobile, #zynga

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Apple, Microsoft and other tech stocks roar as the Presidential election narrows to several states

On the back of sizable gains posted yesterday, tech stocks are once again rising sharply in pre-market trading today. Futures concerning the tech-heavy Nasdaq Composite index are indicating a 3.4% gain this morning, far above a 1.7% gain that the broader S&P 500 index is currently anticipating.

The market capitalization of some of the world’s most valuable companies have added tens of billions of dollars in value this morning, with Apple rising 3.9% in pre-market trading, and Microsoft gaining an even-richer 4.4%.

Smaller key players in the tech market are also rising, with Salesforce gaining 2.9% ahead of the bell, and Twilio adding 3.3% to its own value.

The price of heavily-traded assets have whipsawed during the last 24 hours, with yield on American government debt falling last night — indicating that investors were bullish on the economy as a whole — before rising again when it became clear that no so-called Blue Wave was forming. The prospect of a divided Congress could stifle future economic stimulus, the possibility of which has been a key narrative driver for market trading in recent months.

Precisely why tech stocks are racing higher this morning is not entirely clear. One obvious possibility is that investors are returning to their summer trade, when they bid shares of software-heavy companies higher in hopes of parking their wealth in the firms with the best chance of posting regular growth during a period of intense economic uncertainty.

If a divided Congress means a drag on more stimulus, why not return to the play that worked before?

For tech, and tech-enabled companies hoping to go public before the year ends, or in early 2021, the rally is welcome news. But, as with everything in this election, things could still change.

#apple, #earnings, #microsoft, #salesforce, #twilio

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Tech stocks rip higher on Election Day

Tech stocks shot higher as American voters went to the polls, the gains coming far ahead of results that could indicate who will win the presidency.

American stocks broadly rose, with the S&P 500 index rising just over 2% while the tech-heavy Nasdaq Composite is up just under 2%. SaaS and cloud-focused shares are up a slimmer 1.8% as of the time of writing.

That 2% bump might seem negligible, but consider the past month. The Nasdaq was down just over 8% from all-time highs at the start of trading today. That makes today’s gains worth around a fourth of the gap from its recent declines back to record levels. The Nasdaq fell more than 10% from its recent peak before starting to recover in late-October, making today’s rally part of a developing upward trend.

Depending on how one reads the polling tea leaves, the gains could be read as an endorsement of either candidate’s platform.

Today’s stock market moves come on the back of an uneven technology earnings cycle, with major tech companies swallowing lumps, while some smaller industry players like Five9 rode COVID-19 tailwinds to strong results. Netflix, Intel, Apple, and others struggled to impress investors. Indeed, the domestic stock market’s reaction to earnings beats has been muted this cycle, in contrast to other areas; it appears that American equities were priced to surpass expectations.

For tech, today’s rebound is welcome, possible helping pave the way for a rash of IPO filings that are expected before the year’s end. Airbnb, DoorDash, and others are still candidates for flotation this year.

Certain share prices, notably those of Uber and Lyft, were already on the rise Monday on investor confidence that California voters will pass Proposition 22. The ballot measure, if approved, will exempt the ride-sharing companies from a new California law that forces gig economy workers to be classified as employees rather than contractors.

Pulling back for a moment, Uber’s share price is still down about 3.87% from one month ago. But it’s been recovering, with a pop in the past two days. Uber’s share price closed 2% higher Monday and is now up about 2.7% in trading today. Lyft has experienced an even larger bump with share prices rising 5.67% on Monday. Lyft shares are up 6.39% in midday trading today.

The stakes are high for Uber and Lyft this Election Day. If Proposition 22 fails, the companies say they will have to change their business models. Both companies have threatened temporary shutdowns in the state if forced to comply with the new California law. For now it seems, investors believe Uber and Lyft will be able to continue to operate as they always have.

#earnings, #lyft, #nasdaq, #uber

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PayPal’s earnings don’t excite Wall Street, but bring good news for consumer fintech

PayPal’s stock is down in after-hours trading after reporting third-quarter earnings that beat expectations. It’s not immediately clear why PayPal is losing ground, although it could stem from retail investor having higher expectations than what analysts estimated for the high-flying company.

Despite failing to delight the investing public, it’s possible to see continued strength for the broader fintech industry in its results.

PayPal reported revenues $5.46 billion and adjusted earnings per share of $1.07 in the third quarter of 2020. Both were ahead of analyst expectations of $5.43 billion and $0.94, respectively.

Turning away from PayPal’s income statement, it detailed a wealth of fintech-specific of data to parse, including results that appear to indicate that rising consumer usage of fintech products during the pandemic is continuing. For example, the company reported what it described as the “strongest” pace of growth in its total payment volume in its history.

In numerical terms, PayPal processed $247 billion across, up 38% from the year-ago quarter, and 4 billion payments, up 30% across the same timeframe. For startups that want to facilitate consumer or business payment volume, that’s good news; their market is growing quickly.

PayPal also raised its full-year payment volume growth estimates for the year from the “high 20s” in percentage terms in its Q2 earnings to “approximately 30%” as of the end of Q3 2020, adding to the good fintech news.

Other metrics that PayPal reported were similarly bullish, including Venmo payment processing volume rising 61% compared to the year-ago period to $44 billion. That year-over-year gain was an acceleration from 52% growth in Q2, again compared to year-ago periods.

Finally, PayPal’s “payment transactions per active account on a trailing twelve month basis” grew to 40.1 from 39.2 in the second quarter. Including the Honey deal that closed earlier this year, the number jumps to 41.7.

The results imply winsome ecommerce activity and consumer fintech appetite.

It’s too soon to learn much about from PayPal’s new Venmo credit card, and its cryptocurrency efforts that bolstered the price of bitcoin recently. But core consumer affinity for fintech, viewed through the lens of PayPal’s earnings, looks strong.

Square reports later this week, giving us another look at fintech uptake, as the company processes both business payments and consumer transactions, as well as cryptocurrency purchases.

#earnings, #finance, #paypal, #square

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Q3 earnings find Apple and Google looking to the future for hardware rebounds

“5G is a once-in-a-decade kind of opportunity,” Tim Cook told the media during the Q&A portion of Apple’s Q3 earnings call. “And we could not be more excited to hit the market exactly when we did.”

The truth of the matter is its timing was a mixed bag. Apple was, by some accounts, late to 5G. By the time the company finally announced that it was adding the technology across its lineup of iPhone 12 variants, much of its competition had already beat the company to the punch. Of course, that’s not a huge surprise. Apple’s strategy is rarely a rush to be first.

5G networks are only really starting to come into their own now. Even today, there are still wide swaths of users who will have to default to an LTE connection the majority of the time they use their handsets. The arrival of 5G on the iPhone was really as much about future-proofing this year’s models as anything. Consumers are holding onto phones longer, and in the three or four years before it’s time for another upgrade, the 5G maps will look very different.

Clearly, the new iPhone didn’t hit the market exactly when Apple had hoped; the pandemic saw to that. Manufacturing bottlenecks in Asia delayed the iPhone 12’s launch by a month. That’s going to have an impact on the bottom line of your quarterly earnings. The company saw a 20% drop for the quarter, year-over-year. That’s hugely significant, causing the company’s stock to drop more than 4% in extended trading.

Apple’s diverse portfolio helped curb some of those revenue slides. While the pandemic has generally had a profound impact on consumer spending on “non-essentials,” changing where and how we work has helped bolster Mac and iPad sales, which were up 28 and 46% respectively, year-over-year. It wasn’t enough to completely stop the iPhone stumble, but it certainly brings the importance of a diverse hardware portfolio into sharp relief.

China was a big issue for the company this time around — and the lack of a new, 5G-enabled iPhone was a big contributor. In greater China (including Taiwan and Hong Kong), the company saw a 28% drop in sales. There are a number of reasons to be hopeful about iPhone sales in Q4, however.

As I noted this morning, smartphone shipments were down almost across the board in China for Q3, per new figures from Canalys. Much of that can be chalked up to Huawei’s ongoing issues with the U.S. government. Long the dominant manufacturer in mainland China, the company has been hamstrung by, among other things, a ban on access to Android and other U.S.-made technologies. Apple’s numbers remained relatively steady compared to the competition and Huawei’s issues could present a big hole in the market. With 5G on its side, this next quarter could prove a banner year for the company.

#5g, #alphabet, #amazon, #apple, #earnings, #google, #hardware, #iphone, #mobile, #pixel

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Daily Crunch: Google had a good quarter

Google releases its latest earnings report, Spotify is getting ready to raise prices and Excel gets friendlier to custom data types. This is your Daily Crunch for October 29, 2020.

The big story: Google had a good quarter

Google’s parent company Alphabet released its third-quarter earnings report this afternoon, coming in well ahead of Wall Street expectations thanks in large part to YouTube, which saw revenue rise to $5.0 billion (compared to $3.8 billion during Q3 2019).

Google Cloud also grew revenue from $2.4 billion last year to $3.44 billion in the most recent quarter. Overall, Alphabet reported revenue of $46.2 billion and earnings per share of $16.40, compared to analyst predictions of $42.88 billion in revenue and EPS of $11.21.

The company’s shares quickly rose 8.5% in after-hours trading.

The tech giants

Spotify CEO says company will ‘further expand price increases’ — Although the company didn’t detail its plans, CEO Daniel Ek said the hikes will take place in markets that are more mature for Spotify.

Microsoft now lets you bring your own data types to Excel — That means you can have a “customer” data type, for example, bringing in rich customer data from a third-party service into Excel.

Why Apple’s Q4 earnings look different this year — With Apple’s latest iPhone launch running a few weeks behind this year, it missed the window to be included on Q4.

Startups, funding and venture capital

Donut launches Watercooler, an easy way to socialize online with co-workers — The startup also announced that it has raised $12 million in total funding, led by Accel.

One-click housing startup Atmos raises another $4M from Khosla, real estate strategics and TikTok star Josh Richards — According to CEO Nick Donahue, users have started designing the “first dozen homes” on the platform.

Commissary Club wants to help formerly incarcerated people find community —  While 70 Million Jobs focuses on helping people with criminal records find jobs, its new network Commissary Club is designed to be a place for folks to find community.

Advice and analysis from Extra Crunch

VCs poured capital into European startups in Q3, but early-stage dealmaking appeared to suffer — The VC trends of later and larger continue to change the landscape of private capital.

In the ‘buy now, pay later’ wars, PayPal is primed for dominance — Button’s Stephen Milbank writes that the greatest limitation to buy-now-pay-later adoption is its availability.

Twitter’s API access changes are chasing away third-party developers — On August 12, Twitter launched a complete rebuild of its 2012 API.

(Reminder: Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

Europe to limit how big tech can push its own services and use third-party data — Commission EVP Margrethe Vestager confirmed that a legislative proposal due in a few weeks will aim to ban what she called “unfair self-preferencing.”

Comcast says Peacock has nearly 22M sign-ups — But it’s not clear how many of them are paid versus free.

Tech optimism…in this economy? — The latest episode of Equity looks at big startup opportunities for the coming decade.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

#advertising-tech, #alphabet, #daily-crunch, #earnings, #google, #media

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Apple earnings show strong iPad and Mac sales can’t make up for the iPhone

An older man in a white polo shirt flashes a peace sign while walking outdoors.

Enlarge / Apple CEO Tim Cook. (credit: Patrick T. Fallon/Bloomberg via Getty Images)

Apple announced its fourth-quarter earnings today after the bell, and it was something of a strange quarter because, unlike some previous years (including last year), this quarter’s numbers did not include an iPhone launch. The iPhone 12’s various models ship in October and November instead of September this year.

CEO Tim Cook proudly announced double-digit YOY growth in all product categories besides iPhone on the call, but the iPhone is important: Apple’s total revenue was up only 1 percent year-over-year, with iPhone revenue down almost 21 percent.

While the iPhone didn’t help push up the bottom line, Apple did launch other products during the period, including the redesigned iPad Air and two Apple Watches: the Apple Watch Series 6 and the Apple Watch SE. iPad revenue was up a substantial 46 percent YOY (it totaled $6.8 billion), and Mac revenue was also strong at $9 billion, or 28 percent more than the same quarter last year.

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#apple, #apple-tv, #business, #earnings, #ipad-air, #iphone, #iphone-12, #iphone-12-pro, #stocks, #tech, #ted-lasso, #tim-cook

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Twitter revenue rises 14%, but user growth fails to impress

Twitter continued to see its traffic rise in the third quarter, thanks to that trifecta of returning sports, the presidential campaign and the COVID-19 pandemic. But there wasn’t quite enough growth to appease Wall Street. 

Twitter beat out analyst expectations on revenue and net income; However, Wall Street appeared to get stuck on Twitter’s user growth figures and sent shares lower in after-market trading. Twitter’s MDAUs — the company’s internal audience metric that measures monetizeable daily active users — hit 187 million in the third quarter. That’s a razor thin improvement from the 186 million the company reported in second quarter of this year, although it did represent a 29% rise from the 145 million in the same period last year. Analysts from FactSet had expected 195 million MDAUs.

Shares were down nearly 15% in after-market trading.

Twitter reported Thursday net income of $29 million in the third quarter, or 4 cents per diluted share, a decline from the same time period last year, when the company brought in a net income of $47 million at 5 cents per diluted share. Adjusted earnings were 19 cents a share.

The company’s revenue came in at $936 million, up 14% from the same period last year. Analysts had expected revenue of $777 million. 

Twitter’s ad revenue also grew 15% to $808 million. Total ad engagement rose 27% over the same period in 2019. The return of live events as well as increased and previously delayed product launches helped boost ad revenue, Twitter CFO Ned Segal said.

“We also made progress on our brand and direct response products, with updated ad formats, improved measurement, and better prediction. We remain confident that our larger audience, coupled with ongoing revenue product improvements, new events and product launches, and the positive advertiser response to the choices we’ve made as we have grown the service, can drive great outcomes over time,” he added.

The U.S., Twitter’s biggest market, accounted for $513 million in revenue, a 10% increase YoY. 

However, Twitter warned that the holiday season and U.S. election could impact advertiser behavior.

 

#earnings, #social, #twitter

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Strong ad revenues boost Facebook past expectations as company cites ecommerce boom as tailwind

Facebook reported its Q3 earnings today, including revenues of $21.5 billion, net income of $7.8 billion. The company earned $2.71 in per-share profit during the three month period.

Analysts had expected Facebook, the social giant, to earn a much-smaller $1.91 per-share off smaller revenues of $19.82 billion.

The company also reported an average of 1.82 billion daily active users in September, up 12% compared to the year-ago period. Monthly actives were 2.74 billion, also up 12%. Both results were ahead of expectations.

Notably Facebook’s headcount rose sharply during the year, rising 32% compared to the year-ago period. That outstripped its 22% year-over-year revenue growth. The company’s total expenses rose 28%, again faster than its revenues.

Shares of Facebook are effectively flat in after-hours trading, up around 0.4% at the time of writing.

The company did not share a specific outlook for Q4 2020 or 2021 in its report, instead noting that it anticipates “fourth quarter 2020 year-over-year ad revenue growth rate to be higher than [its] reported third quarter 2020 rate,” along with stronger non-advertising revenues stemming from Oculus Quest 2 sales, the company’s new VR helmet.

Facebook did say that 2021 will bring a “significant amount of uncertainty.” A potential hurdle of Facebook will be the regulatory environment in Europe, and viability of transatlantic data transfers. Facebook says that its “closely monitoring the potential impact on our European operations as these developments progress.”

Analysts expect Facebook to generate revenues of $24.25 billion and per-share profit of $2.67 in the fourth quarter of 2020, and $100.0 billion in 2021 top line leading to $10.26 in per-share income.

What matters in all of this? That the core advertising market that seemed to bolster Snap’s own results has helped fill Facebook’s wings as well. Facebook noted in its earnings that it thinks that the “pandemic has contributed to an acceleration in the shift of commerce from offline to online,” leading to it experiencing “increasing demand for advertising as a result of this acceleration.” Twitter, meanwhile, saw ad revenue only marginally increase, about 8% from the year prior, as advertiser tastebuds remain volatile.

That’s a tailwind from a secular shift. For Facebook, it could mean a good year’s growth.

#earnings, #facebook, #tc

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Amazon crushes Q3 expectations, but AWS growth slowed to 29%

Amazon has continued to reap the rewards of a society increasingly dependent on ecommerce — a trend further fueled by the COVID-19 pandemic. The company crushed analyst expectations Thursday, reporting net income of $6.3 billion in the third quarter, or $12.37 per diluted share, compared with $2.1 billion in net income, or $4.23 per diluted share in the same quarter last year. 

The company brought in a total of $96.15 billion in revenue, a 37.4% increase from the $69.98 billion it generated in the same period last year. 

Analysts polled by Yahoo expected earnings per share of $7.41 on average, up from $4.23 last year. Analysts expected revenue of $92.7 billion, up from $69.98 billion in the same year-ago period. 

While the third-quarter numbers beat expectations, the picture wasn’t all unicorns and rainbows. The company’s cloud-computing service AWS saw growth slow in the third quarter. AWS generated $11.6 billion in sales, a 29% YoY sales growth. That sounds dandy, but it’s actually smaller than the 35% YoY sales growth the segment experienced in the third quarter of 2019.

The financials released Thursday also showed growth from the second period of this year, which was considered at the time a “killer quarter” by just about every measure. Revenue grew 8% and net income popped 21% from the second quarter, figures that suggest that consumers have yet to reach their limit for commerce delivered to their doorsteps.  

Meanwhile, Amazon reported that its operating cash flow increased 56% to $55.3 billion for the trailing 12 months compared to $35.3 billion for the trailing period ended September 30, 2019. Free cash flow (operating cash flow less capital expenditures) also rose to $29.5 billion in the third quarter compared with $23.5 billion in the trailing period ended September 30, 2019. 

Looking ahead, Amazon is bullish on sales, but notes costs related to COVID-19 might affect operating income. The company said it expects sales to grow between 28% and 38% in the fourth quarter compared to the same period in 2019, which would bump that figure to between $112 billion and $121 billion.

Amazon said it expects operating income to be between $1 billion and $4.5 billion, compared with $3.9 billion in fourth quarter 2019. This guidance assumes approximately $4 billion of costs related to COVID-19.

 

#amazon, #aws, #cloud, #earnings, #finance

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Strong YouTube ad growth powers Alphabet to better-than-expected Q3

Today after the bell, Alphabet announced its Q3 performance. The Google parent company generated revenues of $46.2 billion and per-share profit of $16.40 off the back of net income of $11.2 billion.

Analysts had expected Alphabet to earn $11.21 per share, from revenues of $42.88 billion according to Yahoo Finance; other estimates were larger, targeting $11.37 in per-share income off revenue of $42.84 billion.

The company’s shares instantly rose around 8.5% after its earnings beat.

Digging into the company’s numbers, YouTube revenue rose to $5.0 billion, from $3.8 billion in Q3 2019. Analysts had expected YouTube to generate $4.52 billion in total revenue during the most recent quarter.

Google Cloud managed to generate $3.44 billion from $2.4 billion in Q3 2019. The Google Cloud collection of cloud computing, productivity software, and other enterprise services generated $3.0 billion in the second quarter of this year. Analysts had expected Google Cloud to generate $3.31 billion in total revenue during the most recent quarter.

And Alphabet’s skunkworks division, Other Bets managed to generate $178 million in revenue, another quarter in which the set of companies was an excellent source of negative operating income. The collection of efforts lost $1.1 billion in the quarter.

#alphabet, #earnings, #google, #other-bets, #tc

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Spotify CEO says company will ‘further expand price increases’

Spotify is planning further price increases, according to comments made by co-founder and CEO Daniel Ek during the company’s third quarter earnings on Thursday. The streaming service had added 6 million subscribers in Q3 to achieve a total 144 million paying customers across 320 million active users, but fell short on both sales and earnings, driving the stock lower.

By raising prices for its service, Spotify could pull in higher revenues in markets where the company believes users will continue to see the value in paying for their streaming subscription.

The company didn’t specifically detail its plans for price increases in terms of dollars and cents or geographies. However, Ek explained how the company was thinking about possible price hikes in broader terms.

He said although Spotify’s primary focus continues to be user growth, there are markets where the service is more mature and has increased the value it provides subscribers, including with its “enhanced content.”

What he means by “enhanced content” are Spotify’s investments in growing its content library, specifically podcasts. Today, the service has 1.9 million podcasts. This quarter, it released 58 original and exclusive podcast shows, bringing this offering to a total of 16 markets.

Among the highlights, “The Michelle Obama Podcast” sent the new show to No. 1 on the platform for its July launch through August. Spotify’s partnership with DC Comics is kicking off with the “Batman Unburied” podcast. It’s also working with Riot Games‘ “League of Legends on an esports partnership and with Chernin Entertainment to turn its podcasts into film and TV.

However, Spotify’s “The Joe Rogan Experience” deal has been more controversial. It could potentially cause moderation headaches for the company now that it’s been brought in-house, and could lead to some portion of users to unsubscribe as a political stance.

This month, Spotify also rolled out new tools for Anchor users that let them include licensed music in their podcasts to help create a new type of music-and-spoken word programming.

Combined, Spotify sees these efforts as reasons why its service could be priced higher in some markets.

In its mature markets, Spotify says it’s seen engagement and value per hour grow over the years.

“I believe an increase in value per hour is the most reliable signal we have in determining when we are able to use price as a lever to grow our business,” noted Ek.

He also said that early tests of price increases have performed well.

“While it’s still early, initial results indicate that in markets where we’ve tested increased prices, our users believe that Spotify remains an exceptional value and they have shown a willingness to pay more for our service,” said Ek, in his remarks. “So as a result, you will see us further expand price increases, especially in places where we’re well-positioned against the competition and our value per hour is high,” he added.

Spotify has been openly hinting about price increases all year.

In the first quarter, Ek had slightly opened the door to the idea, saying it was “encouraging” to see the company had the opportunity to raise prices when the economy improved. In Q2, Ek again suggested higher prices were coming, and added that Spotify’s exclusive podcast content enables “pricing power,” along with its overall improving service and the existence of higher ARPU (average revenue per user.)

Today, Ek’s statement suggests higher prices aren’t just being weighed or discussed — they’re coming.

To date, Spotify has tested price hikes at its upper tiers of its service in several markets.

Last year, for example, Spotify tested price increases for its Family Plan in some Scandinavian markets, upping the cost by around 13%. The goal of those tests was to figure out if it would make sense for the streamer to roll out higher pricing on a worldwide basis.

Just this month, reports indicated Spotify had increased the price of its Family Plan in Australia from AUS $17.99 to AUS $18.99 — or, approximately US $13.69. This change was effective October 1 for new subscribers.

Today, Spotify notes it also raised the price of the Family Plan in a half dozen other markets this month, including Belgium, Switzerland, Bolivia, Peru, Ecuador, and Colombia, alongside its Duo Plan (2-person plan) in Colombia.

There was one caveat to Spotify’s plans for higher pricing, however: the pandemic. Ek said the company would “continue to tread carefully in these COVID times to ensure we don’t get ahead of the market.”

In other words, it doesn’t make sense to raise prices in a recession, where people have lost jobs and are cutting unnecessary expenses — like their streaming subscriptions.

#earnings, #family-plan, #media, #spotify, #streaming, #streaming-music, #streaming-service, #tc

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Spotify hits 320 million monthly active users

In its latest quarterly financial report, Spotify announced that it had crossed 320 million active monthly users. That marks a 29% growth for the quarter, coming on the heels of what seems to be a rather successful launch into the Russian market. Of that number, it now counts 144 million paid users — a 27% jump.

Spotify continues to be the largest music streaming service globally by a rather wide margin. Apple comes in at number two, with around 60 million paid subscribers, as of last year. Amazon Music, meanwhile, is not too far behind at 55 million — though the company doesn’t break out paid subscriber figures (Apple’s is premium only, following a three-month free trial).

In spite of solid growth, Spotify reported a quarterly loss of around $118 million — a big shift since making a quarterly profit in Q3. Among the key drivers the company cited are its on-going decision to offer discounted plans in order to attract new users to the service.

“We can grow that by either adding more users or raising the price of existing users,” the company said on this morning’s call. “We still think there are billions more to go after in this ecosystem, and we’re going to invest in better tools. That will increase the engagement, and if that increases the engagement, it increases our ability to monetize them as well.”

The company has, of course, been spending money like crazy in a bid to become a leader in podcasting content. The past two years have found it spending hundreds of millions of dollars to purchase technology and content companies, including Gimlet, Anchor, Parcast and sports media giant, the Ringer. It noted in this morning’s call that recent purchase the Joe Rogan Experience has quickly become its most popular podcast in all of its English speaking markets.

Spotify says the show has “outperform[ed] our audience expectations. We look forward to the start of our exclusivity period for this podcast by the end of this year.” Rogan’s show created a storm of controversy almost immediately. Just this week, an appearance by de-platformed conspiracy theorist Alex Jones reignited a number of these issues. The company did not respond to our request for comment yesterday.

Nor did it respond to a recent call to increase pay and transparency for musicians — an increasingly important issue as the COVID-19 pandemic has made it all but impossible to make a living on live shows.

#earnings, #entertainment, #spotify

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Tech stocks sell off sharply as market looks at COVID-19 numbers, whispers ‘oh f***’

The American stock market is struggling today, with tech stocks in particular taking extra stick.

After European stocks tanked on the back of COVID-19 concerns, American stocks are following suit. Tech stocks in particular.

As of the time of writing, the Dow Jones Industrial Average, a venerable if dated stock market barometer, is off 2.81%. The broader and more useful S&P 500 is off 2.90%. And the tech-heavy Nasdaq Composite is off 3.14%.

But perhaps most importantly for startups and startup founders, the SaaS-heavy Bessemer cloud index is off an even sharper 3.80%.

What’s going on? Stimulus is out of the cards for a while. COVID-19 cases and hospitalizations are rising. Deaths are picking up too. Political gridlock is the law of the land. And weak earnings from Intel and Netflix, and lackluster guidance from Microsoft could be weighing on tech-bulls. (Oh, and SAP flopped as well!)

In short, it’s a huge mess out there. More as it happens, but it’s not great day for tech stocks and the sort of bullish public-market valuations that late-stage startups are using as private-market valuation comps.

#earnings

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Microsoft stock flat despite better-than-expected earnings, strong Azure growth

Today after the bell, Microsoft reported its calendar Q3 2020 earnings, the period of that time corresponds to its Q1 fiscal 2021 period. In the three months ending September 30, Microsoft had revenues of $37.2 billion and per-share profit of $1.82.

Analysts had anticipated the company to report $1.54 in earnings per share, generated from $35.72 billion in revenue.

In the aftermath of the beat, shares of the company are effectively flat, gaining only a fraction of a point in after-hours trading. Microsoft was up by nearly 2% in afternoon trading, despite somewhat uneven markets.

Helping drive the movement in Microsoft’s share price was the all-important Azure update. Here’s what Microsoft had to say:

Server products and cloud services revenue increased 22% (up 21% in constant currency) driven by Azure revenue growth of 48% (up 47% in constant currency)

Parsing investor sentiment, it appears that a number closer in the low-40s was anticipated by most, making the Azure result a strong number.

The broader category that Azure sits inside of, called “Intelligent Cloud,” reported $13 billion in revenue, up 20% from the year-ago quarter. That was the best-performing of Microsoft’s three units, which also include the Office-and-LinkedIn heavy “Productivity and Business Processes” group that posted $12.3 billion in revenue — up 11% — and the Windows-and-Xbox heavy “More Personal Computing” which had revenues of $11.8 billion, up a smaller 6% compared to the year-ago quarter.

For the financial dorks in the audience, I snagged the following for your enjoyment:

Other standouts from a first read of the company’s earnings report include:

  • Strong Surface revenue, rising 37% compared to the year-ago period
  • Bing revenue declines, with the company saying that “[s]earch advertising revenue excluding traffic acquisition costs decreased 10%”
  • Commercial cloud revenues of $15.2 billion, up 31% from the year-ago period
  • LinkedIn manage 16% revenue gains in the quarter
  • Gaming revenue gains of 22% year-over-year
  • Consumer PC demand — seen in PC sales numbers — boosted non-Pro Windows OEM revenues by 31% compared to the year-ago quarter, though Pro-focused Windows OEM top line fell 22%

Looking ahead, analysts expect Microsoft to record $1.60 in per-share profit in the current quarter, off $40.4 billion in total revenue. The company will announce its own projections on its earnings call.

#earnings, #microsoft, #tc

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SAP shares fall sharply after COVID-19 cuts revenue, profit forecast at software giant

SAP announced its Q3 earnings yesterday, with its aggregate results down across the board. And after missing earnings expectations, the company also revised its 2021 outlook down. The combined bad news spooked investors, crashing its shares by over 20% in pre-market trading and the stock wasn’t showing any signs of improving in early trading.

The German software giant has lost tens of billions of dollars in market cap as a result.

The overall report was gloomy, with total revenues falling 4% to €6.54 billion, cloud and software revenue down 2%, and operating profit down 12%. The only bright spot was its pure-cloud category, which grew 11% to €1.98 billion.

SAP’s revenue result was around €310 million under expectations, though its per-share profit beat both adjusted, and non-adjusted expectations.

While SAP’s big revenue miss might have been enough to send investors racing for the exits, its revised forecast doubled concerns. Even though the company said that its customers are accelerating their move to the cloud during the pandemic — something that TechCrunch has been tracking for some time now — SAP also said that the pandemic is slowing sales, and large projects.

Constellation Research anayst Holger Mueller says this is resulting in an unexpected revenue slow-down.

“What has happened at SAP is a cloud revenue delay as customers know that SAP is only investing into cloud products, and they have to migrate to those in the future. The news is that SAP customers are not migrating to the cloud during a pandemic,” Mueller told TechCrunch.

In a sign of the times, SAP spent a portion of its earnings results talking about 2025 results, a maneuver that failed to allay investor concerns that the pandemic was dramatically impacting SAP’s business today and in the coming year.

For 2020, SAP made the following cuts to its forecasts:

  • €8.0 – 8.2 billion non-IFRS cloud revenue at constant currencies (previously €8.3 – 8.7 billion
  • €23.1 – 23.6 billion non-IFRS cloud and software revenue at constant currencies (previously €23.4 – 24.0 billion)
  • €27.2 – 27.8 billion non-IFRS total revenue at constant currencies (previously €27.8 – 28.5 billion)
  • €8.1 – 8.5 billion non-IFRS operating profit at constant currencies (previously €8.1 – 8.7 billion)

So, €300 million to €500 million in cloud revenue is now gone, along with €300 million to €400 million in cloud and software revenue, and €600 to €700 million in total revenue. That cut profit expectations by up to €200 million.

The company, however, is trying to put a happy face on the future projections, believing that as the impact of COVID begins to diminish, existing customers will eventually shift to the cloud and that will drive significant new revenues over the longer term. The trade-off is short-term pain for the next year or two.

“Over the next two years, we expect to see muted growth of revenue accompanied by a flat to slightly lower operating profit. After 2022 momentum will pick up considerably though. Initial headwinds of the accelerated cloud transition will start to turn into tailwinds for revenue and profit. […] That translates to accelerated revenue growth and double digit operating profit growth from 2023 onwards,” SAP CFO Luka Mucic said in a call with analysts this morning.

The question now becomes can they meet these projections, and if the longer-term approach during a pandemic will placate investors. As of this morning, they weren’t looking happy about it.

#cloud, #crm, #customer-experience, #earnings, #enterprise, #enterprise-software, #erp, #sap

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Huawei reports slowing growth as its operations “face significant challenges”

Huawei announced earnings results today showing that its growth has slowed significantly this year as the Chinese telecom equipment and smartphone giant said its “production and operations face significant challenges.”

While Huawei did not specify trade restrictions in its brief announcement, the company has been hit with a series of commercial trade restrictions by the U.S. government. The full impact of those policies haven’t been realized yet, because U.S. government has granted Huawei several waivers, including one that will delay the implementation of a ban on commercial trade with Huawei and ZTE until May 2021.

During the first three quarters of 2020, the Chinese telecoms and smartphone giant reported revenue of 671.3 billion yuan (about USD $100.7 billion), an increase of 9.9% year-over-year, with a profit margin of 8%. The company said those results “basically met expectations,” but it represents a huge drop from its performance during the same period last year, when Huawei reported 24.4% growth with a profit margin of 8.7%.

Huawei is a privately-held company and its announcement did not break down its results in terms of smartphone or telecoms equipment sales, or other detail.

The company wrote that “as the world grapples with COVID-19, Huawei’s global supply chain is being put under pressure and its production and operations face significant challenges. The company continues to do its best to find solutions, survive and forge forward, and fulfill its obligations to customers and suppliers.”

Other U.S. restrictions include one that would ban Huawei from using U.S. software and hardware in certain semiconductor processes, forcing it to find other sources for chips.

In addition to the U.S., Huawei is also facing scrutiny by other countries, including the United Kingdom, which is planning to implement a new poicy that will bar telecoms from buying new 5G equipment from Huawei to ZTE and require them to remove any parts from those companies that’s already been installed in UK 5G networks by 2027.

Replacing Huawei equipment also presents costly challenges for telecoms, because Huawei is one of the biggest suppliers in the world. Last month, the U.S. Federal Communications Commission said it would cost $1.837 billion to replace Huawei and ZTE networking equipment, with rural telecom networks facing the most financial pressure.

But 2020 has had a few bright spots for Huawei. In July, a report from Canalys found that Huawei overtook Samsung as the leader in global smartphone shipments during the second quarter of 2020, a major milestone because it marked the the first time in nine years that Apple and Samsung didn’t take the top spot on Canalys’ charts. This was partly because smartphone shipments in general have been hurt during the COVID-19 pandemic, but Huawei was helped by sales within China, its domestic market.

#asia, #china, #earnings, #huawei, #smartphones, #tc, #telecom

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Here’s why Intel’s stock just dropped 10% after reporting earnings

The third-quarter earnings cycle is just getting underway, but we’ve already seen a few companies post numbers that investors did not like. Netflix missed on several metrics yesterday and was punished, and today Intel is joining the video streaming giant in stock-market purgatory.

Intel shares are off around 10% in after-hours trading after the chip company reported its Q3 data. Investors had expected Intel to report an adjusted $1.11 in per-share profit, off around 22% from the year-ago period. They also expected it to report revenues of $18.26 billion in Q3, down a more modest 5% compared to the year-ago Q3.

Notably, Intel beat revenue expectations with top line of $18.3 billion, and met earnings-per-share estimates of $1.11, on an adjusted basis.

So, why are Intel shares sharply lower?

Quick consensus appears to point to weakness in the company data-focused business unit, the smaller of Intel’s two halves (the other focuses on PC chips). Inside the data-side of Intel, its Data Center Group (DCG) had mixed results, including cloud revenue growth of 15%. However, at the same time, the DCG’s “Enterprise & Government” business shrank 47% compared to the year-ago period, following what Intel described as “two quarters of more than 30 percent growth.”

Off that weakness, the resulting top line miss was sharp, with the market expecting $6.22 billion in revenue and DCG only delivering $5.9 billion.

Intel blamed COVID-19 for the weak economics conditions at play in the result. The company also highlighted COVID-19 when it discussed results from its internet of things business and memory operation, which declined 33% and 11% on a year-over-year basis, respectively.

Perhaps due to COVID-19’s recent resurgence in both North America and Europe, investors are concerned that the macroeconomic issues harming Intel’s growth could continue. If so, growth could be negative for a longer period than anticipated. That perspective could have led to some selling of Intel’s equity after the earnings report.

Could guidance have a part to play in Intel’s share price decline? Probably not. Better than what it reported for Q3 2020, Intel’s forward guidance shows a small revenue beat versus expectations, and a small profit beat as well. Intel forecasts revenues of $17.4 billion for Q4 2020 and adjusted earnings per share of $1.10, while the street was looking for $17.34 billion in top line and adjusted earnings per share of $1.06.

Given that Intel is prepped to best expectations in Q4, it’s hard to pin its share-price declines on guidance. That leaves the weakness in its data business as the most obvious culprit.

It is dangerous to over-describe why a stock or a group of stocks move at any given time. But in this case, it seems plain that the revenue miss inside Intel’s data business was at least a portion of why it shed value. As to whether the company’s COVID-19 notes are valid is up to you and how you handicap the broader economy.

#earnings, #intel, #netflix

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Tesla wows on latest numbers

Tesla’s latest quarterly numbers beat analyst expectations on both revenue and earnings per share, bringing in $8.77 billion in revenues for the third quarter.

With the report that Tesla had already beaten Wall Street’s expectations for deliveries earlier this month, the question for today’s earnings call was how much efficiency (and by extension profit) the electric car and battery company was able to wring out of its manufacturing processes.

Now we have the answer as Tesla reported profits of $809 million on revenues of $8.77 billion for the third quarter. That’s up from 39% from the year ago period. Wall Street had expected $8.36 billion in revenue for the quarter, according to estimates published by CNBC.

Revenue grew 30% year-on-year, something the company attributed to substantial growth in vehicle deliveries and operating income also grew to $809 million showing improving operating margins to 9.2%.

And while the automotive business is clearly still the star of the show, both Tesla’s solar and storage businesses also showed marked improvements in the third quarter.

Energy storage reached a company record 759 Megawatt hours in the wuarter and the company said that megapack production for its large scale batteries is growing while Powerwall demand remains strong.

“We continue to believe that the energy business will ultimately be as large as our vehicle business,” the company said.

And the solar business is also improving, according to Tesla. “Our recently introduced strategy of low cost solar (at $1.49/watt in the US after tax credit) is starting to have an impact. Total solar deployments more than doubled in Q3 to 57 MW compared to the prior quarter, with Solar Roof deployments almost tripling sequentially.”

Operating expenses for the company were also up. New factories in Austin and Brandenburg, Germany mean additional expenses and Tesla poured $1.25 billion into operations, up 33% from the previous quarter.

Earlier this month, the company tipped its hand on the good news around deliveries saying that it had already delivered 139,300 vehicles in the third quarter, slightly above Wall Street’s expectations and a notable improvement from last quarter, as well as the same period a year ago.

The delivery beat marked a 43% improvement from the same quarter last year, when the company reported deliveries of 97,000 electric vehicles. And delivery numbers were up 53% quarter on quarter, as the globally spreading COVID-19 pandemic took its toll on sales and production operations for Tesla at its main U.S. factory.

The quarter also saw Tesla unveil a sweeping new vision for its battery manufacturing plans. During the shareholder presentation Tesla chief executive Elon Musk said that he expected deliver up to 40% more electric vehicles than in 2019 and laid out the roadmap for better battery manufacturing efficiency.

Tesla’s earnings beat comes amid mounting competition from some of the world’s largest automakers. Yesterday GMC unveiled its Hummer EV and, in September, Ford announced that it would be slashing the price on its Mustang Mach E to “stay fully competitive”.

Meanwhile startups like Lucid Motors are proving that they could be serious contenders to Tesla’s market dominance. Lucid’s recent pricing for its Air sedan was enough to force Tesla chief executive and head of public relations, Elon Musk, to parry back with a (… creatively selected…) price cut on the company’s own models.

This story is developing and will be updated. 

#automotive, #earnings, #electric-vehicles, #lucid-motors, #tc, #tesla

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