By Louis Juricic and Sarina Isaacs
Investing.com -- Here is your weekly Pro Recap on the biggest headlines out of tech this past week: Earnings beats for Microsoft, Meta and Amazon - but Amazon warns; Intel issues rosy forecast; and Alphabet misses.
InvestingPro subscribers get tech headlines like these in real time. Never miss another market-moving alert.
Amazon beats - and warns
Amazon (NASDAQ:AMZN) on Thursday said Q3 earnings came in at $0.94 per share, flattening the $0.58 estimate, on $143.1 billion in revenue vs. the $141.53B consensus.
Cloud unit Amazon Web Services sales climbed 12% to $23.1B, slightly missing estimates of $23.2B, although it also indicated that growth there was stabilizing.
The company expects total sales of $160B to $167B next quarter, under the average Street target of $167.2B.
"Overall this was a strong print & in-line with our retail margin thesis," said Piper Sandler, which cut the price target by $15 to $170 per share.
Citi hiked the price target by $10 to $177, citing a combination of "attractive valuation" and "a structurally more profitable business."
"We believe AWS is well positioned to deliver accelerating growth as optimization headwinds abate as Amazon gains consumer wallet share given the mix-shift to essentials, while expanding margins," analysts said.
At the same time, Reuters reported that the company warned that discretionary spending was weaker, saying in a call with reporters that they "still see customers remaining cautious about price, trading down where they can and seeking out deals."
Shares gained some 2% for the week to $127.74.
Microsoft comes in strong
Microsoft (NASDAQ:MSFT) said late Tuesday that fiscal Q1 earnings totaled $2.99 per share on sales of $56.52B, comfortably surpassing estimates for $2.65 and $54.53B, respectively.
The company also said sales for its Azure cloud business grew 29% year over year, nicely above Wall Street estimates for a 26% climb. And on the earnings call, CFO Amy Hood said Q2 revenue should be around $60.9B (up or down $500 million), in line with the guidance.
Microsoft's investments in AI - including its famous $10B bet on OpenAI, which created the popular AI tool ChatGPT - are expected to continue to drive growth: Wedbush said it believes over half of Microsoft's installed base "will ultimately use the AI functionality for the enterprise/commercial landscape," representing "a major monetization opportunity" that is already playing out.
Citi, meanwhile, said the report "checked all the boxes" and believes the results indicate "demand trends are stabilizing (or accelerating) and should offer a positive read on the outlook."
And Goldman Sachs expects earnings growth acceleration triggered by heightened gross margin leverage in fiscal 2025, raising Microsoft's price target by $50 to $450.
Shares lifted some 1% for the week to $329.81.
Alphabet weaker under the hood
On the flip side, Alphabet (NASDAQ:GOOGL) shares took a big hit after the Google parent reported top- and bottom-line beats but also said cloud revenue rose just 22% to $8.4B, short of expectations for $8.6 billion, and slightly lower-than-expected operating income of $21.34B.
Overall, earnings came in at $1.55 a share, $0.09 over estimates, on 11% higher revenue of $76.7B that beat the $75.9B average expectation.
The management attributed the disappointing cloud sales to client optimization.
Bernstein said that both popular bull cases for GOOGL - "cloud taking share offering further AI re-rating" and "visible" expansion in margins - "suddenly... feel very distant."
The analysts added, "Top-line tracking well, but margin contraction and a soft cloud print weighs heavily on the question 'why buy Google here?'"
Several Wall Street analysts lowered their price targets on GOOGL stock in response to the Q3 earnings report.
GOOGL shares plummeted about 10% for the week, closing Friday at $122.17.
Meta tops targets but indicates soft ad demand in current quarter
Meta (NASDAQ:META) reported better-than-expected Q3 results and stronger guidance for the current quarter as cost cuts boosted margins, but shares lost ground after the earnings call, when management reported softening brand advertising demand at the beginning of Q4.
"While we don't have material direct revenue exposure to Israel and the Middle East, we have observed softer ad spend in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook," CFO Susan Li said on the call.
In terms of overall earnings and revenue, Meta reported adjusted EPS of $4.39 - smashing the $3.64 average target - on a top line of $34.15B vs. analysts' expectation for $33.57B.
Total costs and expenses were $20.40 billion, down 7% from the prior year, boosting the company's operating margin to 40% in Q3 from 20% a year earlier.
Looking ahead, the company said it expects third quarter revenue to be in the range of $36.5B to $40B, a range that's mostly above the anticipated $38.84B.
Oppenheimer reiterated its bullish view on Meta on "3Q's continued revenue outperformance and cost control, despite conservative low end of 4Q guide on Middle East."
Goldman Sachs continues to "see META as well-positioned against several long-term secular growth themes and are encouraged by the positive momentum across key product initiatives incl. Reels, click-to-messaging Ads and AI including Advantage+ adoption."
Shares were off some 4% for the week to $296.73.
Intel's rosy forecast
Intel (NASDAQ:INTC), amid signs PC demand has bottomed, delivered better-than-expected guidance for the current quarter as well as adjusted Q3 earnings of $0.41 - nearly double the $0.22 target - on better-than-anticipated sales of $14.2B.
Q4 adjusted EPS is expected at $0.44 on revenue of between $14.6B and $15.6B, says the company, well ahead of estimates for EPS of $0.33 on revenue of $14.36B.
HSBC upgraded the stock's rating to Hold from Reduce on the news, with a price target of $33, citing expectations for "significant earnings revisions from better execution and improving PC outlook to lead to a re-rating."
Bernstein boosted the price target to $36 on the "quite strong" results, writing, "Overall the company does appear to have turned the corner on the worst of it, and (perhaps) a PC-dominated narrative might be enough to carry it for the moment."
Shares gained nearly 2% for the week to $35.54.
Senad Karaahmetovic and Yasin Ebrahim contributed to this report.
