Earnings review: Microsoft, Alphabet, AMD, and Novo Nordisk

Microsoft is in a leading position on AI application execution

The world’s most valuable company delivered a strong quarterly result with revenue increasing 18% y/y and EPS of $2.97 up 28% y/y as its global distribution with the corporate sector continues to give Microsoft an edge in execution on generative AI on the application side. Cloud revenue was $33.7bn vs est. $32.2bn and the company said that AI boosted revenue growth by 6%. From a broader macro perspective Microsoft hinted that capital expenditures will increase materially in the current quarter from the previous quarter as demand for AI related services drives a lot of investments in datacentres. While investors were generally a bit disappointed on growth from Microsoft, but also Alphabet and AMD (see below), the overall conclusion is that growth remains robust and that the outlook is positive which should bode well for equity sentiment going forward.

Strong result from Alphabet bodes well for the economic outlook

Although investors were negative last night after Alphabet announced its Q4 earnings result the company delivered its fourth straight quarter of increasing revenue growth hitting 13.5% y/y in Q4. The EBIT margin expanded for the third straight quarter. The combination of rising revenue growth and expanding EBIT margin are powerful for equity sentiment. The increased focus on raising profitability at Alphabet is paying off and the company is now consistently delivering around 27% EBIT margin up from around 20% before the pandemic.

While Alphabet missed a bit on its advertising revenue relative to estimates the absolute numbers are good and from a macro perspective they suggest companies have a positive outlook for global demand. Advertising is a pro-cyclical indicator. One of the positive surprises were the cloud business revenue coming in at $9.1bn vs est. $9bn as the generative AI push by companies bolstered demand in Google’s cloud services.