The 2024 Q2 earnings season picks up considerable momentum this week, ushering a flurry of financial reports from various companies. Among the notable players stepping into the earnings spotlight are major contenders in the cloud computing arena, namely Microsoft and Amazon.
For these tech giants, cloud performance has become a pivotal factor in determining post-earnings market reactions. With insights gleaned from the recent report by Alphabet, the parent company of Google, investors are primed to anticipate the forthcoming results from MSFT and AMZN.
Alphabet Demonstrates Resilience
Alphabet’s recent quarterly report painted a positive picture, with a 31% surge in EPS accompanied by a nearly 14% rise in sales – surpassing consensus expectations and continuing a trend of upbeat quarterly performances.
The cloud segment displayed robust growth, raking in revenues of $10.3 billion, marking a substantial 30% increase year-over-year and setting a new quarterly record. Additionally, Google Cloud’s operating income witnessed a significant leap, climbing to $900 million from $191 million in the corresponding period last year.
Although the overall results were encouraging, the stock faced downward pressure post-release due to uncertainties surrounding AI CapEx. Alphabet has consistently outperformed our consensus cloud forecasts, as illustrated below.
Microsoft’s Continuity in Cloud Success
In its latest disclosure, Microsoft stunned investors with a 23% year-over-year surge in cloud revenue, signaling stability following a period of growth deceleration. Earnings and revenue projections have maintained a steady course in recent months, with an anticipated 8% expansion in EPS and a 14% uptick in sales.
The company has consistently surpassed our cloud forecasts in recent times, as indicated below. Projections for the imminent release indicate a $28.7 billion estimate, reflecting a robust 20% climb from the corresponding period last year.
Amazon’s Quest for Consistent Performance
Amazon Web Services (AWS) showcased stellar results in the preceding quarter, with net sales hitting $25 billion – showcasing a 17% year-over-year surge and breaking a streak of negative surprises in this metric. Forecasts for Cloud revenue in the upcoming release stand at $25.9 billion according to the Zacks Consensus estimate, reflecting a 17.2% year-over-year increase.
Earnings and revenue expectations for the impending report have been largely subdued, yet substantial growth is anticipated, with a projected 63% rise in EPS alongside a 10% increase in sales. Enhanced cost efficiencies and operational optimizations have been instrumental in driving profitability, leading to notable margin expansions.
It is essential to note that the chart below reflects performance on a trailing twelve-month basis.
Concluding Remarks
This week, a lineup of prominent cloud players is set to unveil their performance, including Amazon and Microsoft. Alphabet recently shared its favorable cloud results, signaling a trajectory of solid growth.
Investors await the year-over-year growth figures of these cloud behemoths with bated breath, cognizant that any signs of deceleration could evoke anxiety. Conversely, surpassing growth expectations could pave the way for post-earnings exuberance, although other operational metrics will warrant scrutiny.
