June revenue at Alphabet grew 5% sequentially from March to $84.3 billion, a 13% year-over-year rise and a bit of a deceleration from March’s 15.4% year-over-year rise.
Q2 GAAP EPS of $1.89 beats by $0.04.
At $180, Alphabet is priced at only 21-times 2025 earnings. Very reasonable for a member of the M-7, search market leader, AI pioneer, and owner of You-Tube.
Why is it down post earnings: WSJ’s title was apt Google Fails to ‘Wow’ as AI Bills Mount
Overall revenue exceeded Wall Street’s consensus projection by just 0.6%—the lowest beat percentage in at least five years,
Capex = $49Bn for the year, this was mostly expected but still got a thumbs down, because depreciation will hurt the bottom line.
Google has to spend to keep up – it doesn’t have a choice.
“Look, obviously we are at the early stage of what I view as a very transformative area,” Alphabet Chief Executive Sundar Pichai “the risk of underinvesting is dramatically greater than the risk of overinvesting for us here,” not mentioning the record amounts of capex that tech rivals Microsoft, Amazon and Meta Platforms are pouring into the same thing.
Rejected Alphabet’s bid for $23Bn – I think that’s actually good for Google, at 46x current year sales. Granted this would have given them a considerable leg up in cybersecurity – but is a $500Mn revenue company, which would never move the needle for the behemoth.
I own GOOG, and plan to hold for a long, long time, it’s been recommended on several occasions here. I could buy more if the price drops but given the change in sentiment towards big tech I’m happy to sit on the sidelines for a bit.
There seems to be an inflection point – the rate of growth is going to get lower on tougher comparisons and therefore there is more hesitation to buy at inflated levels.
Apple started its Developers Conference with its long awaited, long overdue AI development announcements yesterday.
These were the key points
Emphasis on privacy – Majority usage of AI on device but cloud available as well for more computing power, they would be using their own cloud service instead of Google or Microsoft. Apple will be hosting its own Cloud AI services on its own Apple Silicon servers to counter Microsoft’s cloud AI.
Strategy was integration and not an add on – To show AI integrated into the apps and products you already use—rather than powering a tacked-on perk or stand-alone chatbot.
Partnering with Sam Altman’s OpenAI – Not developing their own artificial intelligence from scratch, instead partnering with Sam Altman’s AI, but crucially it will be integrated. Using a third party for AI could be a smarter move (cheaper, less Capex, fewer failures) – or simply they were too far behind.
Integration Apple’s strongest differentiation was and remains integrated hardware and software product, “System on chip” – basically Apple created and designed silicon with its own operating system and hardware, it’ll be interesting to see how well it is integrated.
The adoption is companywide and includes iOS 18, iPadOS 18 and MacOS Sequoia, Siri,
Some new features, and a lot of catching up – – several features are in Google and Samsung.
Playing Catch Up – Writing tools, Voice transcription, Image generation and Notifications, these all exist, and are now available from Apple Intelligence.
Differentiators
The key differentiator here is that Apple Intelligence will also make it easier to search through our existing data – for example, What’s exciting here is the blending of AI with the photos we’ve already taken, and prioritize our notifications. Like other chatbots, you can now text with Siri. But unlike other chatbots, Siri has access to all your Apple stuff. When all the promised updates arrive, it will be able to see what’s on your screen and work across apps. “Add this address to his contact card.” “Text yesterday’s picnic photos to my mom.” Things like this make total sense to a human but up until now have been out of Siri’s reach. The thing that really elevates Siri is its new friend, ChatGPT. When you ask Siri to do some things it doesn’t know how to—say, come up with dinner ideas based on your recent grocery haul—it asks your permission to check with an integrated version of OpenAI’s bot. However, If Apple can pull off what it showed and convince people that Siri is no longer painfully stupid, it might be a tech miracle. That’s a big if. The company has a decade long history of underwhelming Siri improvements.
If you get a chance watch Joanna Stern’s video in the Wall Street Journal.
Apple AI analysis: Impact on the company’s business and stock.
Much needed, frankly regardless of much this helps Apple, if they hadn’t done this it would have hurt them really badly.
Apple’s widest moat has been its integration unlike its competitors, for example you have Windows operating, Intel Silicon and Dell hardware – the Wintel systems for the mass market competing on price. Or the Samsung phones with the Android operating system. Apple’s was always designed to be one seamless product from scratch and that’s how they got their premium pricing and loyal customers.
They continue to emphasize integration and privacy with AI, a big plus.
I think overall, this will help and Apple is going add on features with each new iPhone or Mac version and increase sales, which were stalling for the past three years.
For a lot of people, yes may be underwhelming and just catching up for the regular Apple user, it would be a convincing argument to at least stay with Apple and possibly upgrade.
A core holding: I’ve bought and held Apple for several years now, and usually buy on declines, the last buy call I had made was around $170, and will add if there are unusual or large dips, this will remain a core holding for at least another 5 years. Apple is not a big mover but I’m very, very confident of at least 10-12% a year, plus it works well as a defensive stock too in bad times.
China sales are only 8% lower – this is better than expectations.
Japan and the rest of Asia-Pacific were much lower at 13% and 17% respectively.
iPhone sales down 10.4% – this could have been worse.
Services of course the biggest growth category with 14% growth.
The interesting thing here is that even as Apple keeps contracting in its product categories, margins get better with the higher margin services taking more share of the pie. Operating income dropped only 1.5% compared to the 4% revenue drop.
Apple (AAPL) $179 post-market, from $173.
Apple press release (NASDAQ: AAPL): Q2 GAAP EPS of $1.53 beats by $0.03.
Revenue of $90.8B (-4.3% Y/Y) beats by $190M.
Shares +2.4%.
Apple’s board of directors has declared a cash dividend of $0.25 per share of the Company’s common stock, an increase of 4 percent. The dividend is payable on May 16, 2024, to shareholders of record as of the close of business on May 13, 2024. The board of directors has also authorized an additional program to repurchase up to $110 billion of the Company’s common stock.
Quantum computing is still in its infancy and a difficult and risky endeavor. The scale that quantum computing wants to achieve – 3.6 billion GPUs would be required to simulate a 64-qubit system. To do this in a commercially successful way at scale will take a lot to go right.
Several methods are competing with one another:
Solid state is used by the likes of Google, IBM, and Rigetti Computing (RGTI) to use artificially manufactured qubits that are engineered into the system.
Exploiting naturally occurring substrates (photons or atoms) that exhibit quantum properties. This method is used by Quantum Computing (QUBT)
Trapped atomic Ions – IonQ’s methodology uses trapped atomic ions as qubits to construct quantum computers.
None of them have had much commercial success, but are seeing orders and bookings.
IonQ – has a $ 25Mn grant/order from the US Air Force.
Total revenues for 2024 = $42Mn and 2025 = $82Mn
Achieving the 64-qubit system in 2025 is a must-reach milestone for IonQ, simply to have a shot at commercialization or even survival.
The big negative besides the commercialization risks is that the two founders have left – for academia, though not for competitors.
It has cash of $460Mn so will survive through 2027.
No system has achieved a broad quantum advantage – where developers prefer quantum computers to traditional ones – it could be three to five years on the horizon/ or not at all
Quantum wants to combine GPUS, networking, and AI, but hardware and software innovations have to produce systems economically at scale, as well as demonstrate to enterprise-level customers why it needs a quantum computer.
A LOT OF IFS — of competing systems, need to preserve cash, race to innovate, race to scale operations, and do we even need quantum computing?
Bottom line – this is like a biotech or a drug discovery bet, high risk/high reward.
*One can start nibbling at around $19.60 BUT spread out purchases on declines, there should be declines after this post earnings bump and since this is a long term story I still anticipate 15-16% of annual gains over the next 5 years.*
The Reasons for the post earnings pop.
I think the trend of rewarding profitability as in the case of Meta last week seems to be working for Palantir as well.
Investors are seeing that Palantir is serious about cost control and better margins. With revenue growth in the low 20’s overall, with the main catalyst being commercial customers, Palantir is doing the right thing by focusing on profitability.
Consider these metrics for Q4, which indicate a lot of progress since the days when Palantir didn’t care about profitability….I guess the drop to $6.35 at its low changed their perspective quite a bit
Fourth consecutive quarter of GAAP operating profitability. 11% Margin.
Adjusted free cash flow of $305 million; 50% margin; 731Mn for the year.
Adjusted operating margin of 34%; 28% for the year.
Fifth consecutive quarter of expanding adjusted operating margins
Fifth consecutive quarter of GAAP profitability; 15% margin
Commercial customer count grew at a very impressive rate of 55% – higher than the revenue of 32%, this is mostly normal for Palantir, they usually land and expand.
While the revenue guidance is just 1-2% higher than the previous estimate, there is guidance for GAAP profits in each quarter, 40% commercial business growth and adjusted profit margins of 32+% and cash flow of 33% – that is very good.
The AIP (Artificial Intelligence Platform) seems to be getting a lot of attention.
I also suspect multiples and targets will also move up considerably, growth can accelerate from here.
