Microsoft (MSFT) shares fell nearly 7% in extended hours trading on Tuesday after the tech giant reported fiscal fourth-quarter results that topped expectations, but Azure growth was weaker-than-expected or simply the expectations were too high.
For the period ending June 30, Microsoft earned $2.95 per share – above $2.93 guidance as revenue rose 15% year-over-year to come in at $64.7B – above 64.52 guidance
Included in that was $28.52B from its Intelligent Cloud division, which consists of its Azure cloud unit. Microsoft said Azure revenue grew 29% year-over-year and 30% in constant currency.
The company previously said it expected Azure to grow between 30% and 31% in constant currency, and some analysts previously said they expected more than 30% growth.
Guidance for the Sep quarter will come in with the call.
Advanced Micro Devices press release (NASDAQ:AMD): Q2 Non-GAAP EPS of $0.69 beats by $0.01.
Revenue of $5.84B (+9.0% Y/Y) beats by $120M.
Record Data Center segment revenue of $2.8 billion was up 115% year-over-year primarily driven by the steep ramp of AMD Instinct™ GPU shipments, and strong growth in 4th Gen AMD EPYC™ CPU sales. Revenue increased 21% sequentially primarily driven by the strong ramp of AMD Instinct GPU shipments.
Client segment revenue was $1.5 billion, up 49% year-over-year and 9% sequentially primarily driven by sales of AMD Ryzen™ processors.
Gaming segment revenue was $648 million, down 59% year-over-year and 30% sequentially primarily due to a decrease in semi-custom revenue.
For the third quarter of 2024, AMD expects revenue to be approximately $6.7 billion vs. $6.61B consensus, plus or minus $300 million. At the mid-point of the revenue range, this represents year-over-year growth of approximately 16% and sequential growth of approximately 15%. Non-GAAP gross margin is expected to be approximately 53.5%.
I remember this now; it came out with this headline – Serve Robotics skyrockets as Nvidia takes stake.
It’s an UBER spin off with robots for food delivery or other consumables, was going nowhere till the Nvidia stake was disclosed, which they bought from an early investment in a convertible primary note. The stake is about 10%. Interestingly, two others have investments as well including 7-11, and Delivery Hero based out of Germany.
Delivery Robots could work for the last mile, there is potential and its similar to drone delivery.
This business will need a lot of cash to stay alive and keep developing robots so another big risk is dilution – they will have to keep coming to the market and issuing shares for funding needs.
Its hugely speculative and risen from $2.50 this year, if one caught it early around 4 a tiny speculative position wouldn’t have been bad, on a bad day this one could easily drop 50%.
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.
TSM hit it out of the park last week, confirming that the high-performance semiconductor sales are doing extremely well.
Q2 revenue growth of 32.8% y/y and net income growth of 29% y/y.
Q3 expected to set another revenue record on strong AI and smartphone demand, full year guidance raised. Full Year expectations are for 28% and 24% earnings growth to $6.4 per share.
3Nm (the most advanced node powering Nvidia, Apple, etc.) revenue was 15% of sales. Nvidia’s not the only company with higher prices, they in turn pay TSM quite well for 3Nm processing! 5Nm also went to 35% of sales – the two now dominate TSM sales with 50%.
If TSM didn’t have geopolitical risks from China, and Trump demanding payments for protection didn’t help either, this would have been easily 40x earnings, over $250 per share. given the technological and market share lead. Overall, TSMC should continue to dominate in advanced process nodes and high-volume manufacturing for many years.
I had sold 20% around $183 last June, but am going to hold on to the rest, there’s really nothing much we can do with Chinese tensions – if there are nasty developments from that front, we’ll have much bigger problems than the price of TSM!
Reddit – (RDDT) $57 Hold, till post lock up expires on 8/9, we might get it around $50
Last week I had written on Reddit when the stock was in the mid 60’s suggesting a Hold till it dropped 20-25% to around $50-54. Their lock up period post IPO expires on 8/9 and there could be a lot of shares for sale. With the recent turmoil I want to wait longer.
Reddit has an excellent business model of unique Subreddits.
Its user base is enthusiastic, passionate and sticky.
Reddit’s data licensing revenue stream is an excellent opportunity to grow – currently contracted for $203Mn for 2-3 years and a very profitable business. Reddit turned cash flow positive for the first time last quarter with a margin of 12%.
The stock is expensive at 10X sales and could fall once the lock-up period post its 2024 IPO expires in August.
Its biggest weakness is a low Average Revenue Per User (ARPU) $4.77, even Pinterest and Snapchat earn almost double – around $8, and Facebook is in a different league at $68, but this should only grow from such a low base.
Micron (MU) Rating Upgrade to Buy from Hold, $100.
Results expected this afternoon were very good, and I am more optimistic about the guidance. I was hesitant to add or recommend buying because it looked overpriced compared to its historical average and it had doubled in the past year.
Nvidia’s comments on needing more high bandwidth memory (HBM) vendors like Samsung, suggest the Micron is more likely to have challenges meeting demand. Unlike the past year when they had to discount inventory.
With this beat and these upgrades from Wall Street analysts in Barron, I would start buying.
“Micron is likely to report continued soaring demand for “high bandwidth memory,” or HBM—parts that combine multiple DRAM chips to improve data-processing speeds.
TD Cowen analyst Krish Sankar wrote in a recent research note previewing the quarter that when it comes to Micron, “HBM remains the centerpiece of attention.” Last week, he lifted his target for the stock price to $120, from $100. He said there is a “potential scenario” where the stock can reach $150, for a gain of more than 50% from current levels.”
For the May quarter, the Street is projecting revenue of $5.98 billion, with an adjusted profit of 8 cents a share. Analysts expect the rebound to continue from there. Estimates for the August quarter now point to $6.86 billion in revenue and an adjusted profit of 81 cents a share.
FQ3-24
Revenue 6.6Bn Expected 5.8Bn
EPS $0.17 Expected $0.08
FQ3-24
GAAP(1) Outlook
Non-GAAP(2) Outlook
Revenue
$6.60 billion ± $200 million
$6.60 billion ± $200 million
Gross margin
25.5% ± 1.5%
26.5% ± 1.5%
Operating expenses
$1.11 billion ± $15 million
$990 million ± $15 million
Diluted earnings per share
$0.17 ± $0.07
$0.45 ± $0.07
Wedbush analyst Matt Bryson wrote in a recent research note that recent trends in prices for both DRAM and NAND memory chips suggest Micron will beat its guidance for the quarter. Bryson, who has an Outperform rating on Micron shares, said he expects positive commentary from the company on the outlook for HBM demand.
“Since last summer, management has provided consistently optimistic commentary around anticipated progress with HBM in light of the technology being a derivative of their highly successful standard DRAM nodes,” Bryson writes.
Meanwhile, analysts say the balance between supply and demand has stabilized following a supply glut that spanned multiple quarters.
“Customer inventories have largely normalized, demand conditions across markets appear stable, and supply growth remains muted,” Raymond James analyst Srini Pajjuri wrote in a research note previewing the quarter. “In addition, HBM is a significant secular driver that could add $1.5-$2 in incremental EPS at the next peak.”
Pajjuri maintains an Outperform rating on the stock.
Chip Design. (Electronic Design Automation) Pick and Shovels semi and AI play.
I had looked at this company a couple of weeks ago and just checked my notes – “Where’s the growth for a P/E of 42 and a P/S ratio of 13?”
Yeah, it’s a 15% earnings grower, so that’s a PEG (Price Earning to Growth) of 3 and a 12% revenue grower, that sales multiple is also too rich.
It’s a solid company – no doubt, but likely paying a steep price for the ANSYS (ANSS) acquisition, hoping for ambitious synergy targets, which often don’t happen. That said, its chip design simulation business is strong and with the AI buzz can get a boost – that’s why I was surprised to see only 12% revenue growth estimates. Operating margins of both companies are very high at 32% and 28% – that’s a big plus.
There’s another competitor in this space Cadence (CDNS) which is also very profitable at 30% operating margins – same problem – 50X earnings with 17% growth..and 17.6X sales!
I do want to keep this company under the radar for sure and let’s see what the next call reveals.
