ReportWire

Tag: Data Services

  • Jump in cloud revenue lifts Oracle’s results, and stock gains after hours

    Jump in cloud revenue lifts Oracle’s results, and stock gains after hours

    Shares of Oracle Corp. rose after hours Monday after the IT and cloud infrastructure provider reported fiscal fourth-quarter results that topped expectations, helped by a jump in cloud revenue that executives said positioned the company well for the year to come.

    The company reported fourth-quarter net income of $3.32 billion, or $1.19 a share, compared with $3.19 billion, or $1.16 a share, in the same quarter last year. Revenue rose 17% to $13.84 billion, compared with $11.84 billion in the prior-year quarter.

    Excluding stock-based compensation, amortization and other charges, Oracle earned $1.67 a share, compared with $1.54 a year ago.

    Analysts polled by FactSet expected Oracle to report adjusted earnings per share of $1.58, on revenue of $13.74 billion.

    Oracle also declared a quarterly cash dividend of 40 cents a share. Revenue from Oracle’s cloud software and infrastructure services rose 54% during the quarter.

    “So, both of our two strategic cloud businesses are getting bigger — and growing faster,” Chief Executive Safra Catz said in a statement. “That bodes well for another strong year in FY24.”

    Oracle shares
    ORCL,
    +5.99%
    were up 4.8% after hours on Monday. The stock closed regular trading up 5.8% to $116.43, putting it at a record high.

    Prior to the results, analysts were focused on Oracle’s cloud business — which has faced concerns about tighter tech budgets in IT departments as inflation raises concerns about the economy — as well as its AI potential, which has catapulted shares of other tech companies higher. More executives inside and outside of tech, hoping for a similar pop from investors, have been talking about AI on earnings calls more this year.

    Earlier on Monday, Wolfe Research upgraded Oracle, saying its cloud business could double its market share by 2025 “on the backs of architectural advantages, partnerships” and generative AI.

    UBS analysts also said they expected Oracle to highlight its cloud-AI partnership with chip maker Nvidia Corp.
    NVDA,
    +1.84%    ,
    which analysts say is set to benefit from more AI development. Those expectations were confirmed on Monday, when Oracle management name-checked Nvidia in its earnings release.

    “Nvidia themselves are using our clusters, including one with more than 4,000 GPUs, for their AI infrastructure,” Larry Ellison, Oracle’s co-founder and chief technology officer, said in the release.

    Shares of Oracle have marched 81.7% higher over the past 12 months. The S&P 500 Index
    SPX,
    +0.93%
    has risen 15.7% over that period.

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  • Amazon Was the Rare AI and Cloud Play Left Out of the Nvidia Bump. Here’s Why.

    Amazon Was the Rare AI and Cloud Play Left Out of the Nvidia Bump. Here’s Why.

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    https://www.barrons.com/articles/amazon-misses-rally-8a6e2511

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  • ‘AI for us is broader than cloud,’ AMD CEO tells analysts, but chip maker still needs PC recovery to improve margins

    ‘AI for us is broader than cloud,’ AMD CEO tells analysts, but chip maker still needs PC recovery to improve margins

    AMD reports earnings and revenue that top expectations

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  • Chegg, Arista, Uber, Pfizer, DuPont, and More Stock Market Movers

    Chegg, Arista, Uber, Pfizer, DuPont, and More Stock Market Movers

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    https://www.barrons.com/articles/stock-market-movers-7c17b0b6

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  • Amazon stock turns around as CFO admits AWS growth rates are declining further

    Amazon stock turns around as CFO admits AWS growth rates are declining further

    Amazon.com Inc. shares zoomed higher in extended trading Thursday after the company posted its biggest quarterly profit since 2021, but shares turned around after the company’s chief financial officer said in a conference call that cloud revenue is decelerating in the current quarter.

    Amazon AMZN reported that first-quarter revenue grew to $127.4 billion from $116.44 billion in the same quarter last year. Profit reached $3.17 billion, or 31 cents a share, improving from a loss of 38 cents a share a year ago, which was Amazon’s…

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  • Intel tops Wall Street estimates, CEO says data-center business is improving

    Intel tops Wall Street estimates, CEO says data-center business is improving

    A previous version of this article included an inaccurate number for Intel’s second-quarter profit forecast. It has been updated.

    Intel Corp. shares surged in the extended session Thursday, swinging from an initial loss after the chip maker topped Wall Street estimates for the quarter, and Chief Executive Pat Gelsinger assured analysts that the company’s data-center business was improving.

    Intel…

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  • Amazon stock gives up gains as CFO admits AWS growth rates are declining further

    Amazon stock gives up gains as CFO admits AWS growth rates are declining further

    Amazon.com Inc. shares zoomed higher in extended trading Thursday after the company posted its biggest quarterly profit since 2021, but shares turned around after the company’s chief financial officer said in a conference call that cloud revenue is decelerating in the current quarter.

    Amazon AMZN shares jumped more than 10% in after-hours trading immediately following the release of first-quarter results, but those gains disappeared after Chief Financial Officer Brian Olsavsky said in a conference call with analysts that…

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  • Alphabet’s stock rises as earnings show Google ad sales holding steady

    Alphabet’s stock rises as earnings show Google ad sales holding steady

    Alphabet Inc.’s stock rose 1.4% in extended trading Tuesday after Google’s parent company reported quarterly results that slightly topped analysts’ revenue and earnings estimates.

    Alphabet also said its board of directors authorized $70 billion in share repurchases.

    “Resilience in Search and momentum in Cloud resulted in Q1 consolidated revenues…

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  • Walmart, Home Depot, Meta, DocuSign, Medtronic, and More Stock Market Movers

    Walmart, Home Depot, Meta, DocuSign, Medtronic, and More Stock Market Movers

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    https://www.barrons.com/articles/stock-market-movers-5b0c54ae

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  • Amazon stock falls as least profitable holiday quarter since 2014 leads to its worst annual loss on record

    Amazon stock falls as least profitable holiday quarter since 2014 leads to its worst annual loss on record

    Amazon.com Inc. reported its least profitable holiday quarter since 2014 on Thursday, leading to the biggest annual loss on record for the e-commerce giant, which also disappointed Wall Street with its forecast amid concerns about cloud growth.

    Amazon
    AMZN,
    +7.38%
    reported a holiday profit of $278 million, or 3 cents a share, down from $1.39 a share a year ago. Revenue increased to $149.2 billion from $137.41 billion a year ago. Analysts on average were expecting earnings of 17 cents a share on sales of $145.71 billion, according to FactSet.

    Shares fell 5% in after-hours trading following the release of the results, after closing with a 7.4% increase at $112.91.

    “In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” Chief Executive Andy Jassy said in a statement.

    Amazon was expected to post a loss for the whole year for the first time since 2014, but worse-than-expected holiday earnings actually led Amazon to the company’s worst annual loss on record. For the year, Amazon produced a net loss of $2.7 billion and revenue of $513.98 billion, up from $469.82 billion a year ago and the company’s first annual sales total to surpass a half-billion dollars. Amazon had never lost more than $1.4 billion in a single year since going public in 1997, according to FactSet records.

    Amazon’s fourth-quarter profit was hindered again by the decline of Rivian Automotive Inc.
    RIVN,
    +5.94%
    stock, which cost Amazon $2.3 billion in net income in the quarter. In addition, Amazon recognized many of the costs of its recently announced layoffs and other cost cuts in fourth-quarter results as well — a $2.7 billion impairment charge included $640 million in severance charges related to layoffs and $720 million related to closures and impairment of physical stores, Chief Financial Officer Brian Olsavsky said in a call with reporters.

    Without those charges, Amazon would have exceeded expectations, and recognizing them in 2022 leaves a cleaner sheet for this year, when Amazon’s ability to return to strong profitability will be the focus of Wall Street. The end result will likely rest on Amazon Web Services, or AWS, the cloud-computing offering that has supplied the bulk of Amazon’s profit in recent years, including 2022. Last year, AWS had operating profit of $22.84 billion, while the rest of the business produced an operating loss of $10.59 billion.

    But cloud-computing growth has slowed, as Microsoft Corp.
    MSFT,
    +4.69%
    displayed in its results and forecast last week, and Olsavsky confirmed the slowdown Thursday after AWS results missed expectations and suggested revenue growth had slowed to mid-teens and could stay there.

    “Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions,” he said in a conference call with analysts. “As expected, these optimization efforts continued into the fourth quarter.”

    Olsavsky told reporters he expected “slower growth rates for the next few quarters” for AWS, and later disclosed to analysts that revenue growth was in the mid-teens in the first month of this year. He noted that AWS revenue growth rates had been hit by customers looking to cut their cloud spending, and “we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters.”

    Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

    Making his first appearance on an earnings call since being named CEO two years ago, Jassy — who led AWS before being promoted to replace Jeff Bezos as CEO — said “if it’s good for our customers to find a way to be more cost effective in an uncertain economy, our team is going to spend a lot of cycles doing that.”

    “We’re the only ones that really break out our cloud numbers in a more specific way, so it’s always a little bit hard to answer your question about what we see,” Jassy said to an analyst asking about the larger cloud industry, while referencing rival Microsoft’s refusal to provide full financial information about Azure. “But to our best estimations, when we look at the absolute dollar growth year over year, we still have significantly more absolute dollar growth than anybody else we see in this space.”

    In the fourth quarter, AWS produced operating income of $5.21 billion on revenue of $21.38 billion, with sales growing more than 20% and operating income declining slightly. Analysts on average were expecting profit of $5.73 billion on sales of $21.85 billion, according to FactSet.

    Any slowdown in AWS would hit Amazon’s bottom line as well as its overall top line, and executives’ forecast for the first quarter shows less optimism than Wall Street expected. Amazon’s guidance calls for operating profit of break-even to $4 billion and revenue of $121 billion to $126 billion, while FactSet recorded an average analyst forecast of $4.04 billion in operating profit on sales of $125.09 billion.

    Amazon’s e-commerce business has struggled for growth amid the worst inflation in decades, with Olsavsky saying in a call with reporters that Amazon “saw customers spend less on discretionary items… [while] continuing to spend on everyday essentials.” Amazon recently announced it would start charging for grocery delivery for Prime members, which could increase revenue from sales of fresh food.

    For more: Amazon Fresh to start charging Prime customers up to $10 for grocery deliveries

    Amazon’s domestic e-commerce business posted an operating loss of $240 million on sales of $93.36 billion, after a $206 million loss on sales of $82.36 billion in the holiday quarter of 2021. Olsavsky said cuts in the company’s physical stores and device businesses would improve operating margins in North America.

    Amazon’s international efforts struggled more, with a sales decline and increasing losses, as Olsavsky said the U.K. and other parts of Europe showed slowdowns. Amazon reported an operating loss of $2.23 billion on revenue of $34.46 billion overseas, after a loss of $1.63 billion on sales of $37.27 billion a year ago.

    One bright spot in Amazon’s report was a record quarter for its advertising business, which has grown fast in recent years in a challenge to Alphabet Inc.’s
    GOOGL,
    +7.28%
    GOOG,
    +7.27%
    Google and other online ad giants. Ads brought in $11.56 billion in the holiday quarter, growing nearly 19% from $9.71 billion a year ago and beating the analysts’ consensus.

    Amazon stock has fallen more than 25% over the past 12 months, but has experienced a rebound so far in 2023, gaining more than 33% year to date. The S&P 500 index
    SPX,
    +1.47%
    has declined 10.2% in the past year while gaining 7.3% since the calendar flipped to 2023.

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  • AMD CEO promises to keep taking data-center from Intel even as cloud demand pauses following ‘strong’ 2022

    AMD CEO promises to keep taking data-center from Intel even as cloud demand pauses following ‘strong’ 2022

    Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales gained and executives forecast sales of more than $5 billion to start 2023, even as cloud-customer demand begins the year light.

    AMD shares AMD rose 3% after hours, following a 3.7% gain in the regular session to close at $75.15.

    AMD…

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  • Intel stock drops nearly 10% after earnings miss, execs predict quarterly loss as data-center market shrinks

    Intel stock drops nearly 10% after earnings miss, execs predict quarterly loss as data-center market shrinks

    Intel Corp. shares dropped more than 9% in the extended session Thursday after the chip maker reported a big miss for the fourth quarter, forecast a loss for the first quarter, said the data-center market was contracting and that inventory digestion will gnaw at margins.

    Intel
    INTC,
    +1.31%
    executives forecast an adjusted loss of 15 cents a share on revenue of about $10.5 billion to $11.5 billion and adjusted gross margins of about 39% for the current quarter. Analysts surveyed by FactSet had estimated adjusted first-quarter earnings of 25 cents a share on revenue of $13.93 billion.

    Chief Executive Pat Gelsinger told analysts on a conference call he would not provide a 2023 forecast. Gelsinger restricted the outlook to the current quarter, citing macro uncertainties, a digestion of PC inventory that was “difficult” to forecast and a contracting data-center market. In the fourth quarter, AI group sales dropped 33% to $4.3 billion, while the Street expected revenue of $4.08 billion.

    “We expect Q1 server consumption [total addressable market] to decline both sequentially and year-over-year at an accelerated rate, with first-half 2023 server consumption TAM down year-on-year before returning to growth in the second half,” Gelsinger said.

    Chief Financial Officer David Zinsner told analysts that the company will institute an accounting change in the first quarter, where Intel will extend the useful life of their machinery to eight years from a current five years. Gelsinger said that Intel was going to “squeeze” its effective capacity.

    While Zinsner would not give a full-year outlook, he did say that continued inventory digestion should be weighted to the first half of the year.

    Pressed on how Intel could get back to the 51% to 53% margins range he promised a year ago, Zinsner said a “significant inventory burn” on PC inventory would hit gross margins by 400 basis points in the first quarter. Gross margins for the fourth quarter dropped to 43.8% from 55.8% a year ago, and from 45.9% in the third quarter.

    Intel reported a fourth-quarter loss of $664 million, or 16 cents a share, versus net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported earnings of 10 cents a share, compared with $1.13 a share from a year ago.

    Revenue declined to $14.04 billion from $20.52 billion in the year-ago quarter, for a 10th straight quarter of year-over-year declines.

    Analysts surveyed by FactSet estimated earnings of 21 cents a share on revenue of $14.49 billion, based on Intel’s forecast of 20 cents a share on about $14 billion to $15 billion.

    Intel shares fell 9% in after-hours trading, after closing the regular session up 1.3% at $30.09. Other chip stocks also declined, including top rival Advanced Micro Devices Inc.
    AMD,
    +0.33%    ,
    which saw shares drop more than 3% in after-hours trading, and Nvidia Corp.
    NVDA,
    +2.48%    ,
    which declined 2%.

    Breaking down divisions: Client-computing sales fell 36% to $6.6 billion from a year ago; “network and edge” sales slipped 1% to $2.1 billion; and foundry services revenue rose 30% to $319 million.

    Analysts surveyed by FactSet expected revenue from client computing to come in at $7.36 billion; “network and edge” revenue of $2.23 billion; and foundry services revenue of $199.1 million.

    Over the past 12 months, Intel stock has fallen 43%. Over the same period, the Dow Jones Industrial Average 
    DJIA,
    +0.61%
     — which counts Intel as a component — has slipped 1%, the PHLX Semiconductor Index 
    SOX,
    +1.63%
     has dropped 13%, the S&P 500 index 
    SPX,
    +1.10%
     has declined 7%, and the tech-heavy Nasdaq Composite Index 
    COMP,
    +6.59%
     has dropped 15%.

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  • Microsoft Posts Earnings Beat On Solid Cloud Results, But Guidance Disappoints

    Microsoft Posts Earnings Beat On Solid Cloud Results, But Guidance Disappoints



    Microsoft


    posted better-than-expected results for the December quarter, driven by strength in cloud computing. But the strong results were tempered by disappointing guidance for the March quarter.

    While the company saw weakness in its PC software business, Microsoft (ticker: MSFT) posted solid results in cloud computing and enterprise applications. In particular, the Azure public cloud business beat Wall Street growth estimates, which is a relief to investors nervous about the outlook for corporate IT spending.

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  • CES 2023: AMD, Nvidia, auto applications get the hype, but analysts say this one chip maker ruled

    CES 2023: AMD, Nvidia, auto applications get the hype, but analysts say this one chip maker ruled

    As CES 2023 draws to a close, much of the attention in the chip world was lauded on companies like Advanced Micro Devices Inc. and Nvidia Corp. but a lower profile chip maker appears better positioned coming out of the convention.

    Morgan Stanley analyst Joseph Moore said there’s still a lot of caution about overall chip demand especially with softness in China, but autos appear to be one of the strong themes of CES 2023, he said.

    “The areas that have been weak remain somewhat weaker – notably memory, semi cap, and generally PC and cloud builds – while the markets that have been strong (such as automotive and industrial) remain strong but with lead times clearly starting to normalize, which likely points to longer term revenue pressures particularly in a weaker economy,” Moore said.

    “Still, the longer term themes remain positive, especially for autos (which is increasingly the focus of CES),around themes such as EVs, ADAS and autonomous.”

    Such was the case when Nvidia Corp.
    NVDA,
    +4.16%
     said on Tuesday it was partnering with Hon Hai Technology Group
    2317,
    +0.41%
     , or Foxconn, best known for being the manufacturer of Apple Inc.’s
    AAPL,
    +3.68%
    iPhone, to make electric vehicles that use Nvidia’s Drive Orin chips and sensors, and bringing its GeForce Now streaming video game service to autos made by Hyundai Motor Group
    005380,
    +0.31%    ,
    BYD
    1211,
    -2.60%    ,
    and Swedish EV maker Polestar.

    “We generally think that Nvidia numbers are likely OK from here, though there was some caution on sell through in China for gaming, and a clear awareness that while the company’s position within cloud is very good, that pressure in cloud budgets leads to somewhat lower visibility,” Moore said. “But we would say that generally we think that they are past the worst of the pressures in their business, in contrast to most of the semiconductor group where there are still likely numbers cuts ahead.”

    Meanwhile, Advanced Micro Devices Inc.
    AMD,
    +2.62%
    used the CES keynote to introduce the Instinct MI300 chip as “world’s first data-center integrated CPU + GPU.” The  combined central processing unit and graphics processing unit meant for AI inference, the months-long process where data centers spend millions of dollars a year on electricity to train and develop artificial intelligence. AMD Chief Executive and Chair Lisa Su said the MI300 can reduce the time it takes for an inference modeling process from months to weeks.

    But one chip maker that doesn’t get a lot of attention appeared to emerge from CES best positioned for the year: ON Semiconductor Corp.
    ON,
    +4.57%    ,
    which focuses on electric vehicles and advanced driver assistance systems as primary growth drivers, leveraging its legacy position in auto chips.

    “Most notably, the company’s push into [Silicon Carbide] remains on track, and expect to still exit the year at a run-rate where the majority of crystal driving the business is internally sourced,” Moore said. “The company remains confident that demand in the EV space will far outpace supply for a long time and have thus shifted their focus over to execution on the production side.”

    Citi Research analyst Christopher Danley lauded ON as being the most bullish chip maker of CES 2023.

    “ON remains on track to triple Silicon Carbide revenue YoY from roughly $300 million in 2022 to $1.0 billion in 2023,” Danley said. “The company stated it is sold out through 2023.”

    But ON aside, Danley said everyone at CES is “nervous” about “cracks” in data-center demand, “and they should be.”

    “There was a tone of nervousness on the data center outlook with many execs and investors cautious and talking about ‘uncertainty’ in data center outlooks from both hyperscalers and enterprise customers,” Danley said. “We continue to believe data center correction will happen given a multitude of datapoints and leading indicators.”

    Back in early December, Danley said his checks “indicate order rates from the data center end market are fading with downside from the enterprise end market (roughly 40% of the data center end market) and Facebook,” which is owned by parent company Meta Platforms Inc.
    META,
    +2.43%
    “We continue to expect a correction in the data center end market in 1H23,” Danley said.

    That said, Danley said his top pick was and continue to believe a correction there is inevitable. We remain cautious on semis until all end markets and companies correct and our top pick remains chip maker Analog Devices Inc.
    ADI,
    +3.65%

    Back to autos: Ambarella Inc.
    AMBA,
    +6.77%
    on Thursday, Ambarella said it was partnering with Continental AG
    CON,
    +2.32%
    to develop hardware and software for assisted driving using AI with the ultimate goal of an autonomous driving system. The companies hope to have systems in production in 2026.

    Moore said Ambarella’s tech “continues to impress,” and said the Continental partnership will provide software revenue that’s shared but with the larger portion going to Continental.

    At CES 2023, “the companies are showing a full L2+ ADAS implementation for a 10-camera system running on a single chip, which per AMBA was only using 8% of the compute value of the chip.”

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  • Oracle’s Cloud Business Is Still Growing

    Oracle’s Cloud Business Is Still Growing



    Oracle


    shares were moving higher late Monday after the company posted better-than-expected financial results for its latest quarter. The enterprise software giant continued to see success in shifting more of its business to the cloud during the period.

    “Simply put, we had an outstanding quarter,” Oracle CEO Safra Catz said on a call with analysts. “More and more customers are recognizing our second generation infrastructure cloud as being better architected for higher performance, better security and unmatched reliability” than other cloud providers.

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  • Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

    Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

    Okta Inc. executives on Wednesday said they will report an adjusted profit in the fourth quarter and, in a surprise, predicted profitability for all of next fiscal year, trumping profit concerns stemming from recent sales-operation issues.

    For the fourth quarter, Okta
    OKTA,
    +4.04%
    guided for adjusted earnings of 9 cents to 10 cents a share on revenue of $488 million to $490 million. Analysts, on average, were expecting an adjusted loss of 12 cents a share on sales of $488.3 million, according to FactSet.

    In a surprise announcement during the conference call, Chief Financial Officer Brett Tighe revealed a full forecast for fiscal 2024 as well. Most software companies shy away from such practices amid uncertainty about macroeconomic conditions. He said Okta executives are aiming for adjusted profits for the full year on revenue of $2.13 billion to $2.15 billion. Analysts on average expected adjusted losses of 30 cents a share on sales of $2.3 billion, beating profit projections widely but also missing sales expectations by more than $100 million.

    Shares rallied as much as 18% in after-hours trading immediately following the release of the results, but those gains noticeably pared back to a steady 12% level after Tighe announced the outlook to analysts on the call. They have fallen 76% so far this year, compared with a 27% decline by the tech-heavy Nasdaq Composite Index
    COMP,
    +4.41%    .

    In an exclusive interview with MarketWatch ahead of the company’s conference call, Okta Chief Executive and co-founder Todd McKinnon said the company is not providing any forecasts past 2024 because of uncertainty in the macro environment.

    “We’re thinking a pretty conservative assumption that the macro is going to get worse before it gets better, so that’s definitely factored into the guide,” McKinnon told MarketWatch.

    On a more positive note, McKinnon said sales-rep attrition has been the lowest it has been in the past several quarters, following a spike last quarter. Okta also announced that Susan St. Ledger, the president of worldwide field operations, is retiring and McKinnon will take over her duties on an interim basis.

    “What we’ve done over the last six months is what a lot of companies are doing, slowing hiring, re-evaluating real estate, doubling down on the things we know are high value. And some of the things that are maybe less value we’re doing less of, so that’s where we see the profitability come from,” McKinnon told MarketWatch.

    Much of that comes from addressing the company’s struggle in combining Okta’s salesforce with sales reps acquired in the May 2021 acquisition of identity-platform Auth0 (pronounced “Auth Zero”), which is more focused on direct-to-user sales than Okta’s corporate focus.

    “The problem was never that we didn’t have talented sales people,” McKinnon told MarketWatch. “The problem is that we didn’t enable them and clarify things with them.”

    In-depth: Okta CEO says ‘short-term challenges’ resulted in workers leaving at a higher rate

    “We still have work to do,” McKinnon said. “We don’t think we’ve solved it after one quarter of a positive trend but I do think it’s progress.”

    “The biggest factor: We’ve really done a much better job clarifying the products and the positioning and saying we have two clouds: We have Workforce Identity Cloud and Customer Identity Cloud and it’s very clear what to sell when,” he said.

    Okta reported a third-quarter loss of $208.9 million, or $1.32 a share, compared with a loss of $221.3 million, or $1.44 a share, in the year-ago period. After adjusting for stock-based compensation expenses and other items, the company reported break-even results on a per-share basis, compared with a loss of 7 cents a share in the year-ago period. Revenue rose to $481.4 million from $350.7 million in the year-ago quarter.

    Analysts had forecast an adjusted loss of 24 cents a share on revenue of $465.4 million, based on the company’s forecast for a loss of 24 cents to 25 cents a share on sales of $463 million to $465 million.

    For the current year, Okta forecast an adjusted loss of 27 cents to 26 cents a share on revenue of about $1.84 billion, compared with the Street’s forecast of 73 cents a share on revenue of $1.82 billion.

    So far in November, cloud software stocks have been getting trashed. While the S&P 500
    SPX,
    +3.09%
    has gained 5.4%, and the Nasdaq has advanced 4.4%, the iShares Expanded Tech-Software Sector ETF
    IGV,
    +4.39%
    has risen 1.6%, the Global X Cloud Computing ETF
    CLOU,
    +6.00%
    has ticked up 0.8%, the First Trust Cloud Computing ETF
    SKYY,
    +4.54%
    has fallen 2%, and the WisdomTree Cloud Computing Fund
    WCLD,
    +4.99%
    has dropped 6.9%.

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  • Amazon stock sinks after holiday forecast and cloud growth, profit disappoint; $150 billion in market cap at risk

    Amazon stock sinks after holiday forecast and cloud growth, profit disappoint; $150 billion in market cap at risk

    Amazon.com Inc. predicted Thursday that holiday sales and profit would come in well lower than analysts expected as cloud growth slowed and Amazon Web Services profit missed expectations by nearly $1 billion, sending shares south in after-hours trading.

    Amazon
    AMZN,
    -4.06%
    executives guided for fourth-quarter operating profit of break-even to $4 billion and holiday sales of $140 billion to $148 billion, while analysts on average were expecting operating income of $5.05 billion on revenue of $155.09 billion, according to FactSet. AWS sales of $20.54 billion grew 27.5% from the year before, the lowest growth rate for the pioneering cloud-computing product in records dating back to the beginning of 2014, and lower than analysts’ average estimate of $21.2 billion; AWS operating income of $5.4 billion handily missed analysts’ average estimate of $6.37 billion, according to FactSet.

    “As the third quarter progressed, we saw moderating sales growth across many of our businesses, as well as increased foreign-currency headwinds … and we expect these impacts to persist throughout the fourth quarter,” Chief Financial Officer Brian Olsavsky said in a conference call Thursday afternoon. “As we have done in similar times in our history we are also taking action to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere.”

    Shares dove as much as 20% in after-hours trading immediately following the release of the results, after closing with a 4.1% decline at $110.96, but ended the extended trading period down 13%. After-hours prices could chop roughly $150 billion from Amazon’s market capitalization and send it lower than $1 trillion for the first time since April 2020 if they were to persist through Friday’s regular trading session, according to FactSet.

    Amazon reported its first quarterly profit of the year for the third quarter, and easily beat analysts’ expectations for the back-to-school period that included the company’s first Prime Day of the year, but earnings still declined from last year. Executives reported third-quarter profit of $2.87 billion, or 28 cents a share, down from 31 cents a share in the year-ago quarter after adjusting for Amazon’s 20-to-1 stock split.

    Revenue grew to $127.1 billion from $110.8 billion, in the middle of executives’ forecast for $125 billion to $130 billion but slightly missing analysts’ expectations; executives said revenue would have been $5 billion higher without the effects of the strengthening dollar. Analysts on average expected earnings of 22 cents a share on sales of $127.39 billion, according to FactSet.

    “There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Chief Executive Andy Jassy said in a statement. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

    Amazon had reported quarterly losses through the first half of the year, largely because of a rapid post-IPO decline in one of its investments, Rivian Automotive Inc.
    RIVN,
    +0.17%    .
    But the Seattle-based company has also been looking to cut costs after spending wildly during the first two years of the COVID-19 pandemic to keep up with spiking demand for its online store and Amazon Web Services cloud-computing products.

    Amazon’s stock has suffered as it faces comparisons to the headier days of last year, and will do so again in the holiday season, when it faces a comparison with a nearly $12 billion profit from its Rivian investment, which has declined more than 50% from its IPO price and stands at roughly one-fifth its peak post-IPO price.

    There were thoughts that Amazon would be cautious with its holiday forecast, as its attempts to cut costs run into the need to keep its giant logistics operation running smoothly. The company is looking to hire 150,000 workers to get through the holiday season, and recently announced increased pay for fulfillment workers.

    “On 4Q consensus estimates, we believe AMZN will likely err on the side of being more conservative, given the uncertain consumer spend environment,” MKM Partners Managing Director Rohit Kulkarni wrote in a note. “We believe recently announced wage hike, higher near-term content costs amortization (NFL & Lord Of Rings), and potentially greater merchandise discounting might weigh on 4Q Op Margins.”

    Amazon’s e-commerce operations were boosted in the third quarter by the company’s annual Prime Day event in July, and the company tried to replicate the event in October, but analysts saw the second Prime Day as less successful and potentially a sign of weakness.

    “We see Amazon’s decision to hold two Prime Day sales in one calendar year as a red flag for weak e-commerce sales; consistent with retailers, in general, holding more sales when their sales are under pressure,” D.A. Davidson analyst Tom Forte wrote in a preview of Amazon’s report.

    In the third quarter — with back-to-school sales and the first Prime Day event — quarterly retail sales in North America hit $78.84 billion, while overseas revenue totaled $27.72 billion. Analysts on average were expecting $77.24 billion and $29 billion respectively, according to FactSet. Sales in both locations were unprofitable from an operating perspective for the fourth consecutive quarter, losing a total of $2.88 billion.

    Amazon’s profit largely comes from the fat margins of its AWS cloud-computing offering, but there have been concerns about growth leveling off for cloud after rival Microsoft Corp.
    MSFT,
    -1.98%
    reported a deceleration earlier this week and guided for a further decline in growth in the fourth quarter. AWS did provide enough profit in the third quarter to overcome the losses in e-commerce, but the result was the lowest quarterly operating income for Amazon overall since the first quarter of 2018, according to FactSet records.

    Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

    “The ongoing macroeconomic uncertainties have seen an uptick in AWS customers focused on controlling costs and we are proactively working to help customers cost-optimize just as we have done throughout our history, especially in periods of economic uncertainty,” Olsavsky said in Thursday’s conference call, before adding that revenue growth dipped to the mid-20s late in the period from an overall rate of 27.5% for the quarter.

    “So carry that forecast to the fourth quarter, we are not sure how it’s going to play out, but that’s generally our assumption,” he said, suggesting that Amazon expects the AWS revenue-growth rate to decline again in the fourth quarter.

    Amazon’s other higher-margin business is advertising, which has grown strongly in recent years as companies seeking to sell products on Amazon pay the company to list their products higher when consumers search for them on the e-commerce platform. Amazon reported third-quarter advertising revenue of $9.55 billion, up from $7.61 billion a year ago and topping the average analysts estimate of $9.48 billion.

    The results seemed to spread fears to other e-commerce companies and cloud-focused companies. Wayfair Inc.
    W,
    +0.37%    ,
    eBay Inc.
    EBAY,
    +0.71%
    and Etsy Inc.
    ETSY,
    -0.48%
    shares all fell roughly 5% or more in after-hours trading, as did cloud-software providers Snowflake Inc.
    SNOW,
    -0.20%    ,
    MongoDB Inc.
    MDB,
    -0.35%
    and Datadog Inc.
    DDOG,
    +0.81%
    Microsoft’s stock declined about 1.5%.

    Amazon stock has fallen 33.5% so far this year, as the S&P 500 index
    SPX,
    -0.61%
    has dropped 19.6%.

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  • Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

    Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

    Data-center stocks buoyed an otherwise down chip sector Thursday as shares of Facebook parent Meta Platforms Inc. cratered on torn-in-half profits and a hike in capital spending to fuel Mark Zuckerberg’s metaverse ambitions, prompting one analyst to ask if server chips can only go up now.

    As shares of Meta dropped as much as 25% Thursday, shares of Nvidia Corp.
    NVDA,
    +2.31%
    surged as much as 7%, compared with less than 1% declines on the PHLX Semiconductor Index
    SOX,
    -1.51%
    and S&P 500 index
    SPX,
    -0.69%    .

    Late Wednesday, Meta reported that quarterly profits fell by more than 50% and added that it expects 2022 capital expenditure of $32 billion to $33 billion, compared with a previous range of $30 billion to $34 billion. In 2023, the company said, it expects capital expenditure in the range of $34 billion to $39 billion, “driven by our investments in data centers, servers, and network infrastructure.”

    Meta
    META,
    -24.64%
    noted that an “increase in AI capacity is driving substantially all of our capital expenditure growth in 2023.”

    Soon after Meta made that announcement, Jefferies analyst Mark Lipacis said in a note that “positive capex commentary from Alphabet
    GOOGL,
    -2.80%    ,
    Microsoft
    MSFT,
    -2.03%
    and Meta” was all a positive for data-center equipment providers Nvidia, Advanced Micro Devices Inc.
    AMD,
    -1.92%    ,
    Broadcom Inc.
    AVGO,
    -1.26%
    and Marvell Technology Inc.
    MRVL,
    +3.61%    .
    Lipacis has buy ratings on all four stocks.

    Shares of AMD rallied as much as 5%, Broadcom shares rose as much as 2% and Marvell shares surged as much as 10% Thursday. Intel Corp.
    INTC,
    -3.69%
    shares were up a little more than 1% at one point ahead of its earnings report, scheduled for after the close Thursday.

    Opinion: Facebook and Google grew into tech titans by ignoring Wall Street. Now it could lead to their downfall

    Jefferies noted that Meta’s capital expenditure for 2023 alone charts a 12% year-over-year hike at midpoint, compared with the Wall Street consensus of $29 billion, or a 5% year-over-year decline.

    “We sense investor caution around Nvidia’s datacenter business this quarter, but we expect all four [equipment providers] to discuss positive datacenter trends this earnings season,” Lipacis said, noting he was a buyer of Nvidia stock “in front of its earnings call.”

    From the perspective of the chip industry — which has gone from a two-year global chip shortage to a sudden glut in a matter of months as PC and consumer-electronics demand has dropped sharply, causing chip fabricators to pump the brakes on investments in new capacity — Lipacis questioned whether the glut will ever reach data-center sales, as many have feared.

    “The most common comment we hear from investors on Nvidia is ‘the Datacenter Shoe has to Drop,’” Lipacis said, noting that his data shows that the shoe has already dropped and an uptick is on the horizon.

    Lipacis explained that data-center sales from Nvidia, AMD and Intel combined declined to $10.5 billion in the second quarter from $12 billion in the fourth quarter of 2021 and that he is modeling another $10.5 billion quarter in the third.

    “This looks consistent with the pattern since 2017 of 4-to-5 qtrs above trendline, followed by 2-to-3 qtrs of below trendline ‘digestion,’ i.e., it looks like the datacenter shoe has already dropped,” Lipacis said.

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  • Microsoft stock slips as Azure growth slows and cloud sales miss projections

    Microsoft stock slips as Azure growth slows and cloud sales miss projections

    Microsoft Corp. shares slipped in after-hours trading Tuesday despite an earnings beat, as the company’s cloud-computing revenue came in lower than expected and its core cloud product, Azure, grew at a slower rate than projections.

    Microsoft’s
    MSFT,
    +1.38%
    cloud-computing business has grown into the largest and most important business for the company, especially for investors who like Azure’s high margins and strong growth. There have been concerns about cloud growth as the U.S. faces its first possible recession since the technology became ubiquitous, and Azure’s growth in Tuesday’s report was the slowest Microsoft has reported in the past two years, while Microsoft’s cloud division was the only segment to come in lower than estimates.

    The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Microsoft said that Azure grew by 35%, while analysts on average were expecting 36.5% growth, according to FactSet.

    Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

    That is a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year. Microsoft only reports percentage growth for its core cloud-computing product, even as main rivals Amazon.com Inc.
    AMZN,
    +0.65%
    and Alphabet Inc.
    GOOGL,
    +1.91%
    GOOG,
    +1.90%
    report revenue and profit margin for their cloud-computing products.

    Overall, Microsoft
    MSFT,
    +1.38%
    reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when Microsoft disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

    Microsoft shares fell between 1% and 2% in after-hours trading following the release of the results, after closing with a 1.4% increase at $250.66. Microsoft stock tends to react most strongly in after-hours trading following earnings reports after executives share their forecast for the current quarter in their conference call, which is scheduled to begin at 5:30 p.m. Eastern.

    Microsoft has started to show some effects of a weakening macroeconomic climate, confirming layoffs of fewer than 1,000 employees earlier this month. Microsoft has suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

    For more: The pandemic PC boom is over, but its legacy will live on

    Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

    “Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

    Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

    Microsoft’s second-quarter guidance will be crucial to investors hoping that the tech giant can withstand any economic jolts headed its way and show stronger growth in cloud. Analysts on average were expecting overall second-quarter revenue of $56.16 billion and “Intelligent Cloud” sales of $21.82 billion heading into the print, according to FactSet, while some wrote that they would like to hear more from Microsoft executives about the picture for the full year.

    “Our hope is that management provides a bit more color on full-year fiscal 2023 beyond just the double-digit revenue growth and operating margins being roughly flat commentary from last quarter,” MoffetNathanson analysts, who have a “market perform” rating and $282 price target on the stock, wrote in their preview. “We would expect headcount-related revenue streams like Office to see increasing headwinds in coming quarters, but volume businesses like Azure, which is tied to data, being more resilient.”

    Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
    SPX,
    +1.63%
    has dropped 20.3% and the Dow Jones Industrial Average
    DJIA,
    +1.07%
    — which counts Microsoft as one of its 30 components — has declined 13.3%.

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  • SAP reports cloud-driven higher revenue, confirms annual profit and sales outlook

    SAP reports cloud-driven higher revenue, confirms annual profit and sales outlook

    SAP SE, the German business software company, confirmed its profit and sales outlook for the year after posting higher third-quarter revenue led by growth at its cloud business.

    Reporting on a non-IFRS basis, the Walldorf, Germany-based company
    SAP,
    +0.14%

    SAP,
    +4.18%
    said Tuesday that revenue jumped to 7.84 billion euros ($7.74 billion) from EUR6.85 billion, with cloud revenue up to EUR3.29 billion from EUR2.39 billion. Software-licenses revenue fell to EUR406 million from EUR657 million.

    Analysts polled by FactSet had forecast overall revenue of EUR7.65 billion, and cloud revenue of EUR3.19 billion.

    “We have delivered a strong cloud quarter with accelerating momentum across all key cloud indicators,” SAP Chief Financial Officer Luka Mucic said. The company said its cloud business performed strongly in all regions led by the U.S. and Germany, while activity in Brazil, China, India and Switzerland was particularly robust.

    SAP is moving away from software-licenses sales, once its biggest revenue streams, to subscription-based cloud services, banking on a more profitable and predictable model based on recurring revenue.

    “With a recurring revenue share of more than 80%, it’s clear that our transformation has reached an important inflection point, paving the way for continued growth in the future,” SAP Chief Executive Christian Klein said.

    Operating profit for the quarter slipped to EUR2.09 billion from EUR2.10 billion a year earlier, with SAP’s operating margin down to 26.7% from 30.7%. Analysts polled by FactSet had forecast operating profit of EUR2 billion.

    SAP, like other European software companies, presents its figures as two sets of numbers. One set is based on the International Financial Reporting Standards–an international accounting method that seeks to provide a global reporting standard–though analysts and investors tend to follow SAP’s non-IFRS numbers. Those figures exclude share-based compensation, restructuring expenses and acquisition-related charges.

    For the year, SAP continues to expect non-IFRS operating profit at constant currencies between EUR7.6 billion and EUR7.9 billion, and cloud revenue at constant currencies between EUR11.55 billion and EUR11.85 billion. However, free cash flow is now expected at roughly EUR4.5 billion against a previous forecast above EUR4.5 billion.

    Looking ahead, SAP is still targeting double-digit growth in operating profit for 2023, though the company said it expects to update midterm targets in the coming quarters, citing the strong cloud momentum and favorable currency movements.

    Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

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