Tag: Earnings Projections

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

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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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February 2, 2023
Meta stock spikes nearly 20% as cost cuts and $40 billion for investors overshadow earnings miss

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Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.

Meta
META,
+2.79%
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.

Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.

Shares jumped more than 19% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.

Alphabet Inc.’s
GOOGL,
+1.61%

GOOG,
+1.56%
Google and Pinterest Inc.
PINS,
+1.56%
benefited from Meta’s results, with shares for each company rising more than 4% in extended trading Wednesday.

“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss

Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.

Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
+0.79%
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.

The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.

Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year based on slower salary growth, cost of revenue, and $1 billion in savings from facilities consolidation — down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.

In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency” after 18 years of unbridled growth. He recommitted to Meta’s emphasis on AI and the metaverse, a platform for “better social experiences” than the phone, he said.

“The reduced outlook reflects our updated plans for lower data-center construction spend in 2023 as we shift to a new data-center architecture that is more cost efficient and can support both AI and non-AI workloads,” Li said in her outlook commentary included in the release.

Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.

“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.

“At first glance…Meta getting its mojo back,” Baird Equity Research analyst Colin Sebastian said in a note late Wednesday. “Results and guidance look particularly solid after Snap’s dismal report; however, further cuts to operating and capital expenditures announced this afternoon were perhaps the biggest surprise.”

UBS analyst Lloyd Walmsley said he anticipates double-digit revenue growth exiting 2023 and strong growth in earnings and free cash flow.

The results came a day after Snap Inc.
SNAP,
-10.29%
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.

Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report

Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index
SPX,
+1.05%
has tumbled 10% the past year.

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February 1, 2023
Altria Beats Earnings Estimates, Unveils $1 Billion Stock Buyback

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Marlboro maker

Altria

Group beat earnings and revenue estimates in the fourth quarter and announced a new $1 billion share buyback plan.

The cigarettes company reported adjusted earnings per share (EPS) of $1.18 on revenue of $6.1 billion in the final three months of the year. Analysts expected EPS of $1.17 on sales of $5.15 billion in the quarter, according to FactSet data.

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February 1, 2023
Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss

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Snap Inc. stumbled through another bleak quarter to end 2022 and executives refused to provide guidance Tuesday, sending shares sliding.

In a potential barometer of what’s to come from advertising-dependent internet companies, Snap SNAP on Tuesday posted a loss of more than a quarter-billion dollars in the holiday quarter and declined to provide a forecast for the current quarter, which is likely to rattle investors in Meta Platforms Inc. META and Alphabet Inc.’s GOOGL GOOG Google, both of which report financial results later…

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January 31, 2023
Could Big Tech layoffs keep growing? Apple, Amazon, Facebook and Google may give hints in biggest week of earnings.

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In the biggest week of the holiday-earnings season, Big Tech results will receive the spotlight amid thousands of layoffs that could only be the beginning.

After tech stocks were decimated in 2022, investors will be looking for signs of a turnaround in holiday reports and potential forecasts for the year ahead from three of 2022’s top five market-value losers: Amazon.com Inc.
AMZN,
-0.66%,
Apple Inc.
AAPL,
-0.63%
and Meta Platforms Inc.
META,
-0.60%.
The other two stocks on that list — Microsoft Corp.
MSFT,
-1.38%
and Tesla Inc.
TSLA,
-0.15%
— reported last week, and Microsoft’s results in the wake of a mass-layoffs announcement did not bode well for its Big Tech brethren.

See also: Microsoft could be the cloud sector’s ‘canary in the coal mine’

Those companies — along with Google parent Alphabet Inc.
GOOGL,
-1.32%
GOOG,
-1.49%
— will deliver results after finding themselves in unfamiliar territory: A backdrop of layoffs amid slowing demand for core products like digital ads, electronics and e-commerce, after a two-year pandemic surge and a two-decade-plus honeymoon with investors. Some analysts say the bottom hasn’t arrived, for either their finances or their workforces.

The one Big Tech company that hasn’t taken a sword to its payroll is Apple, which also increased its staff the least among the group during the COVID-19 pandemic. Apple shed $846 billion from its market cap last year, and now reports after its core product was part of the smartphone industry’s worst year since 2013 and worst holiday-season decline on record. The iPhone maker could also face questions from Wall Street about changing up its product sourcing, which has relied heavily on China, a nation whose COVID-19 restrictions have constrained production of some phones.

While the tech-industry layoffs have yet to hit Apple, some analysts say the company is unlikely to be spared, despite Chief Executive Tim Cook requesting and receiving a healthy cut to his compensation.

“Similar to other big technology companies, we expect Apple to adjust its head count to reflect an increasingly challenging global macroeconomic environment,” D.A. Davidson analyst Tom Forte said in a research note Tuesday.

Rivals that have already cut could face more if profit continues to fall along with revenue growth. Alphabet, for instance, is cutting 12,000 employees, but an activist investor has already said that is not enough considering how much the company grew during the pandemic, and the difficulties it now faces in the online-ad sector.

Opinion: Microsoft’s big move in AI does not mean it will challenge Google in search

Analysts have said Meta’s “darkest days” are still ahead, as it navigates a round of more than 11,000 layoffs, competition from TikTok and its early stumbles in the metaverse. While cutting, Chief Executive Mark Zuckerberg has promised to keep spending on metaverse development, even as the efforts slash the Facebook parent company’s previously healthy bottom line.

“In 2023, we expect Meta to remain engulfed in arduous battles inside the Octagon,” Monness Crespi Hardt analyst Brian White said in a research note on Thursday. “In the long run, we believe Meta will benefit from the secular digital ad trend and innovate in the metaverse; however, regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us.”

Full Facebook earnings preview: Meta’s ‘darkest days’ are ahead, but some analysts say ad sales are still on track

Online retailer Amazon
AMZN,
-0.66%
was the first Big Tech company to publicly declare cost-cutting was in order a year ago, and still coughed up $834 billion in market value in 2022. It kicked off 2023 with plans to lay off more than 18,000 workers as struggles continued throughout last year, when inflation siphoned away more consumer dollars toward essentials.

Amazon’s own AWS cloud-infrastructure unit has helped to drive sales in years past, as businesses built out their tech infrastructures. But remarks and the outlook from Microsoft executives — the third-biggest market-cap loser of 2022, and a big barometer for tech spending overall — weren’t exactly encouraging for cloud growth: Executives there last week warned of “moderating consumption growth” for its own cloud business.

For more: One company could determine whether U.S. corporate profits rise to a record in 2023

“Sentiment was already bearish on AWS, with investors looking for slowing revenue over the next three quarters, largely confirmed after Microsoft earnings and conversations with industry checks,” Oppenheimer analyst Jason Helfstein said in a note on Wednesday. “Positively, we believe e-commerce revenue has stabilized, and margins should improve from organic scale and announced head-count reductions.”

Layoffs are also starting to spread beyond Big Tech companies that grew fast during the pandemic in response to massive demand spikes. International Business Machines Corp.
IBM,
+0.76%
confirmed plans for 3,900 layoffs as it reported earnings, despite already reducing its workforce by at least 20% during the pandemic.

One sector to watch is semiconductors, where a chip shortage has turned into a glut: Chip-equipment maker Lam Research Corp.
LRCX,
+0.04%
announced layoffs in the past week as Silicon Valley semiconductor giant Intel Corp.
INTC,
+0.27%
displayed “astonishingly bad” results while laying off workers. When Intel rival Advanced Micro Devices Inc.
AMD,
-1.64%
reports this week, it could determine whether there is any silver lining in the semiconductor storm.

Earnings preview: AMD faces even more scrutiny after ‘astonishingly bad’ Intel outlook

Wedbush analyst Daniel Ives said in a Sunday note that a common theme of this week’s Big Tech earnings will be that “tech layoffs will accelerate with more pain ahead to curb expenses,” though he added that “Apple will likely cut some costs around the edges, but we do not expect mass layoffs from Cupertino this week.”

Big Tech earnings were a salve to other problems in the market for the past decade-plus, but with layoffs already under way and doubts about the path forward, don’t expect salvation from their results this week.

This week in earnings

For the week ahead, 107 S&P 500
SPX,
-0.19%
companies, including six members of the Dow Jones Industrial Average
DJIA,
+0.18%,
will report results, according to FactSet. While more Dow components reported last week, this will be the busiest week for S&P 500 holiday earnings of the season, FactSet senior earnings analyst John Butters confirmed to MarketWatch.

Appliance-maker Whirlpool Corp.
WHR,
+1.18%
reports on Monday, after it forecast fourth-quarter sales that were below expectations, following what it called a “one-off supply-chain disruption” and the pandemic home-renovation boom.

On Tuesday, package-deliverer United Parcel Service Inc.
UPS,
-0.26%
reports, amid questions about holiday-season demand. So does streaming service Spotify Technology,
SPOT,
-0.02%
following its own layoffs and suggestions of possible price hikes, as well as McDonald’s Corp.
MCD,
-0.30%,
amid concerns that rising prices are keeping people from dining out. Exxon Mobil Corp.
XOM,
-0.99%,
Caterpillar Inc.
CAT,
-0.12%,
Snap Inc.
SNAP,
+0.64%
and Pfizer Inc.
PFE,
+0.72%
also report Tuesday.

Earnings outlook: McDonald’s earnings haven’t been hit by higher prices

On Wednesday, T-Mobile US Inc.
TMUS,
+0.23%
reports, in the wake of a data breach and wobbling cellphone demand. Coffee chain Starbucks Corp.
SBUX,
-0.58%
reports on Thursday, with analysts likely to be zeroed in on U.S. demand and China’s reopening, after executives said they were confident that higher prices, along with enthusiasm from younger customers and for customizable drinks, could help them navigate any potholes in the economy.

For the Big Tech companies, Thursday is also the big day: Apple, Amazon and Alphabet will report that afternoon, after Meta reports the prior day.

The calls to put on your calendar

WWE upheaval: World Wrestling Entertainment Inc.
WWE,
+0.91%
reports earnings on Thursday, as Vince McMahon — who returned to the professional-wrestling organization this month following allegations of sexual misconduct — seeks a buyer or some other so-called “strategic alternative” for the company.

Analysts have speculated how the company’s wrestling events and backlog of media content might be repurposed, with some entertaining the possibility of interest from Amazon or Netflix Inc.
NFLX,
-0.39%.
But WWE has struggled to develop story lines that stick with viewers, and has thinned its ranks of wrestlers.

The Wall Street Journal this month reported that McMahon would pay a multimillion-dollar settlement to a former referee who accused him of raping her. Among the changes since McMahon returned was the departure of his daughter, who had been promoted to co-CEO after he stepped down from the role last year.

There isn’t much clarity on whether Vince McMahon will be on Thursday’s earnings call, which was moved from the morning to the afternoon due to a scheduling conflict. But it should offer drama no matter who attends.

The numbers to watch

GM and Ford auto sales: Auto makers General Motors Co.
GM,
-2.00%
and Ford Motor Co.
F,
-0.94%
will issue results on Tuesday and Thursday respectively, amid signs of waning demand and rising interest rates that have made car loans more expensive. Despite falling new-vehicle sales in the third quarter, GM managed to keep its own sales higher, the AP noted.

Mary Barry, GM’s chief executive, called out the popularity of vehicles like the Escalade, the Chevrolet Bolt EV and some pickups and SUVs during the auto maker’s third-quarter earnings call in October. During that quarter, GM said it completed and shipped nearly 75% of the unfinished vehicles held in its inventory in June. She said supply-chains were opening up again, but added that “short-term disruptions will continue to happen.”

The auto makers report as they try to put a chip shortage and other production constraints behind them. But some forecasts call for 2022 auto sales, or sales volumes, to be the weakest in roughly a decade. Electric vehicle maker Tesla’s recent price cuts could also cut into GM’s and Ford’s own EV sales.

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January 29, 2023
Tesla posts record quarterly profit amid challenges, offers sunny outlook

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Tesla Inc. late Wednesday reported mixed quarterly results, with revenue slightly below Wall Street expectations, but injected some optimism in its production outlook for 2023 and promised to rein in costs faster.

Demand is not a problem, Chief Executive Elon Musk said in a call with analysts after results. “I want to put that concern to rest,” he said, adding that January orders are stronger than ever, and demand far outstrips Tesla’s rate of production.

“We…

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January 25, 2023
Microsoft stock dives into the red after forecast misses, CFO warns about deceleration

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Microsoft Corp.’s profit declined more than 12% in the holiday season, and executives said Tuesday that a revenue deceleration at the end of 2022 is expected to continue into the new year as the company lays off workers.

Microsoft MSFT Chief Financial Officer Amy Hood said in a conference call Tuesday that “we are seeing customers exercise caution,” which resulted in “moderating consumption growth in Azure and lower-than-expected growth in new business” in December. Hood then said that “we expect business trends that we saw…

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January 24, 2023
United Airlines swings to profit despite ‘worst’ winter storm, issues blue-sky guidance

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United Airlines Holdings Inc. late Tuesday reported fourth-quarter earnings that were well above Wall Street expectations, saying it managed well the severe winter-weather disruptions in late December, and offered an optimistic view of the current quarter and guidance for full-year 2023.

United
UAL,
-0.87%
managed through “one of the worst weather events in my career to get deliver for so many of our customers and get them home for the holidays,” United Airlines Chief Executive Scott Kirby said.

U.S. airlines canceled or delayed thousands of flights in late December due to Winter Storm Elliott, with Southwest Airlines Co.
LUV,
+0.14%
the worst affected. Southwest told Wall Street to expect a fourth-quarter loss, adding that the cancelations are likely to cost about $825 million.

United’s Kirby pinned the different outcome for his airline on “critical” investments in personnel and technology. “That’s why we’ve got a big head start, and we’re now poised to accelerate in 2023,” the CEO said.

United earned $843 million, or $2.55 a share, in the fourth quarter, swinging from a loss of $646 million, or $1.99 a share, in the year-ago quarter. Adjusted for one-time items, United earned $2.46 a share.

Revenue rose to $12.40 billion from $8.2 billion a year ago.

Analysts polled by FactSet expected United to report adjusted earnings of $2.11 a share on revenue of $12.23 billion.

The stock rallied more than 3% in extended trading after ending the regular trading day down 0.9%. The airline has scheduled a conference call with analysts Wednesday at 10:30 a.m. Eastern

See also: Here’s what Delta Air earnings say about the rest of the industry

United guided for first-quarter adjusted EPS between 50 cents and $1, well above current FactSet consensus of 31 cents a share, and said it expects revenue to grow around 50% in the quarter.

For the full year, the airline called for adjusted EPS between $10 and $12, also significantly higher than FactSet consensus of $6.84 a share.

United stock has gained 9% in the past 12 months. That contrasts with losses of around 14% for the S&P 500 index
SPX,
-0.20%
and of nearly 10% for the U.S. Global Jets ETF
JETS,
+0.40%.

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January 17, 2023
Delta Beats Profit Estimates. Why the Stock Is Falling.

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Delta Air Lines

beat earnings estimates in the fourth quarter as air travel demand remained strong but the stock fell in early trading Friday as the carrier’s first quarter guidance disappointed.

The airline (ticker: DAL) reported adjusted earnings per share of $1.48 in the fourth quarter, and revenue of $12.3 billion, an 8% increase on the same period in 2019.

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January 13, 2023
J Sainsbury sees 2023 profit toward upper end of views on robust Christmas period

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J Sainsbury PLC said Wednesday that it expects to deliver profits for fiscal 2023 toward the upper end of its current guidance following record trading during the Christmas period.

The U.K. grocer
SBRY,
-3.09%
said like-for-like sales excluding fuel rose 5.9% in the 16 weeks ended Jan. 7 compared with the same period a year ago. Like-for-like sales including fuel rose 6.8%, it said.

The FTSE 100 listed company currently expects underlying pretax profit for the year ending March to be toward the upper end of the guidance range of between 630 million pounds and 690 million pounds ($765.5 million and $838.4 million).

The company said the performance of its digital retailer business Argos was exceptional over the Christmas week.

Write to Michael Susin at michael.susin@wsj.com

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January 10, 2023
Macy’s stock slides as holiday lulls weigh on sales forecast and execs predict difficulties into 2023

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Shares of department-store chain Macy’s Inc. slid 8% in after-hours trading on Friday after the retailer gave a more downbeat forecast on its fourth-quarter sales, with management citing big “lulls” in the holiday-shopping season and saying customers would likely feel the squeeze from inflation into next year.

Executives said they expected those sales to land in the “low-end to mid-point” of prior expectations for between $8.161 billion to $8.401 billion. They said they expected adjusted earnings per share to be within its previously forecast range of $1.47 to $1.67.

“Black Friday/Cyber Monday sales were in line with our expectations, while the week leading up to and following Christmas were ahead,” Macy’s
M,
+2.64%
Chief Executive Jeff Gennette said in a statement. “However, the lulls of the non-peak holiday weeks were deeper than anticipated.”

“Based on current macro-economic indicators and our proprietary credit card data,” he continued, “we believe the consumer will continue to be pressured in 2023, particularly in the first half, and have planned inventory mix and depth of initial buys accordingly.”

Macy’s issued the sales and profit figures as Wall Street parses consumer behavior during the holiday season. Adobe on Thursday said online sales surpassed $210 billion and beat expectations. Costco Wholesale Corp., a day earlier, reported an increase in December sales, even though online sales fell.

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January 6, 2023
Micron sales could dive more than 50%, and more belt-tightening is expected before outlook improves

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Micron Technology Inc.’s revenue declines could worsen to more than 50% before inventory-saturated customers work though that product and boost sales in the second half of 2023, but before then the memory-chip maker is implementing some austerity measures.

Micron
MU,
+1.01%
said it expects an adjusted loss of between 72 cents and 52 cents a share on revenue of $3.6 billion to $4 billion for the fiscal second quarter, with the midpoint 51% lower than last year’s second-quarter revenue total of $7.78 billion. Analysts had forecast an adjusted loss of 32 cents a share on revenue of $3.92 billion.

In a filing with the Securities and Exchange Commission, the memory-chip specialist disclosed that management plans to cut about 10% of its staff in 2023, “through a combination of voluntary attrition and personnel reductions.” About $30 million in restructuring costs are expected, all in the fiscal second quarter.

Along with headcount reductions, Micron said in 2023 it will also suspend share buybacks, productivity programs and company bonuses, and that executive salaries would be “cured” for the rest of the fiscal year. Sanjay Mehrotra, Micron’s chief executive, also told analysts after the release of results that he expected profitability to remain challenged through 2023.

Micron specializes in DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are the flash memory chips used in smaller devices like smartphones and USB drives.

Micron shares were down less than 1% after hours, following a 1% rise to close the regular session at $51.19. Micron shares are down 45% for the year compared with a 19% fall by the S&P 500 index
SPX,
+1.49%
and a 32% drop by the Nasdaq Composite Index
COMP,
+1.54%
and a 33% drop on the PHLX Semiconductor Index
SOX,
+2.36%.

Mehrotra said he expects DRAM growth to rise by about 10% and NAND to rise by around 20%. “For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in the end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China,” Mehrotra said.

“But the largest impact to the profitability and financial outlook for us is the supply-demand balance, and the rate and pace of this improvement is going to be a function of aligning supply with demand, and we’re taking decisive actions on CapEx and utilization to address it,” Mark Murphy, Micron’s chief financial officer, told analysts on the call.

Data-center and cloud sales were considered relatively safe, but in another potentially developing crack, Mehrotra said the current environment showed some softness in cloud data-center demand, given tighter consumer spending.

“We do absolutely expect that once we get past the current macroeconomic environment and macroeconomic weakening, longer-term trends for cloud will remain strong,” Mehrotra said. “In terms of the current environment, yes, inventory adjustments and some impact of cloud and demand weakening as well. That’s impacting our overall data-center outlook.”

The CEO also told analysts he expects customers to be in a much better position in the burning off of their inventories by the middle of 2023.

“By mid-calendar ’23, we are projecting, even though we don’t have perfect visibility, but based on all of our discussions with our customers, we are projecting that inventory at customers will be in relatively healthier position by that time.”

“And that’s where we say that our second half of fiscal-year revenue will be greater than first half, and we would expect continued improvements beyond the second half as well,” the CEO said.

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December 21, 2022
Adobe stock jumps after earnings beat, in-line annual forecast

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Adobe Inc. shares rose in the extended session Thursday after the software company capped off its fiscal year by topping quarterly earnings expectations, and executives predicted the new fiscal year would play out close to Wall Street’s expectations.

Adobe ADBE reported fiscal fourth-quarter net income of $1.18 billion, or $2.53 a share, compared with $1.23 billion, or $2.57 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $3.60 a share, compared with…

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December 15, 2022
Delta Air Lines stock jumps on raised guidance, as carrier cites ‘robust’ demand for air travel

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Delta Air Lines’ stock rose 4.7% before market open on Wednesday after the company raised its earnings guidance.

The carrier
DAL,
-4.00%
said it is executing on its three-year recovery plan, with year-one results ahead of expectations. Delta also highlighted robust demand for air travel as the industry recovers from the widespread disruption caused by the COVID-19 pandemic.

The carrier raised its 2022 adjusted EPS guidance to $3.07 to $3.12. Analysts surveyed by FactSet were looking for earnings of $2.88 a share. For 2023, Delta Air Lines Inc. forecast a near doubling of adjusted earnings to $5 to $6 a share.

See Now: After too little, too much, there are ‘Goldilocks’ conditions for air travel in 2023

Delta also forecast 2023 revenue growth at 15% to 20% compared with 2022 and said it is on track to meet its 2024 earnings target of more than $7 a share. “Demand for air travel remains robust as we exit the year and Delta’s momentum is building,” said Delta CEO Ed Bastian, in a statement.

Delta said it expects to deliver strong topline growth in 2023 and significant operating leverage, boosted by a full restoration of its network and continued improvements in premium and loyalty revenue.

Non-fuel unit costs are expected to decline 5% to 7%, driving Delta’s margin expansion and adjusted earnings growth, the company said. Delta expects to generate more than $2 billion of free cash flow, which it said will enable further debt reduction.

See Now: Delta kicked off airline earnings season with a bang. What does it mean for other carriers?

“2022 is proving to be a pivotal year as we rebuild the world’s best-performing airline,” said Bastian, in the statement.

The company’s robust guidance boosted other airline stocks before market open, with United Airlines Holdings Inc.
UAL,
-6.94%
rising 1.4%, American Airlines Group Inc.
AAL,
-5.21%
gaining 1.3%, and JetBlue Airways Corp.
JBLU,
-7.67%
rising 1.3%.

Delta shares have fallen 14.6% this year, compared with the S&P 500 index’s
SPX,
+0.73%
decline of 15.7% and the U.S Global Jets ETF’s
JETS,
-2.85%
slump of 14.3%.

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December 14, 2022
Oracle stock rises as earnings and revenue beat, but forecast is still to come

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Oracle Corp. topped Wall Street’s expectations for profit and revenue in its most recent quarter, though the software company is still expected to issue a forecast that could be more fraught.

Oracle
ORCL,
+1.78%
on Monday reported fiscal second-quarter net income of $1.74 billion, or 63 cents a share, on revenue of $12.28 billion, up from $10.36 billion a year ago. After adjusting for stock-based compensation and other costs, Oracle reported earnings of $1.21 a share, even with the same quarter a year ago.

Analysts on average expected adjusted earnings of $1.17 a share on sales of $11.96 billion, according to FactSet. Oracle shares gained nearly 3% in after-hours trading immediately after the results were announced, following a 1.8% increase to $81.29 in regular trading.

Oracle executives did not provide guidance for the fiscal third quarter in Monday’s announcement, but Chief Executive Safra Catz does typically provide a forecast in their conference call, which is scheduled for 5 p.m. Eastern time. Those numbers are likely to affect earnings more than the results, as concerns about an increasing slowdown in business spending have rocked a swath of software companies in recent weeks.

“We believe the darkest days of this downturn are ahead of us,” Monness Crespi Hardt analyst Brian J. White wrote in a preview of Oracle results, later adding that “results across Big Tech, the leading public clouds, and the enterprise software complex paint an increasingly concerning picture for the software world heading into 2023.”

Oracle stock has outperformed the S&P 500 index
SPX,
+1.43%
since executives hosted an event for financial analysts and investors in October, with shares gaining 4.8% in the past three months while the larger index fell 3.9%. Oracle executives promised to grow adjusted earnings by more than 10% every year as revenue growth accelerates, after years of stagnant sales growth led to large share repurchases and constant cuts to improve the software company’s bottom line.

Oracle is experiencing strong revenue growth thanks to the acquisition of healthcare-focused company Cerner, a $28 billion deal that closed in June. There are hopes for organic growth as well, though, as Oracle’s cloud-computing effort starts to show fruit, including winning part of a recent Defense Department contract after suing to halt an earlier version of that award.

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December 12, 2022
Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

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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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November 30, 2022
CrowdStrike stock drops nearly 20% as elongating sales cycle slows new subscriptions

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CrowdStrike Holdings Inc. shares dropped in the extended session Tuesday after the cybersecurity company said new subscriptions came in below expectations amid macro headwinds and longer customer buying cycles.

Given concern that businesses are cutting back on spending, CrowdStrike
CRWD,
-1.04%
shares plummeted nearly 20% after hours, following a 1% decline in the regular session to close at $138.

George Kurtz, CrowdStrike’s co-founder and chief executive, told analysts on a conference call that the company reported $198.1 million in net new annual recurring revenue, or ARR, in the quarter, not as much as it had hoped.

ARR is a software-as-a-service metric that shows how much revenue the company can expect based on subscriptions. That grew 54% to $2.34 billion from the year-ago quarter, while the Street expected $2.35 billion. Kurtz said that about $10 million was deferred to future quarters.

“We expect these macro headwinds to persist through Q4,” Kurtz told analysts.

Burt Podbere, CrowdStrike’s chief financial officer, explained that the company relies on ARR because it’s “an X-ray into the contract sales.”

“As George mentioned, even though we entered Q2 with a record pipeline, and we are expecting the elongated sales cycles due to macro concerns to continue, we’re not expecting to see the typical Q4 budget flush given the increased scrutiny on budgets.”

Podbere said it is “prudent to assume” fourth-quarter net new ARR will be up to 10% below the third quarter’s. That would mean about a 10% year-over-year headwind going into the first half of next year, and “full-year net new ARR would be roughly flat to modestly up year over year.”

“This would imply a low 30s ending ARR growth rate and a subscription revenue growth rate in the low to mid-30s for FY 2024,” Podbere said.

Read: Cloud software is suffering a cold November rain. Can Snowflake and Salesforce turn things around?

The company expects adjusted fiscal fourth-quarter earnings of 42 cents to 45 cents a share on revenue of $619.1 million to $628.2 million, while analysts surveyed by FactSet forecast earnings of 34 cents a share on revenue of $633.9 million, according to analysts.

CrowdStrike expects full-year earnings of $1.49 to $1.52 a share on revenue of $2.22 billion to $2.23 billion. Wall Street expects $1.33 a share on revenue of $2.23 billion.

The company reported a fiscal third-quarter loss of $55 million, or 24 cents a share, compared with a loss of $50.5 million, or 22 cents a share, in the year-ago period. Adjusted net income, which excludes stock-based compensation and other items, was 40 cents a share, compared with 17 cents a share in the year-ago period.

Revenue rose to $580.9 million from $380.1 million in the year-ago quarter.

Analysts expected CrowdStrike to report earnings of 28 cents a share on revenue of $516 million, based on the company’s outlook of 30 cents to 32 cents a share on revenue of $569.1 million to $575.9 million.

So far in November, cloud software stocks have been getting trashed. While the S&P 500
SPX,
-0.16%
has gained 2%, and the tech-heavy Nasdaq Composite
COMP,
-0.59%
is flat, the iShares Expanded Tech-Software Sector ETF
IGV,
-0.78%
has fallen more than 2%, the Global X Cloud Computing ETF
CLOU,
-1.12%
has declined more than 4%, the First Trust Cloud Computing ETF
SKYY,
-0.74%
has fallen more than 6%, and the WisdomTree Cloud Computing Fund
WCLD,
-1.05%
has dropped more than 11%.

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November 29, 2022
Disney stock dives 10% after earnings and revenue miss, sales growth forecast to slow after record year

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Walt Disney Co. wrapped up its fiscal year with record sales and its best revenue growth in more than 25 years, but executives predicted much slower sales increases in the year ahead while missing expectations for fourth-quarter earnings and sales, sending shares down more than 10% Tuesday afternoon.

Disney
DIS,
-0.53%
reported fiscal fourth-quarter net income of $162 million, or 9 cents a share, on sales of $20.15 billion, up from $18.53 billion a year ago but more than $1 billion short of expectations. After adjusting for amortization and certain investment changes, Disney reported earnings of 30 cents a share, down from 37 cents a share a year ago.

Analysts surveyed by FactSet had on average expected adjusted earnings of 56 cents a share on revenue of $21.27 billion.

Disney executives blamed a number of factors for the revenue miss, including lower content sales because they had fewer theatrical films on the calendar; underperformance of the parks and media divisions; and seasonality of its fourth quarter, which tends to be the lowest for margins.

For the full fiscal year, Disney reported record sales of $82.72 billion, more than 22% higher than the previous year, the strongest annual sales growth for Disney since the 1996 fiscal year, according to FactSet records. Profit grew to $3.19 billion from $2.02 billion the year before, but is nowhere close to prepandemic Disney earnings, which hit eight figures in both 2019 and 2018.

In a conference call Tuesday afternoon, though, Chief Financial Officer Christine McCarthy suggested that revenue and profit growth will slow to single digits on a percentage basis in the current fiscal year, missing Wall Street’s expectations. Analysts’ average revenue projection for Disney in the new fiscal year suggested revenue growth of about 13.9% and operating-income growth of roughly 17.4%, according to FactSet.

“Putting this all together, assuming we do not see a meaningful shift in the macroeconomic climate, we currently expect total company fiscal 2023 revenue and segment operating income to both grow at a high-single-digit percentage rate versus fiscal 2022,” McCarthy said.

Disney shares initially fell more than 6% in after-hours trading following the release of the results, but plunged anew to a decline of more than 10% after closing with a 0.5% decline at $99.94.

Disney has been helped by the return of visitors to its theme parks in the third year of the COVID-19 pandemic, as well as a recovering movie business. The main attraction for investors, though, has been growing Disney’s streaming efforts — total streaming subscribers topped Netflix Inc.’s
NFLX,
+1.88%
subscriber total last quarter, and grew its lead in Tuesday’s report, with Disney adding 12.1 million net new subscribers, while analysts on average expected 10.4 million.

Disney’s streaming growth has hampered its profitability, however, as the company spends to add content to its streaming services in order to compete with Netflix. Those days appear to be coming to an end as Disney struggles with profit.

“The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally, and we expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Disney Chief Executive Bob Chapek said in a statement announcing the results. “By realigning our costs and realizing the benefits of price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future.”

Disney’s largest business segment, media and entertainment distribution, reported sales of $12.73 billion in the quarter, down from $13.08 billion a year ago; analysts on average predicted $13.86 billion. Direct-to-consumer sales, which includes streaming services as well as some international products, hauled in $4.9 billion, compared with analysts’ forecast of $5.4 billion on average.

The trajectory of Disney’ meteoric rise as video-streaming market leader is likely to continue once its advertising-supported service debuts in the U.S. next month, according to Wall Street analysts, after Netflix launched its rival offering on Nov. 3. Disney has leaned heavily on its stable of mega-franchises such as “Star Wars” and the Marvel Cinematic Universe to outpace Netflix Inc.
NFLX,
+1.88%,
Apple Inc.
AAPL,
+0.42%,
Comcast Corp.
CMCSA,
+0.95%,
Warner Bros. Discover Inc.
WBD,
-2.04%,
Amazon.com Inc.
AMZN,
-0.61%,
Paramount Global
PARA,
+1.28%
and others.

Read more: Disney overtook Netflix as the streaming leader, and is expected to widen its lead

Disney’s television networks generated sales of $6.34 billion, while analysts’ average estimates called for $6.64 billion. Content sales and licensing, a category that includes Disney’s film business, registered revenue of $1.74 billion vs. analysts’ expectations of $2.08 billion.

The company’s signature theme parks and product sales business increased to $7.43 billion in revenue from $5.45 billion a year ago. The average analyst estimate was $7.46 billion.

Shares of Disney are down 35.5% this year, while the broader S&P 500 index
SPX,
+0.56%
has dropped 20%.

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November 8, 2022
Atlassian stock suffers worst day ever, nearly $13 billion in valuation wiped away

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Atlassian Corp. shares dropped nearly 30% Friday, after the business-collaboration software company’s earnings and revenue outlook fell short of Wall Street expectations and executives described signs of economic weakness taking hold.

Atlassian
TEAM,
-28.96%
shares plummeted to an intraday low of $117.11 in Friday trading, nearly 33% lower than Thursday’s closing price and the lowest price for Atlassian stock since March of 2020. At the close, shares were trading for $123.73, a 29% descent that is easily the worst daily percentage decline on record for Atlassian stock — the previous mark was a 15.9% decline on Feb. 5, 2016.

Atlassian — known for software programs such as Jira — was worth roughly $44 billion at its closing price Thursday, so Friday’s decline represented a loss of nearly $13 billion in market capitalization, $12.86 billion to be exact. Atlassian shares had already declined 54.3% so far this year as of Thursday’s close, while the S&P 500 index
SPX,
+1.36%
declined 21.1%.

Atlassian executives forecast revenue of $835 million to $855 million for their fiscal second quarter, while analysts expected $879.3 million on average, according to FactSet. Executives also decreased their revenue guidance for the full year, without providing a specific figure for overall annual revenue; instead, they gave color in a letter to shareholders about the different revenue segments within the company.

In that letter to shareholders, Atlassian’s co-chief executives and co-founders, Mike Cannon-Brooks and Scoot Farquhar, said that the company tracked slower conversions from free to paid subscriptions for its “freemium” software, and slower growth from its paying customers in the quarter.

“The above two trends are the result of companies tightening their belts and slowing their pace of hiring. In other words, Atlassian is not immune to broader macroeconomic impacts,” they wrote. “Our outlook assumes these trends will persist, but we’ll monitor, respond and keep you updated accordingly.”

“We will focus our investments on strengthening our market position and scooping up top-tier talent in this environment. But we will balance these investments with the growth of our business and be responsive to the macroeconomic conditions,” they continued. “So while we’re lowering our revenue outlook for FY23 based on macroeconomic headwinds, we are maintaining our midteens % operating margin outlook for the year.”

Chief Financial Officer Joe Binz detailed planned cost cuts and a hiring slowdown in response during a conference call Thursday afternoon.

“First and foremost, we’re making reductions in our non-head count-driven discretionary spending,” he said in response to an analyst’s question. “And then, secondarily, we’ll be moderating the rate of planned head count growth in the second half of FY 2023.”

Executives reported a fiscal first-quarter loss of $13.7 million, or 5 cents a share, compared with a loss of $411.2 million, or $1.63 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 36 cents a share, compared with 37 cents a share in the year-ago period.

Revenue rose to $807.4 million from $614 million in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of 40 cents a share on revenue of $806.3 million.

“These results came as a bit of a shock, and are frankly something we thought we’d never see from a high-performing company like TEAM that also possesses a unique value proposition and business model,” Mizuho analysts wrote while chopping their price target on the stock to $255 from $320 but maintaining a “Buy” rating on the stock.

“Despite the big setback, we believe TEAM is likely to be one of the biggest
winners once the macro environment improves,” they wrote. “Why? Most notably, we would highlight a very strong competitive position in the important DevOps market, a still vibrant top-of-funnel (35K net new paid customers added over the LTM), a multiyear cloud migration catalyst, and meaningful pricing power as key growth drivers.”

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November 4, 2022
Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

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Qualcomm Inc. shares fell in the extended session Wednesday following the chip maker’s poor outlook, and estimates of about two months or more of inventory it needs to clear in its core business.

Qualcomm
QCOM,
-4.12%
shares dropped 7.6% after hours, following a 4.1% decline to close at $112.50 in the regular session. In late July, the San Diego-based chip maker cut its forecast because of weakness in the smartphone market that had yet to creep into the premium handset market.

On the call with analysts, Chief Executive Cristiano Amon said the accelerated weak demand was related to “macro economic headwinds and the prolonged COVID in China,” and “the rapid deterioration in demand and easing of supply constraints” across the chip industry.” would take out about 80 cents a share in first-quarter earnings.

“It’s the major factor,” Amon told analysts on the call. “It’s mostly a handset consumer story.” Earnings for the first quarter, as a results, would take a hit of 80 cents a share, the company said.

Another big factor is that companies are just spending less. Amon said “companies across the board had much higher inventory policies, supply chain got resolved, and you got that macro economic uncertainty, you have a drawdown trying to bring inventory to a different level than it was during the situation of demand constraint.”

Qualcomm forecast first-quarter earnings of $3 to $3.30 a share on revenue of $9.2 billion to $10 billion, while the Street estimated $3.43 a share on revenue of $12.02 billion.

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

Chief Financial Officer Akash Palkhiwala told analysts there is about eight to 10 weeks of elevated in the channel. In the meantime, Qualcomm was instituting a hiring freeze, and looking into cost-saving measures, execs told analysts.

While handset-chip sales surged 40% to a record $6.57 billion from a year ago, topping the Street’s expectation of $6.55 billion, the company’s forecast indicates a big glut in inventory in Qualcomm’s CDMA Technologies unit, the one that includes handset and RF chips as well as chips for autos and Internet of Things.

Qualcomm expects QCT sales of $7.7 billion to $8.3 billion, and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast forecast $10.42 billion in QCT sales and QTL revenue of $1.71 billion.

Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, a 28% gain from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5 billion to $10.1 billion.

Fourth-quarter auto-chip sales zoomed up 58% to a record $427 million, and Internet of Things, or IoT, sales rose 24% to a record $1.92 billion. The Street was expecting auto sales of $362.4 million, and IoT sales of $1.82 billion.

Revenue from the QTL segment fell 8% to $1.44 billion compared with Wall Street estimates of $1.58 billion, based on a company forecast of $1.45 billion to $1.65 billion.

Read about: Intel’s quarterly results, AMD’s quarterly results

The company reported fiscal fourth-quarter net income of $2.87 billion, or $2.54 a share, compared with $2.8 billion, or $2.45 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.13 a share, compared with $2.55 a share in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.

Analysts had estimated earnings of $3.13 a share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 a share on revenue of $11 billion to $11.8 billion.

Year to date, Qualcomm shares are down 38%, compared with a 41% decline for the PHLX Semiconductor Index
SOX,
-3.09%,
a 21% decline by the S&P 500 index
SPX,
-2.50%
and a 33% drop by the tech-heavy Nasdaq Composite Index
COMP,
-3.36%.

Shares of Advanced Micro Devices Inc.
AMD,
-1.73%
outperformed the broader market Wednesday after the chip maker said it would clear excess inventory by the end of the year, and forecast that data-center and embedded product sales would continue to rise.

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November 2, 2022