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Tag: Microsoft Corp

  • Alibaba plans to list cloud division as quarterly revenue misses expectations

    Alibaba plans to list cloud division as quarterly revenue misses expectations

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    Alibaba Cloud, the cloud computing subsidiary of Alibaba, unveiled its ChatGPT-style product Tongyi Qianwen during the 2023 Alibaba Cloud Summit on Tuesday morning.

    Bloomberg | Bloomberg | Getty Images

    Alibaba announced plans to spin off its cloud division as a separate, publicly traded company, while the Chinese e-commerce titan’s quarterly revenue missed expectations.

    “We are taking concrete steps towards unlocking value from our businesses and are pleased to announce that our board has approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, with intention for it to become an independent publicly listed company,” company CEO Daniel Zhang said.

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    Alibaba shares were down 2.4% in early U.S. trading, following an initial drop of around 1% shortly after the earnings report was issued, as investors reacted to the company’s results and spinoff plans.

    Here’s how Alibaba did in the quarter, which ended March 31, 2022, compared with Refinitiv consensus estimates: 

    • Revenue: 208.2 billion Chinese yuan ($29.6 billion) vs. 210.2 billion yuan expected, up 2% year on year
    • Non-GAAP diluted earnings per share: 1.34 yuan vs. 2.08 yuan expected, up 35% year on year

    Restructuring effort

    The report is Alibaba’s first since splitting into six units and is also the first whose numbers reflect China’s reopening. The country in December abruptly ended its strict Covid controls, such as lockdowns and travel restrictions.

    In its report for the fiscal fourth quarter, Alibaba said it plans to spin off its cloud division as a newly listed company, subject to restructuring certain assets, liabilities and contracts, and regulatory approvals.

    Alibaba is a major player in cloud computing in its home country and increasingly seeks to compete with established U.S. giants, such as Amazon and Microsoft.

    Dan Ives, an analyst at Wedbush Securities, said Alibaba’s cloud spinoff plan was a “no brainer strategic move that we believe adds to the sum of the parts valuation on BABA.”

    “We believe this was a step in the right direction for the Alibaba story,” Ives told CNBC in emailed comments Thursday.

    The company also announced plans to raise money from outside investors for its international digital commerce group, which includes the Lazada and AliExpress online shopping platforms.

    Alibaba also said it intends to launch an initial public offering for its Cainiao Smart Logistics unit, in which it currently holds a 67% stake. The IPO is slated to complete in the next 12 to 18 months.

    Alibaba’s board approved the start of an exploration of listing its Freshippo retail business in the next six to 12 months, the company said.

    Slow start

    The year got off to a tepid start, with overall sales of online physical goods staying weak, bosses of major e-commerce platforms suggested in February.

    Retail sales in China rose by 18.4% in April, according to recent economic data. China’s economy grew 4.5% in the first quarter, achieving the fastest pace in a year. The performance was expected to boost Alibaba’s sales.

    The company operates two of the largest online shopping sites in China: Taobao and Tmall. Despite ann increase in competition, Alibaba’s results remain an important indicator of the world’s second-largest economy.

    China generates almost 50% of the world’s online shopping transactions.

    Alibaba said it saw positive domestic growth momentum in March, after a slow start to the year.

    Overall for the quarter, the company’s Taobao and Tmall platforms saw mid-single-digit declines for their online physical goods orders, but by May, they “turned positive, driven by strong growth of fashion & accessories and healthcare categories,” the company said.

    The Thursday earnings figures are the first since Alibaba announced a substantial overhaul of its organization, splitting the business into several distinct units in a development that several analysts interpreted as signaling an easing in Beijing’s crackdown on tech companies.

    The new company structure is broken down into six divisions: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group.

    Generative A.I. in demand

    Meanwhile, China’s regulatory tightening of the past two years on tech has begun to ease, as Beijing’s enforcement of the rules becomes more predictable.

    Some investors are betting on a strong recovery for China’s tech giants. On Tuesday, Michael Burry of “The Big Short” fame boosted his bets on Chinese e-commerce companies Alibaba and JD.com, doubling his stake in Alibaba to $10.2 billion and his JD.com holding to $11 million.

    Alibaba, which developed its own ChatGPT-style generative artificial intelligence tool Tongyi Qianwen earlier this year, said that the system could help expand customer adoption of its cloud computing service.

    So far, Alibaba has seen ample demand for the product, with 2,000 enterprise customers applying for trial access, company management said on the firm’s earnings call.

    The firm is starting work to develop “vertical” models developed by third-party partners and developers but based on the firm’s own Tongyi Qianwen system.

    On Wednesday, Tencent’s president, Martin Lau, said the company has been “making good progress” in building foundation models, the systems which underpin AI chatbots like ChatGPT, after the company reported a solid bounce in revenue.

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  • CNBC Daily Open: Farewell for now, default fears

    CNBC Daily Open: Farewell for now, default fears

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    The US Treasury Department building is seen in Washington, DC, January 19, 2023.

    Saul Loeb | Afp | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Progress on U.S. debt ceiling talks and a sign of health at one regional bank gave markets the confidence to rally Wednesday.

    What you need to know today

    • U.S. markets rose Wednesday as investors hoped U.S. lawmakers manage to reach a deal on the country’s debt ceiling. Asia-Pacific stocks traded higher Thursday on the back of that optimism. Japan’s Topix Index rose 1.1%, its third straight day of increase, as Japan’s trade deficit narrowed by almost half in April.
    • Microsoft CEO Satya Nadella told CNBC’s Andrew Ross Sorkin in a taped interview that society needs to come together to “mitigate the dangers” of artificial intelligence. But Nadella was also optimistic about AI’s impact: He thinks it’ll create new jobs and improve education.
    • PRO Traders expect the Federal Reserve to keep interest rates unchanged when it meets later in June. However, the central bank could enact a “substitute” hike that would keep monetary policy tight, according to Evercore ISI.

    The bottom line

    Progress on U.S. debt ceiling talks and a sign of health at one regional bank gave markets the confidence to rally Wednesday.

    U.S. leaders from both sides of the political spectrum expressed hope that the country will avert a sovereign debt crisis, which could come in as little as two weeks, if U.S. Treasury Secretary Janet Yellen’s warning of a June 1 deadline comes true. Though neither Biden nor McCarthy offered concrete details on a deal, their comments were markedly more positive than those on Monday, when McCarthy told NBC News both sides are still “far apart.”

    Adding to yesterday’s positive sentiment, regional bank Western Alliance reported that customer deposits have grown by more than $2 billion throughout the current quarter. Analysts and investors cheered the news. Shares of the bank jumped 10.2% and helped to lift the sector. PacWest, another regional bank, surged 21.7%, while the broader SPDR S&P Regional Banking ETF (KRE) rose 7.4%.

    Technology stocks rallied yesterday, possibly because of diminishing fears of a debt crisis and positive sentiment from Tesla, which climbed 4.4% after the company’s shareholder meeting. The Technology Select Sector SPDR Fund (XLK) rose 1.2%, hitting a 52-week high for the third straight day.

    Major stock indexes benefited from those rises. The Dow Jones Industrial Average closed 1.24% higher, the Nasdaq Composite added 1.28% and the S&P 500 rose 1.19%.

    But the S&P might be too reliant on tech stocks, Mizuho warned. Simply put, without Big Tech stocks, the S&P 500 would be down for the year. That implies that if Big Tech experiences a downturn — as it did last year — then the S&P would tumble pretty quickly.

    Still, the future is bright for now. Goldman Sachs’ Senior Strategist Ben Snider told CNBC AI could increase the profits of S&P companies by 30% — with technology sector being the immediate winner. Fears averted for another day.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • CNBC Daily Open: Goodbye for now, default fears

    CNBC Daily Open: Goodbye for now, default fears

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    The south facade of the White House in Washington DC, United States on April 21, 2022.

    Yasin Ozturk | Anadolu Agency | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Progress on U.S. debt ceiling talks and a sign of health at one regional bank gave markets the confidence to rally Wednesday.

    What you need to know today

    • UBS expects to incur $17 billion in costs from its emergency takeover of Credit Suisse. However, UBS also expects to gain $34.8 billion from “negative goodwill,” which refers to the acquisition of assets at a price below what they’re worth.
    • Microsoft CEO Satya Nadella told CNBC’s Andrew Ross Sorkin in a taped interview that society needs to come together to “mitigate the dangers” of artificial intelligence. But Nadella was also optimistic about AI’s impact: He thinks it’ll create new jobs and improve education.
    • PRO Traders expect the Federal Reserve to keep interest rates unchanged when it meets later in June. However, the central bank could enact a “substitute” hike that would keep monetary policy tight, according to Evercore ISI.

    The bottom line

    Progress on U.S. debt ceiling talks and a sign of health at one regional bank gave markets the confidence to rally Wednesday.

    U.S. leaders from both sides of the political spectrum expressed hope that the country will avert a sovereign debt crisis, which could come in as little as two weeks, if U.S. Treasury Secretary Janet Yellen’s warning of a June 1 deadline comes true. Though neither Biden nor McCarthy offered concrete details on a deal, their comments were markedly more positive than those on Monday, when McCarthy told NBC News both sides are still “far apart.”

    Adding to yesterday’s positive sentiment, regional bank Western Alliance reported that customer deposits have grown by more than $2 billion throughout the current quarter. Analysts and investors cheered the news. Shares of the bank jumped 10.2% and helped to lift the sector. PacWest, another regional bank, surged 21.7%, while the broader SPDR S&P Regional Banking ETF (KRE) rose 7.4%.

    Technology stocks rallied yesterday, possibly because of diminishing fears of a debt crisis and positive sentiment from Tesla, which climbed 4.4% after the company’s shareholder meeting. The Technology Select Sector SPDR Fund (XLK) rose 1.2%, hitting a 52-week high for the third straight day.

    Major stock indexes benefited from those rises. The Dow Jones Industrial Average closed 1.24% higher, the Nasdaq Composite added 1.28% and the S&P 500 rose 1.19%.

    But the S&P might be too reliant on tech stocks, Mizuho warned. Simply put, without Big Tech stocks, the S&P 500 would be down for the year. That implies that if Big Tech experiences a downturn — as it did last year — then the S&P would tumble pretty quickly.

    As Mizuho’s note put it, “For our sake, hope [Big Tech companies] hold.”

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • Microsoft’s bid to buy Activision Blizzard clears a key hurdle. But the $69B deal is still at risk

    Microsoft’s bid to buy Activision Blizzard clears a key hurdle. But the $69B deal is still at risk

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    LONDON (AP) — The European Union on Monday approved Microsoft’s $69 billion purchase of video game maker Activision Blizzard, deciding the deal won’t stifle competition for popular console titles like Call of Duty and accepting the U.S. tech company’s remedies to boost competition in cloud gaming.

    But the blockbuster deal is still in jeopardy because British regulators have rejected it and U.S. authorities are trying to thwart it.

    The acquisition, sweetened by Microsoft’s promises to automatically license Activision games to cloud gaming platforms, “would no longer raise competition concerns and would ultimately unlock significant benefits for competition and consumers,” said the European Commission, the 27-nation bloc’s executive arm and top antitrust watchdog.

    The commission’s approval “has removed one potential major roadblock for this deal” but “it doesn’t necessarily mean they’re in a stronger position” to overturn the U.K.’s rejection, said Liam Deane, a game industry analyst for tech research and advisory firm Omdia.

    The all-cash deal announced more than a year ago has been scrutinized by regulators around the world over fears that it would give Microsoft and its Xbox console control of Activision’s hit franchises like Call of Duty and World of Warcraft.

    Fierce opposition has been driven by rival Sony, which makes the PlayStation gaming system.

    Microsoft sought to counter the resistance by striking a deal with Nintendo to license Activision titles like Call of Duty for 10 years and offering the same to Sony if the deal went ahead.

    Following its review, the European Commission dismissed the possibility that Microsoft would cut off its games from PlayStation, saying that excluding the most popular gaming console would put a big dent in its profits.

    The emerging cloud gaming market received closer scrutiny from Brussels. Cloud gaming frees players from buying expensive consoles and gaming computers by allowing them to stream games they own to tablets, phones and other devices, typically through a cloud platform that may charge a fee.

    The commission approved the deal after accepting Microsoft’s offer to modify its licensing agreements to allow users and cloud gaming platforms to stream its titles without paying royalties for 10 years.

    The licenses “will apply globally and will empower millions of consumers worldwide to play these games on any device they choose,” Microsoft President Brad Smith said in a statement.

    Microsoft has already announced deals to bring Xbox PC games to cloud gaming platforms operated by chipmaker Nvidia and independent player Boosteroid.

    Activision games aren’t available on cloud services, but the commission noted that the licensing commitments could expand the cloud gaming market “by bringing Activision’s games to new platforms, including smaller EU players, and to more devices than before.”

    The EU decision might help Microsoft’s chances as it faces down regulators in the U.S., where the Federal Trade Commission is taking the company to court to block the deal. A trial before the FTC’s in-house judge set to begin Aug. 2.

    But Brussels’ approval is at odds with the stance taken by British antitrust regulators, who last month upended the biggest tech deal in history over concerns it would hurt competition in the small but rapidly growing cloud gaming market.

    Britain’s Competition and Markets Authority said in a statement Monday that it “stands by its decision,” an unusual move that highlights the more muscular approach London has taken.

    “Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next ten years,” authority chief executive Sarah Cardell said. “They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale.”

    The companies are appealing the U.K. decision to a tribunal, but history doesn’t bode well.

    The watchdog previously denied Facebook parent Meta’s purchase of Giphy over concerns it would limit innovation and competition. The social media giant was ultimately forced to sell off the GIF-sharing platform after it lost an appeal.

    If Microsoft’s appeal fails, the company would be forced to either scrap the deal or carve out the U.K. as a separate market, which appeared to be an unfeasible option, said Deane, the game analyst.

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  • A stock-market milestone: Apple is now worth more than the entire Russell 2000

    A stock-market milestone: Apple is now worth more than the entire Russell 2000

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    The market capitalization of Apple Inc. has surpassed that of the entire Russell 2000 for two weeks, the longest stretch on record, according to Bloomberg data.

    Apple’s market capitalization, which measures how much the company is worth based on the value of all its outstanding stock, surpassed that of the Russell 2000
    RUT,
    +1.19%
    on April 27 and has held higher through Monday. The only other time that occurred was Sept. 1, 2020, when Apple’s valuation passed that of the small-cap index for only a day.

    Apple’s premium over this group of small-cap stocks continued to widen over the past two weeks as the consumer-technology giant reported earnings that surpassed Wall Street analysts’ expectations.

    With a market capitalization of roughly $2.7 trillion, Apple is now worth roughly $100 billion more than the combined value of all 2,000 stocks in the Russell 2000, according to Bloomberg data shared with MarketWatch.

    To be sure, the gap narrowed somewhat on Monday as Apple shares declined by 0.4% to $171.80, while the Russell 2000 gained 1.3% to trade at 1,763.

    A team of stock-market analysts from Bespoke Investment Group illustrated the trend in a chart shared on Twitter Monday.

    U.S. equity benchmarks have powered higher in 2023, but some say the strength in popular indexs like the S&P 500 and Nasdaq Composite has masked weakness in other corners of the market.

    Both the S&P 500, which has risen more than 7% year-to-date, and the Nasdaq Composite, which has risen nearly 18%, owe the bulk of their gains to a handful of megacap technology stocks including Apple, Microsoft Corp.
    MSFT,
    +0.16%    ,
    Alphabet Inc.
    GOOG,
    -0.81%
    and Nvidia Corp.
    NVDA,
    +2.16%

    The top 10 stocks in the S&P 500 hold a 29% weight in the index, and have been responsible for around 70% of its year-to-date performance gains, according to a MarketWatch report from last week.

    See: The S&P 500 is top-heavy with tech. Here’s what that says about future stock-market returns.

    The Russell 2000, meanwhile, is essentially unchanged since the start of 2023. Apple, by comparison, has risen more than 32% since Jan. 1, according to FactSet data. The relative weakness in small-caps has inspired discussion about whether this might be a buying opportunity, as market strategists told Barron’s.

    See: Small-Cap Stocks Have Been Crushed. 3 With Big Potential.

    Small-caps have struggled against a plethora of headwinds since the start of 2023. Shrinking corporate earnings, a string of regional-bank failures and signs of a looming recession have taken a heavy toll. Facing so much uncertainty, equity investors have sought safety in shares of megacap technology names this year following a punishing selloff in 2022.

    “It is pretty incredible that one company could overtake an entire universe of small-cap stocks in terms of size,” said Callie Cox, U.S. equity strategist at eToro, during a phone interview with MarketWatch. “To me, it really speaks to how beaten down small-caps are.”

    When Apple reported earnings for the quarter ended in March last week, the company’s management revealed a surprise growth in its iPhone business, which helped to overcoming a shortfall in Mac revenue. The company also promised investors billions more in dividends and stock repurchases, which helped to boost the stock price. Apple’s shares traded higher in response.

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  • The streaming wars are over, and it’s time for media to figure out what’s next

    The streaming wars are over, and it’s time for media to figure out what’s next

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    Robyn Beck | Afp | Getty Images

    I’m calling it. The Streaming Wars are over. 2019-2023. RIP.

    The race between the biggest media and entertainment companies to add streaming subscribers, knowing consumers will only pay for a limited number of them, is finished. Sure, the participants are still running. They’re just not trying to win anymore.

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    Disney announced its flagship streaming service, Disney+, lost 4 million subscribers during the first three months of the year, dropping the company’s total streaming subscribers to 157.8 million from 161.8 million. Disney lost 4.6 million customers for its streaming service in India, Disney+ Hotstar. In the U.S. and Canada, Disney+ lost 600,000 subscribers.

    It’s become clear the biggest media and entertainment companies are operating in a world where significant streaming subscriber growth simply isn’t there anymore – and they’re content not to chase it hard. Netflix added 1.75 million subscribers in its first quarter, pushing its global total to 232.5 million. Warner Bros. Discovery added 1.6 million to land at 97.6 million.

    The current big media narrative is all about getting streaming to profitability. Warner Bros. Discovery announced last week its U.S. direct-to-consumer business turned a profit of $50 million in the quarter and will remain profitable this year. Netflix’s streaming business turned profitable during the pandemic. Disney on Wednesday announced streaming losses narrowed to $659 million from $887 million.

    Read more: Iger praises rival Universal’s ‘Super Mario Bros. Movie’

    Netflix has curbed its content spending growth, and Warner Bros. Discovery and Disney have both announced thousands of job eliminations and billions of dollars in content spending cuts in recent months. Disney will “produce lower volumes of content” moving forward, Chief Financial Officer Christine McCarthy said during Wednesday’s earnings conference call, though Chief Executive Bob Iger noted he didn’t think it would have an impact on global subscriber growth.

    There’s still some growth among the smaller players. NBCUniversal’s Peacock gained 2 million subscribers last quarter, giving it 22 million subscribers. Paramount Global added 4.1 million subscribers in the quarter, putting it at 60 million subscribers.

    But the key question isn’t looking at the growth numbers as much as it’s about the investor reaction to the growth numbers. Paramount Global fell 28% in a day last week after the company announced it was cutting its dividend from 25 cents a share to 5 cents a share to save cash.

    Disney+ Hotstar subscribers brought in a paltry 59 cents per month of revenue last quarter, down from 74 cents last quarter. It appears Disney is OK with losing these low-paying customers. Disney gave up its Indian Premier League cricket streaming rights last year. Those rights were acquired for $2.6 billion by Paramount Global.

    Disney also announced it’s raising the price of its ad-free Disney+ service later this year. Disney’s average revenue per user for U.S. and Canadian subscribers rose 20% in the most recent quarter after yet another price increase was announced last year. Big price hikes typically aren’t the strategy executives use if the priority is adding subscribers.

    What’s next?

    Raising prices and cutting costs isn’t a great growth strategy. Streaming was a growth strategy. Maybe it will come back a bit with cheaper advertising tiers and Netflix’s impending password sharing crackdown.

    But it’s highly unlikely growth will ever return to the levels seen during the pandemic and the early years of mass streaming.

    That probably means the media and entertainment indudstry will need a new growth story soon.

    The most obvious candidate is gaming. Netflix has started a fledgling video game service. Comcast considered buying EA last year, as first reported by Puck. Microsoft’s deal for Activision is now in jeopardy after UK regulators blocked the transaction. If that acquisition fails, Activision could immediately be a target for legacy media companies as they look for a more exciting story to tell investors.

    While Disney shut down its metaverse division as part of its recent cost cuts, marrying its intellectual property with gaming seems like an obvious match. One can easily envision the growth potential of Disney buying something like Epic Games, which owns Fortnite, and building its version of an interactive universe through gaming.

    More consolidation will happen – eventually – among legacy media companies. But one major gaming acquisition could start a run in the industry.

    Perhaps The Gaming Wars is the next chapter.

    Disclosure: NBCUniversal is the parent company of Peacock and CNBC.

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  • Microsoft skips salary increases for full-time employees this year

    Microsoft skips salary increases for full-time employees this year

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    Satya Nadella, CEO of Microsoft, appears at the World Economic Forum in Davos, Switzerland, May 24, 2022.

    Hollie Adams | Bloomberg | Getty Images

    Microsoft will hold off on offering salary increases to full-time employees, CEO Satya Nadella told staffers by email Wednesday.

    The move aligns with Microsoft’s efforts to reduce costs as revenue growth slows and clients reel in spending. In January, the software maker said it would cut 10,000 jobs, or just under 5% of its workforce. Alphabet, Amazon, Meta and other tech companies have downsized as well in recent months.

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    Last year, as inflation rippled through the economy, Microsoft nearly doubled the budget for merit increases and boosted stock allocations for certain employees. This year, compensation will look more normal.

    “We will maintain our bonus and stock award budget again this year, however, we will not overfund to the extent we did last year, bringing it closer to our historical averages,” Nadella wrote in the email. Microsoft did not immediately respond to a request for comment. Insider reported on the message earlier.

    Nadella said performance bonuses for Microsoft’s top executives will be down considerably from last year.

    In April, Microsoft Chief Financial Officer Amy Hood said year-over-year revenue growth in the current quarter would slow to 6.7% from 7.1% in the first three months of the year. The company also called for operating expenses to grow less than 2%, compared with 7.4% growth in the first quarter.

    In addition to his comments on pay, Nadella highlighted Microsoft’s effort to capitalize on a growing artificial intelligence market.

    “We are clear that we are helping drive a major platform shift in this new era of Al, and doing so in a dynamic, competitive environment while also facing global macroeconomic uncertainties,” Nadella wrote.

    In January, Microsoft announced a multibillion-dollar investment in startup OpenAI, which relies on Microsoft’s Azure cloud to run its viral ChatGPT chatbot and provide large language models such as GPT-4 to power apps from Microsoft and a variety of other companies.

    Hood said last month Microsoft’s capital expenditures would increase quarter over quarter because of investment in Azure AI infrastructure.

    WATCH: Microsoft’s Satya Nadella joins fellow tech executives for White House meeting on AI

    Microsoft's Satya Nadella joins fellow tech executives for White House meeting on AI

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  • Stanley Druckenmiller says A.I. could win big coming out of a recession, and he’s bullish on Nvidia

    Stanley Druckenmiller says A.I. could win big coming out of a recession, and he’s bullish on Nvidia

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  • LinkedIn lays off 716 employees, kills China jobs app

    LinkedIn lays off 716 employees, kills China jobs app

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    Aytac Unal | Anadolu Agency | Getty Images

    LinkedIn, the popular business social networking platform owned by Microsoft, will discontinue its China-specific jobs app InCareer and lay off 716 employees worldwide, the company said in a message to employees.

    The move, announced Monday, will impact around 3.5% of LinkedIn’s approximately 19,000 employees worldwide. LinkedIn launched InCareer in Dec. 2021 after sunsetting its localized LinkedIn product in China.

    “Though InCareer experienced some success in the past year thanks to our strong China-based team, it also encountered fierce competition and a challenging macroeconomic climate,” LinkedIn CEO Ryan Roslansky said in the message.

    Shares of parent company Microsoft were largely flat in pre-market trading Tuesday morning. In the third quarter of 2023, LinkedIn revenue grew 8% year-over-year to $3.7 billion, according to Microsoft’s earnings report and quarterly SEC filing.

    InCareer will delete all user data by Aug. 9, according to a LinkedIn help page.

    LinkedIn will continue to operate other businesses in China, including its LinkedIn Learning product. But Roslansky signaled that the company would continue to “manage expenses” in the year ahead, suggesting that further cost cuts or layoffs could be on the table.

    China is a fertile market for U.S.-based tech companies, which often jostle with homegrown competitors to capture market share. The total number of InCareer and LinkedIn users in China was over 57 million, according to an InCareer page. By comparison, domestic competitor Zhaopin claimed over 320 million professional users and corporate users ranging from Baidu to Chinese government agencies.

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  • A.I. trade is leaving investors vulnerable to painful losses: Evercore

    A.I. trade is leaving investors vulnerable to painful losses: Evercore

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    The artificial intelligence trade may be leaving investors vulnerable to significant losses.

    Evercore ISI’s Julian Emanuel warns Big Tech concentration in the S&P 500 is at extreme levels.

    “The AI revolution is likely quite real, quite significant. But… these things unfold in waves. And, you get a little too much enthusiasm and the stocks sell off,” the firm’s senior managing director told CNBC’s “Fast Money” on Monday.

    In a research note out this week, Emanuel listed Microsoft, Apple, Amazon, Nvidia and Alphabet as concerns due to clustering in the names.

    “Two-thirds [of the S&P 500 are] driven by those top five names,” he told host Melissa Lee. “The public continues to be disproportionately exposed.”

    Emanuel reflected on “odd conversations” he had over the past several days with people viewing Big Tech stocks as hiding places.

    “[They] actually look at T-bills and wonder whether they’re safe. [They] look at bank deposits over $250,000 and wonder whether they’re safe and are putting money into the top five large-cap tech names,” said Emanuel. “It’s extraordinary.”

    It’s particularly concerning because the bullish activity comes as small caps are getting slammed, according to Emanuel. The Russell 2000, which has exposure to regional bank pressures, is trading closer to the October low.

    For protection against losses, Emanuel is overweight cash. He finds yields at 5% attractive and plans to put the money to work during the next market downturn. Emanuel believes it will be sparked by debt ceiling chaos and a troubled economy over the next few months.

    “You want to stay in the more defensive sectors. Interestingly enough with all of this AI talk, health care and consumer staples have outperformed since April 1,” Emanuel said. “They’re going to continue outperforming.”

    Disclaimer

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  • CNBC Daily Open: Investors liked April’s jobs growth

    CNBC Daily Open: Investors liked April’s jobs growth

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    A ‘Now Hiring’ sign posted outside of a restaurant looking to hire workers on May 05, 2023 in Miami, Florida.

    Joe Raedle | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Investors liked April’s jobs growth.

    What you need to know today

    • U.S. markets jumped Friday as Apple shares popped and regional bank stocks recovered. Asia-Pacific stocks mostly traded higher Monday. China’s Shanghai Composite rose 1.6% even as economists expect the country’s trade surplus to decrease slightly from March to April.
    • If the White House fails to raise the debt ceiling, there will be a “steep economic downturn” and “economic chaos will ensue,” U.S. Treasury Secretary Janet Yellen warned on Sunday. The U.S. might hit its debt ceiling as early as June 1.
    • PRO During Berkshire’s meeting, Buffett shared his favorite stocks. One of them is a “better business than any we own,” Buffett said. Another is “one of the best-managed and important companies in the world” — yet Buffett decided to sell shares in it. Here’s why.

    The bottom line

    A strong jobs reading, a note from JPMorgan and an optimistic earnings report from Apple buoyed U.S. markets Friday.

    The gains made by stocks were impressive — especially after the previous few days of renewed banking fears — so let’s start with them. The Dow Jones Industrial Average added 1.65%, the S&P 500 rose 1.85% and the Nasdaq Composite jumped 2.25%.

    The tech-heavy Nasdaq’s jump is straightforward: Apple shares leaped 4.7% after the company reported better-than-expected earnings and revenue Thursday. Other Big Tech companies, like Microsoft and Amazon, rose alongside Apple.

    Broader markets were boosted by April’s jobs report, which showed a higher-than-expected increase in jobs growth and an unemployment rate of 3.4% — a record low since 1969.

    Markets’ reaction might seem confusing at first. A tight labor market implies the Federal Reserve might continue raising interest rates. Generally speaking, that’s bad for markets. Recall January’s jobs report: There were 517,000 new jobs in December, almost three times the forecast. Markets fell on the news.  

    Yet this time, markets rallied, suggesting that the worry gripping traders is one of recession, not inflation. A strong jobs market increases the probability that the U.S. economy can tame inflation without contracting too severely.

    Indeed, there are signs the U.S. economy has been slowing. At the end of April, we learned that GDP rose at an annualized 1.1% pace in the first quarter, about half of what analysts had estimated. The banking crisis — resurrected by First Republic’s failure — is spreading again, causing banks to lend less and ultimately slow growth even further.

    There’s good news on that front, however. On Friday, banking titan JPMorgan Chase upgraded three regional bank stocks to “overweight,” saying that Western Alliance, Zions Bancorp and Comerica were all “substantially mispriced” — as I had argued in Friday’s edition of this newsletter.

    Investors digested the note and pushed the SPDR S&P Regional Banking ETF (KRE) up 6.3%. Individual bank stocks saw more drastic jumps: PacWest surged 81.7% and Western Alliance popped 49.2%.

    But make no mistake: This isn’t a sign that banking fears have been put to rest definitively. If stocks can swing so drastically in one direction on the back of a note, they can do so in the other at the faintest whisper of trouble. What we’re seeing isn’t renewed confidence, but continued volatility.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • CNBC Daily Open: Investors like jobs growth

    CNBC Daily Open: Investors like jobs growth

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    A ‘Now Hiring’ sign posted outside of a restaurant looking to hire workers on May 05, 2023 in Miami, Florida.

    Joe Raedle | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Investors like jobs growth.

    What you need to know today

    • U.S. markets jumped Friday as Apple shares popped and regional bank stocks recovered. Europe’s Stoxx 600 rose 1.1% — Adidas, with an 8.9% surge, was a big winner in the index.
    • If the White House fails to raise the debt ceiling, there will be a “steep economic downturn” and “economic chaos will ensue,” U.S. Treasury Secretary Janet Yellen warned on Sunday. The U.S. might hit its debt ceiling as early as June 1.
    • PRO During Berkshire’s meeting, Buffett shared his favorite stocks. One of them is a “better business than any we own,” Buffett said. Another is “one of the best-managed and important companies in the world” — yet Buffett decided to sell shares in it. Here’s why.

    The bottom line

    A strong jobs reading, a note from JPMorgan and an optimistic earnings report from Apple buoyed U.S. markets Friday.

    The gains made by stocks were impressive — especially after the previous few days of renewed banking fears — so let’s start with them. The Dow Jones Industrial Average added 1.65%, the S&P 500 rose 1.85% and the Nasdaq Composite jumped 2.25%.

    The tech-heavy Nasdaq’s jump is straightforward: Apple shares leaped 4.7% after the company reported better-than-expected earnings and revenue Thursday. Other Big Tech companies, like Microsoft and Amazon, rose alongside Apple.

    Broader markets were boosted by April’s jobs report, which showed a higher-than-expected increase in jobs growth and an unemployment rate of 3.4% — a record low since 1969.

    Markets’ reaction might seem confusing at first. A tight labor market implies the Federal Reserve might continue raising interest rates. Generally speaking, that’s bad for markets. Recall January’s jobs report: There were 517,000 new jobs in December, almost three times the forecast. Markets fell on the news.  

    Yet this time, markets rallied, suggesting that the worry gripping traders is one of recession, not inflation. A strong jobs market increases the probability that the U.S. economy can tame inflation without contracting too severely.

    Indeed, there are signs the U.S. economy has been slowing. At the end of April, we learned that GDP rose at an annualized 1.1% pace in the first quarter, about half of what analysts had estimated. The banking crisis — resurrected by First Republic’s failure — is spreading again, causing banks to lend less and ultimately slow growth even further.

    There’s good news on that front, however. On Friday, banking titan JPMorgan Chase upgraded three regional bank stocks to “overweight,” saying that Western Alliance, Zions Bancorp and Comerica were all “substantially mispriced” — as I had argued in Friday’s edition of this newsletter.

    Investors digested the note and pushed the SPDR S&P Regional Banking ETF (KRE) up 6.3%. Individual bank stocks saw more drastic jumps: PacWest surged 81.7% and Western Alliance popped 49.2%.

    But make no mistake: This isn’t a sign that banking fears have been put to rest definitively. If stocks can swing so drastically in one direction on the back of a note, they can do so in the other at the faintest whisper of trouble. What we’re seeing isn’t renewed confidence, but continued volatility.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • Apple reports better-than-expected quarter driven by iPhone sales

    Apple reports better-than-expected quarter driven by iPhone sales

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    Apple reported second-fiscal quarter earnings on Thursday that beat Wall Street’s soft expectations, driven by stronger-than-anticipated iPhones sales. Apple CEO Tim Cook told CNBC that the quarter was “better than we expected.” 

    However, Apple’s overall sales fell for the second quarter in a row. The tech giant’s shares rose nearly 2% in extended trading, and continued climbing when Apple gave forecast data points about the current quarter.

    related investing news

    Apple's profit report is the market's next big test now. JPMorgan breaks down whether it can deliver

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    Here’s how the company did versus Wall Street expectations per Refinitiv consensus expectations: 

    • EPS: $1.52 per share vs. $1.43 expected 
    • Revenue: $94.84 billion vs. $92.96 billion expected 
    • Gross margin: 44.3% vs. 44.1% expected 

    Apple reported $24.16 billion in net income during the quarter compared to $25.01 billion in the year-earlier period. Total revenue was off 3% from $97.28 billion in the prior quarter.

    Here’s how Apple’s individual product lines did versus StreetAccount consensus expectations: 

    • iPhone revenue: $51.33 billion vs. $48.84 billion expected 
    • Mac revenue: $7.17 billion vs. $7.80 billion expected 
    • iPad revenue: $6.67 billion vs. $6.69 billion expected 
    • Other Products revenue: $8.76 billion vs. $8.43 billion expected 
    • Services revenue: $20.91 billion vs. $20.97 billion expected 

    Apple didn’t provide formal guidance, continuing its practice that dates back to 2020 and the start of the Covid-19 pandemic. Management typically provides some data points on a call with analysts.

    Apple finance chief Luca Maestri said the company expects overall revenue in the current quarter to decline about 3%.

    “We expect our June quarter year-over-year revenue performance to be similar to the March quarter assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter,” Maestri said on a call with analysts. He added the company is facing macroeconomic challenges in digital advertising and mobile gaming, which is part of Apple’s services business.

    The highlight of Apple’s report was iPhone sales, which grew from the year-ago quarter even as the broader smartphone industry contracted nearly 15% during the same time, according to an IDC estimate.  

    IPhone revenue increased 2% during the quarter that ended April 1, suggesting that parts shortages and supply chain issues that had hampered the product for the last few years — including an iPhone factory shutdown late last year — had finally abated.  

    “It was quite a good quarter from an iPhone point of view, particularly relative to the market when you look at the market stats,” Cook told CNBC’s Steve Kovach.  

    Chief Executive Officer (CEO) of Apple Tim Cook waves to people during the opening of the first Apple Inc. flagship store in Mumbai, India on April 18, 2023.

    Imtiyaz Shaikh | Anadolu Agency | Getty Images

    Apple’s Mac and iPad businesses didn’t fare as well. The company warned last quarter that both business segments would decline, partially due to parts shortages but they fell further than expected.  

    Apple’s Mac sales were off more than 31% to just over $7.17 billion. But that’s a difficult comparison from the year-earlier period when Apple was still benefiting from the end of a pandemic boom in PC sales and a shift to its own chips that offer longer laptop battery life.  

    “There’s really two reasons for that,” Cook said. “One is the macro situation in general. And the other is where we’re still comparing to the very difficult compare of the M1 MacBook Pro 14 and 16-inch from the year-ago quarter.” 

    Revenue from iPads declined nearly 13% to $6.67 billion.  

    Apple’s Services business includes monthly subscriptions, revenue from Apple’s App Store, warranties and search-licensing revenue from companies like Google. Apple reported $20.9 billion in services revenue, a 5.5% year-over-year increase, signaling the company’s highest-margin business line continues to grow.  

    Apple’s wearables division, including Apple Watch and headphones such as AirPods, dropped 1% during the quarter, beating analyst expectations. Last fall, the company released a more expensive Apple Watch, called Ultra.  

    Apple’s China regional business, which includes the mainland, Taiwan and Hong Kong, reported $17.81 billion in sales, down from last year’s $18.34 billion. Analysts had hoped that China’s demand for electronics would rise in the quarter as the company exits out of Covid-era lockdowns and other restrictions.  

    While sales shrunk in most regions that Apple monitors, they grew in the Asia Pacific region to $8.11 billion.

    Cook was optimistic about Apple’s prospects in India after his visit last month to the country where he opened Apple stores and met with politicians.  

    “The switcher and first-time buyer metrics look very good there for India,” Cook said. Apple uses the term “switcher” to refer to first-time iPhone buyers who previously had Android devices.  

    As expected, Apple’s board authorized $90 billion in share repurchases and dividends. Apple said it paid $23 billion in buybacks and dividends in the March quarter. Apple also raised its dividend 4% to 24 cents per share.  

    Cook also said that Apple was not planning layoffs like those that other big tech companies have started over the past year.  “I view that as a last resort and, so, mass layoffs is not something that we’re talking about at this moment,” he said.  

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  • Microsoft opens up Bing access and adds chat history and export features

    Microsoft opens up Bing access and adds chat history and export features

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    Microsoft CEO Satya Nadella speaks during an event at the company’s headquarters in Redmond, Washington, on Feb. 7, 2023.

    Chona Kasinger | Bloomberg | Getty Images

    Microsoft said Thursday that it’s dispensing with the waiting list it has had in place for the past three months for its revamped Bing search engine, allowing anyone with a Microsoft account to use it. The new Bing, revealed in February, features a chatbot smartened up with the GPT-4 artificial intelligence model from OpenAI that’s similar to the startup’s viral ChatGPT bot.

    Google remains the leader in search advertising. Microsoft wants to become a more formidable challenger after introducing Bing in 2009, with help from OpenAI. Microsoft has said that for every percentage point of share it gains in the highly profitable search category, its revenue will increase by $2 billion.

    With its appearance in late November, ChatGPT has sparked a wave of interest in generative AI technologies that create text, images and other content in response to human input. Microsoft provides cloud services for ChatGPT and offers GPT-4 to businesses looking to draw on generative AI.

    In addition to augmenting Bing with the GPT-4, Microsoft has announced plans to incorporate the AI model into its Microsoft 365 productivity software and bring out a chatbot for security practitioners, among other products. Google, for its part, is working to add generative AI to its search engine, and it has a language model rivaling GPT-4 that developers have begun using.

    “We have really good, positive signal from the time we launched,” Divya Kumar, global head of marketing for search and AI at Microsoft, told CNBC in an interview. Last week, Microsoft CEO Satya Nadella said Bing had crossed 100 million daily active users.

    But while Bing has taken share of consumer web searches, it has not won share of search revenue in the nearly three months since Microsoft introduced the new version during a press event on its Redmond, Washington, campus, Bernstein analysts led by Mark Shmulik wrote in a Wednesday note to clients.

    “At its heights Bing hit #4 on the US iOS App download rank in early February,” the Bernstein analysts wrote, citing Apptopia data. “Following the launch of the new Bing, Bing’s total app download volume has increased by 4x. However, Bing download momentum declined throughout March and April.” Bernstein has the equivalent of buy ratings on Google parent Alphabet and Microsoft shares.

    Now, Microsoft is bulking up Bing with more capabilities in addition to broadening access.

    Microsoft is adding a way to get back to previous chat conversations, which ChatGPT has offered for months. It will provide a way to export chats to Microsoft Word documents. It also will start showing images and other media in chat messages when appropriate.

    And over time, Bing will add integrations to third-party services such as OpenTable and Wolfram Alpha, enabling people to view and take action on current information when talking with the chatbot. OpenAI announced a similar concept called plug-ins for ChatGPT in March, but those wishing to try them must first join a waiting list.

    Kumar said the company will provide more details on how developers can build for the Bing chatbot at its Microsoft Build developer conference, which starts on May 23.

    People still must go through Microsoft’s Edge web browser on PCs or the Bing app on mobile devices in order to use the new Bing, including its chatbot. That means Google has yet to allow people to use the Bing chatbot from Google’s dominant Chrome browser. “We’re still early in the journey and were still learning,” Kumar said.

    Edge has increased its share of the web browsing market every quarter for the past two years, Yusuf Mehdi, consumer marketing chief, wrote in a blog post. Microsoft includes Edge in its Windows 10 and Windows 11 operating systems, and the default search engine in Edge is Bing.

    Microsoft is updating Edge so that when people open a result that appears during a Bing chat, the chat will move to a sidebar in Edge in order to keep the conversation going, Mehdi wrote.

    WATCH: A.I. may ruin Alphabet’s only real business: Google Search, says CIC Wealth’s Malcolm Ethridge

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  • CEOs of Microsoft and Alphabet called to AI meeting at White House

    CEOs of Microsoft and Alphabet called to AI meeting at White House

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    Vice President Kamala Harris will host the chief executives of Alphabet GOOG GOOGL, Microsoft MSFT, OpenAI and Anthropic at the White House on Thursday to discuss artificial-intelligence issues.

    Harris and senior administration officials aim to have a “frank discussion” of the risks in AI development and of “ways we can work together to ensure the American people benefit from advances in AI while being protected from its harms,” according to an invitation for the meeting obtained by MarketWatch.

    The…

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  • Top cloud providers Amazon, Microsoft and Google face ongoing spending cuts by clients

    Top cloud providers Amazon, Microsoft and Google face ongoing spending cuts by clients

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    Amazon Web Services logo at the Web Summit in Lisbon.

    Henrique Casinhas | Sopa Images | Lightrocket | Getty Images

    The cloud-computing market keeps growing as companies move an increasing number of workloads out of their own data centers, but executives from the leading cloud vendors said this week that clients are looking for ways to trim costs.

    The result is slowing revenue growth at the cloud divisions run by Amazon, Microsoft and Google. And for Amazon Web Services, the leader in the space, it means a slimmer operating margin and less profit for its parent company.

    It’s a phenomenon that began in 2022, as fears of a recession hit the economy. AWS saw deceleration in the third and fourth quarters, and last quarter Microsoft finance chief Amy Hood spooked analysts with comments about a slowdown in December that she expected to persist.

    Amazon finance chief Brian Olsavsky was the bearer of bad news for investors on Thursday, when he said that in April, AWS revenue growth had slumped by about five percentage points from the first-quarter growth rate of almost 16%. The company’s stock price slid in response.

    Amazon CEO Andy Jassy said “what we’re seeing is enterprises continuing to be cautious in their spending in this uncertain time.”

    At Google, cloud growth slowed to 28% from a year earlier in the first quarter from 32% in the prior period. The deceleration occurred even as Google’s cloud segment reached profitability for the first time on record.

    “We saw some headwind from slower growth of consumption with customers really looking to optimize their costs given that macro climate,” said Ruth Porat, Alphabet’s finance chief, on Tuesday’s earnings call.

    Sundar Pichai, Alphabet’s CEO, said the slowdown is understandable.

    “We are leaning into optimization,” he said. “This is an important moment to help our customers, and we take a long-term view. And so it’s definitely an area we are leaning in and trying to help customers make progress on their efficiencies where we can.”

    The companies remain optimistic that cloud will continue to be a strong market for tech, as businesses still have a long way to go before they’ll be fully taking advantage of the benefits.

    “People sometimes forget that 90-plus percent of global IT spend is still on-premises,” Jassy said.

    And Hood noted that pretty soon the financial comparisons will be against numbers from the point last year when the market was softening.

    “When you start to anniversary that, you do see that it gets a little bit easier in terms of the comps year-over-year,” Hood said.

    WATCH: Ongoing deceleration in IT spending not reflected in tech earnings

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  • U.S. stocks head for best day in 2 weeks on strong earnings from Meta and other big-tech names

    U.S. stocks head for best day in 2 weeks on strong earnings from Meta and other big-tech names

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    U.S. stocks rose on Thursday, on track for their biggest gain in two weeks, as another batch of strong big-tech earnings reports helped boost the broader market while offsetting signs of slowing economic growth.

    How are stocks trading

    On Wednesday, the Dow Jones Industrial Average fell 229 points, or 0.68%, to 33,302 as worries about First Republic Bank FRC overshadowed upbeat big-tech earnings.

    What’s driving markets

    For…

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  • CNBC Daily Open: A regional bank casts a shadow over Big Tech

    CNBC Daily Open: A regional bank casts a shadow over Big Tech

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    A pedestrian walks by a First Republic bank on April 26, 2023 in San Francisco, California.

    Justin Sullivan | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets because of fears reignited by First Republic.

    What you need to know today

    • First Republic Bank has a plan to save itself, CNBC learned from sources. Advisors to First Republic are persuading big U.S. banks to buy bonds from First Republic at above-market prices. Though those big banks will lose money on the purchase, their losses would be much lower than the Federal Deposit Insurance Corp. fees banks would have to pay if First Republic fails.
    • Meanwhile, First Republic’s stock continued its freefall. It plummeted 29.75% Wednesday to hit an all-time low of $5.69, giving the bank a market value below $1 billion.
    • Still, the global banking sector looks mostly solid, at least for big banks. Deutsche Bank reported a net profit attributable to shareholders of 1.158 billion euros, which was a 9.2% increase from a year earlier. That’s the 11th straight quarter of profit for the German bank — though it’s joining other companies in laying off workers because of falling revenue.
    • U.S. stocks ended Wednesday mixed as First Republic’s troubles overshadowed excitement about Big Tech earnings. Asia-Pacific markets traded higher Thursday. Singapore’s Straits Times Index lost 0.39%, weighed down by real estate stocks, as the country increased stamp duties on property purchases.
    • PRO First-quarter economic growth in the U.S. is likely to hit at least 2% year on year, according to analysts’ projections. Despite that solid number, there are signals that a recession is still coming.

    The bottom line

    Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets.

    On Wednesday, Microsoft rallied 7.24% on the back of a strong earnings report that was boosted by a jump in revenue from its Intelligent Cloud business segment. The tech company’s stock hit a 52-week high, putting it within a hair’s breadth of $300 per share. Amazon climbed 2.35% as investors hoped the e-commerce giant, which is the market leader in cloud services, would post strong numbers Thursday too.

    Still, the tech-heavy Nasdaq Composite finished the day only 0.47% higher. (Meta, which also had an excellent first quarter, posted earnings after markets closed.)

    Why didn’t the Nasdaq rise more from Big Tech’s better-than-expected first-quarter results? Probably because tech stocks were already doing so well.

    “There was such a rally into their earnings season that I think you needed earnings to really clear a high bar to actually catalyze another leg higher,” said Ross Mayfield, investment strategy analyst at Baird. “That just hasn’t been the case, especially when you have other headwinds pressing down on the market.”

    Indeed, fears around First Republic induced losses in other major indexes. The Dow Jones Industrial Average lost 0.68% and the S&P slipped 0.38%.

    Banks might not be as exciting as technology companies. But banks are so fundamental to the health of the economy that any sign of weakness in one is enough to send waves of fear throughout investors and make them forget, if only temporarily, the promises of Big Tech. What use is there, after all, in building a skyscraper if the foundation is shaky?

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • A U.S. tech downturn offers India ‘a bigger opportunity,’ says Infosys founder

    A U.S. tech downturn offers India ‘a bigger opportunity,’ says Infosys founder

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    Infosys founder Narayana Murthy sees tech layoffs in the U.S. as an opportunity for India.

    “I look at these things [such as tech layoffs] as part of a business cycle. The curve goes up and down, up and down. So I would not be that much worried,” Murthy told The CNBC Conversation.

    While India’s domestic IT companies worry that a slowdown in the U.S. economy could lead to American firm cutting back on tech spending and projects in India, Murthy said Indian IT firms stand to gain instead.

    “Whenever there is a downturn in the U.S. or in the developed world, there is a bigger opportunity for countries like India, particularly in my sector, which provide better value for money,” Murthy told CNBC’s Tanvir Gill.

    “In a downturn, the market shrinks a little bit and our charter is very clear. We work even harder and then we take a slightly larger market share and you will not have any issue of job losses,” said Murthy.

    Read more about tech and crypto from CNBC Pro

    Sometimes described as the father of India’s IT sector, Murthy — with his six friends — founded Infosys in 1981. He served as CEO from 1981 to 2002.

    Funded with an initial investment of $250 from Murthy’s wife, Infosys has grown into a multibillion dollar company valued at over $60 billion.

    India’s second-largest IT company hires more than 346,000 workers across the world from Asia-Pacific to North America to Europe and the Middle East.

    Many companies opt to outsource software development to India for quality at lower costs, said Krina Mehta, co-founder of U.S.-based offshore software development company Fortune Infosys, in a LinkedIn post.

    “By working with [Indian developers], you will have the access to high-quality IT professionals for quite reasonable cost compared to the prices you will have to pay in the West,” said Mehta.

    There are other American and European companies coming. So I suppose our opportunity will come in the coming years.

    Narayana Murthy

    Founder, Infosys

    Mehta said India has a talent pool filled with skilled software developers who developed a wide range of tech specializations from relevant and core technologies like Python programing to newer enterprise technologies like .NET Core.

    According to custom software development company Peerbits, companies can save 20% to 30% in tech spending by offshoring their custom software development needs to India.

    “The lesson for the U.S. corporations is to ensure that they improve their productivity, reduce their cost automatically even without depending on countries like India, China, etc. I think that is the way to move forward,” said Murthy.

    Opportunities ahead

    How N.R. Narayana Murthy founded Infosys

    Murthy said many American companies like General Electric and Microsoft have set up research and development centers in India.

    “There are other American and European companies coming. So I suppose our opportunity will come in the coming years,” said Murthy.

    “The Indian leadership under the prime minister Shri Narendra Modi has put in a lot of initiatives like ‘Startup India’ to make sure that the country becomes a source of innovation,” said Murthy.

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  • CNBC Daily Open: A regional bank overshadows Big Tech

    CNBC Daily Open: A regional bank overshadows Big Tech

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    A pedestrian walks by a First Republic bank on April 26, 2023 in San Francisco, California.

    Justin Sullivan | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets because of fears reignited by First Republic.

    What you need to know today

    • First Republic Bank has a plan to save itself, CNBC learned from sources. Advisors to First Republic are persuading big U.S. banks to buy bonds from First Republic at above-market prices. Though those big banks will lose money on the purchase, their losses would be much lower than the Federal Deposit Insurance Corp. fees banks would have to pay if First Republic fails.
    • Meanwhile, First Republic’s stock continued its freefall. It plummeted 29.75% Wednesday to hit an all-time low of $5.69, giving the bank a market value below $1 billion.
    • Meta’s first-quarter revenue rose 3% to $28.65 billion from a year earlier, the first time in three quarters that its sales increased. Adding to the good vibes, the company projected that revenue in the second quarter will come in higher than Wall Street’s expectations.
    • It wasn’t uniformly good news for Meta: Net profit fell 24% to $5.71 billion, year on year, dragged down by the company’s Reality Labs unit — its metaverse division — which recorded an operating loss of $3.99 billion. But that wasn’t enough to dampen investors’ optimism: The company’s stock jumped 11.67% in extended trading.
    • PRO First-quarter economic growth in the U.S. is likely to hit at least 2% year on year, according to analysts’ projections. Despite that solid number, there are signals that a recession is still coming.

    The bottom line

    Big Tech continues its winning streak, but it wasn’t enough to ignite a broader rally in markets.

    On Wednesday, Microsoft rallied 7.24% on the back of a strong earnings report that was boosted by a jump in revenue from its Intelligent Cloud business segment. The tech company’s stock hit a 52-week high, putting it within a hair’s breadth of $300 per share. Amazon climbed 2.35% as investors hoped the e-commerce giant, which is the market leader in cloud services, would post strong numbers Thursday too.

    Still, the tech-heavy Nasdaq Composite finished the day only 0.47% higher. (Meta, which also had an excellent first quarter, posted earnings after markets closed.)

    Why didn’t the Nasdaq rise more from Big Tech’s better-than-expected first-quarter results? Probably because tech stocks were already doing so well.

    “There was such a rally into their earnings season that I think you needed earnings to really clear a high bar to actually catalyze another leg higher,” said Ross Mayfield, investment strategy analyst at Baird. “That just hasn’t been the case, especially when you have other headwinds pressing down on the market.”

    Indeed, fears around First Republic induced losses in other major indexes. The Dow Jones Industrial Average lost 0.68% and the S&P slipped 0.38%.

    Banks might not be as exciting as technology companies. Financial institutions don’t constantly push us into the future, doing things like inventing eerily humanlike programs that chat with us. Instead, banks are doing what they’ve been doing for centuries: accepting deposits from, and loaning money to, people and companies.

    But it’s that very function that makes banks so fundamental to the health of the economy. Any sign of weakness in a bank is enough to send waves of fear throughout investors and make them forget, if only temporarily, the promises of Big Tech.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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