Tobias

Microsoft’s fiscal Q1 exceeded expectations, driven by a 40% Azure revenue surge. While overall revenue rose 18% to $77.67 billion, and net income increased, the stock dipped due to anticipated capex increases for AI and cloud infrastructure. The Intelligent Cloud unit generated $30.9 billion, surpassing estimates. Microsoft anticipates continued growth, forecasting $79.5-$80.6 billion for fiscal Q2. Microsoft’s investment in OpenAI impacted net income by $3.1 billion.

Fueled by megacap tech stocks, particularly Nvidia, the S&P 500 and Nasdaq reached intraday highs. Nvidia’s valuation surpassed $5 trillion after projecting substantial data center visibility, exceeding Wall Street estimates due to surging AI demand. Potential easing of US-China trade restrictions could further boost Nvidia’s growth. Corning also rebounded, poised to benefit from the increasing demand for fiber optic cables in data centers supporting AI. Investors are awaiting the Federal Reserve’s interest rate decision amidst earnings reports.

On Wednesday, Microsoft’s Azure and 365 services suffered a significant outage, impacting global users just before its earnings announcement. The Azure status page cited issues with Azure Front Door due to an “inadvertent configuration change.” The outage affected various services including Xbox and Azure Databricks. Microsoft reported improvements later in the day. Alaska Airlines also reported disruptions due to its Azure reliance. This incident, following a recent AWS outage, highlights risks linked to cloud dependency and the importance of multi-cloud strategies. The timing raises concerns about potential financial impact and infrastructure reliability.

Wall Street saw a volatile Wednesday following the Fed’s rate cut and Chairman Powell’s cautious remarks. The S&P 500 briefly hit an intraday high, driven by semiconductor strength fueled by AI demand. Nvidia’s market cap surpassed $5 trillion. Analysts are revising upwards, anticipating sustained AI capital expenditure. Boeing shares declined on 777X delays. Honeywell’s Solstice spin-off finalized, while analysts are positive on DuPont’s Qnity spin-off. Investors await earnings from Meta, Microsoft, and other major companies.

Federal Reserve Chair Jerome Powell addressed AI bubble concerns, differentiating it from the dotcom era by highlighting tangible earnings and revenue streams in many AI companies. He cited investments in infrastructure like data centers and chip tech as key economic drivers. While Nvidia’s profitability underscores hardware demand, some AI startups like OpenAI and Anthropic are burning cash despite high valuations. The market’s long-term viability relies on translating innovation into sustainable profits, a key area of focus for the Fed in assessing AI’s impact on economic stability.

ServiceNow’s Q3 results exceeded expectations, driven by AI platform adoption. Revenue reached $3.41 billion, with subscription revenue at $3.3 billion, up 22% year-over-year. EPS was $4.82 adjusted. The company raised full-year guidance and announced a 5-for-1 stock split. ServiceNow’s AI business is projected to generate over $500 million in annual contract value this year, aiming for $1 billion by 2026. Q4 subscription revenue is projected between $3.42 billion and $3.43 billion.

Despite substantial losses in its Reality Labs division, Meta continues investing in VR/AR technologies for the metaverse. Q3 saw a $4.4B operating loss on $470M in sales. While VR headsets face headwinds, Meta anticipates growth in AI glasses revenue, driven by strong demand for its $799 Meta Ray-Ban Display glasses. These glasses, integrating AI for real-time translation and hands-free control, boosted EssilorLuxottica sales. A strategic shift towards AI is suggested by Vishal Shah’s appointment, raising questions about balancing metaverse investment with AI’s potential across Meta’s platform and driving Reality Labs profitability.

Microsoft’s Q1 net income was impacted by a $3.1 billion investment in OpenAI. Despite this, Microsoft reported overall net income growth, driven by strong Azure cloud performance. Microsoft has invested $13 billion in OpenAI since 2019, holding a significant equity stake now valued at $135 billion. OpenAI completed a recapitalization, with the OpenAI Foundation holding a substantial equity stake. The companies’ partnership is described as highly successful, fostering collaboration while also sparking competition in the AI market.

YouTube is undergoing a strategic product reorganization, offering voluntary buyouts to U.S. employees. The move signals a deeper commitment to integrating AI across the platform, aligning with Google’s broader AI-driven efficiency mandate. This marks YouTube’s first major product team restructuring in a decade, with key product groups now reporting directly to the CEO. Christian Oestlien leads subscription products, while Johanna Voolich oversees viewer products. This restructuring mirrors an industry-wide trend of tech companies adapting to rapid AI advancements and economic pressures.

ServiceNow CEO Bill McDermott addresses concerns about AI potentially displacing enterprise software. He emphasizes ServiceNow’s integration with major AI hyperscalers, viewing it as a collaborative ecosystem rather than a threat. McDermott argues that AI models won’t replicate ServiceNow’s comprehensive solutions for business processes, especially in complex environments. He highlights the limitations of siloed AI deployments and stresses the importance of a cross-functional approach. Additionally, ServiceNow announced a five-for-one stock split to attract retail investors, following strong earnings that exceeded expectations.