This video provides an in-depth analysis of the recent quarterly earnings reports for Microsoft, Meta, and Amazon. Microsoft delivered a stellar quarter, driven by the accelerating, market-share-gaining growth of its Azure cloud division, pushing its stock to all-time highs, though the presenter views its valuation as expensive. Meta reported what the presenter calls the most impressive results of the season, with significant revenue and earnings growth fueled by its advertising business; however, the company warns of rising costs and future margin pressure. Despite this, its valuation is considered more reasonable. Amazon presented a mixed report, with decent overall growth overshadowed by significant concerns about its AWS cloud division, which is lagging behind competitors in growth and not accelerating. The presenter criticizes CEO Andy Jassy's handling of these concerns on the earnings call. A key bright spot for Amazon was its fast-growing advertising segment. Ultimately, the presenter explains that while these companies are performing well, he is not buying their stocks, as he believes there is more value and upside potential in small and mid-cap international stocks.
Analyzing the Earnings of Tech Giants: Microsoft, Meta, & Amazon
0:44 Microsoft's Stellar Quarter: Microsoft reported incredible results that pushed its stock to all-time highs. Revenue grew 18% to $76.4 billion, and net income was up 24%. The key driver was its Azure cloud division, which surpassed a $75 billion annual revenue run rate and saw its growth accelerate to 34%.
2:50 Broad-Based Growth at Microsoft: Every single one of Microsoft's business segments reported growth, with many showing double-digit increases. This demonstrates the overall health and momentum of the entire company, not just its cloud services.
5:23 Microsoft's Strong Outlook & Market Share Gains: The company projects another year of double-digit revenue growth and expects Azure's growth to accelerate further to 37% in the next quarter. CEO Satya Nadella confirmed that demand for data centers is higher than supply and that Azure is actively taking market share from competitors.
8:56 Microsoft's High Valuation: Despite the fantastic results, the presenter believes the stock is expensive. It trades at a price-to-operating cash flow multiple of 29, which is near its historical high. For this reason, he is not a buyer at current prices.
10:01 Meta's "Blowout" Earnings: The presenter calls Meta's report the most impressive of the season, with revenue up 22% and earnings per share surging by 38%. This growth was fueled by both an 11% increase in ad impressions and a 9% increase in the average price per ad.
11:58 Meta Warns of Rising Costs: While guiding for continued strong revenue growth of 18% next quarter, Meta explicitly warned investors that expense growth will accelerate in 2025 and 2026. This is expected to put pressure on profit margins in the near future.
14:44 Meta's Unsustainable Buybacks: Meta's operating cash flow is growing strongly (up 32%), but the company is spending more on share buybacks than it generates in free cash flow. This means it is dipping into its cash reserves, a practice the presenter believes is unsustainable at the current rate.
18:11 Meta's Reasonable Valuation: At a price-to-operating cash flow of 18.4, the presenter views Meta as one of the cheaper stocks in the "Magnificent 7" and not overly expensive, but he is still not buying due to his preference for opportunities in international markets.
22:01 Amazon's Mixed Report & AWS Red Flag: Amazon's stock fell 8% after its report. While overall sales grew 13%, its crucial Amazon Web Services (AWS) division grew at only 17.5%, half the rate of Microsoft's Azure. A major concern is that AWS's growth is not accelerating like its competitors, suggesting it's losing market share.
23:19 Critique of Amazon's CEO: The presenter heavily criticized CEO Andy Jassy's earnings call performance, calling his response to questions about AWS's lagging growth "weak." He believes this poor response was a direct cause of the stock's significant drop.
30:40 Amazon's Bright Spots & Reinvestment Strategy: Despite the AWS concerns, Amazon's advertising business was a major highlight, growing 23% and outpacing both Meta and Google. Unlike its peers, Amazon is not paying a dividend or buying back stock, instead reinvesting all available cash into massive capital expenditures to capture future growth.
36:14 The AI Power Bottleneck: A common theme across all three companies is that demand for AI and data center capacity is outstripping supply. The single biggest constraint identified is the availability of electrical power to run the data centers.