💸 Google Announces A Dividend

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Happy Friday!

The weekend is finally here following a hectic week with a lot of the big names in the S&P 500 reporting earnings.

I hope you all get some much needed rest, but before then, let me catch you up to speed on everything that has happened over the last 2 days.

For those of you looking for fast updates, interesting data, and much more, definitely follow me on X!

Some key data bites from this week that you should know: 

• U.S. GDP grew by 1.6%, slower than expected.

• Chipotle’s $CMG Q1 revenue jumped 14.1% to $2.7B.

• Boeing’s $BA commercial airplane revenue fell 30% in Q1.

• Biden has proposed the highest ever federal capital gains tax at 44.6%.

• Huawei saw Q1 phone sales in China jump 70%.

• TiKTok has spent $7M on lobbying and ads to stall a ban.

• Spotify’s $SPOT monthly active users jumped 19% YoY to 615M.

• SoftBank to invest roughly $1B to strengthen its computing facilities.

• Nvidia $NVDA will acquire AI startup Run:ai for $700M.

• Snap $SNAP revenue increased 21% YoY to $1.2B.

In today’s newsletter:

• 📲 Meta Plunges After Earnings

• ☁️ Microsoft Cloud Growth Continues

• 🔎 Alphabet Announces A Dividend

Let’s dive right in!

We’ve seen this play out before.

A company beating earnings estimates but plunging after hours.

Meta reported Q1 FY24 earnings on Wednesday and here’s the key figures:

• Earnings: $4.71 (+114% YoY, vs. $4.32 Est. from LSEG)

• Revenue: $36.46B (+27% YoY, vs. $36.16B Est. from LSEG)

• Family Daily Active People: 3.24B (+7% YoY)

• Cash & Cash Equivalents: $58.12B

• Free Cash Flow: $12.53B

• Headcount: 69,329 (-10% YoY)

Meta experienced re-accelerated growth across all of its key metrics, yet the stock tanked 15% after hours.

Here are three main reasons for the decline:

1. Q2 Revenue Outlook: Meta projects revenues between $36.5B and $39B. The midpoint of this range, $37.75B, fell short of analyst expectations of $38.3B.

2. Increase in Capital Expenditures: The forecast for full-year 2024 capital expenditures has risen from the previously estimated $30B - $37B to now $35B - $40B. This increase reflects Meta's accelerated investments in AI research and product development.

3. Legal and Regulatory Challenges: Meta issued a warning about growing legal and regulatory pressures in the EU and U.S., which could significantly impact the company's operations.

These factors, coupled with Meta’s substantial +100% increase over the past year, led to a sharp sell-off as some investors likely decided to take profits.

The cloud is continuing to grow.

Microsoft shares increased by roughly 4% following the release of its Q3 FY24 earnings report.

Here’s a rundown of the key figures:

• Earnings: $2.94 (vs. $2.82 Est. from LSEG)

• Revenue: $61.86B (+17% YoY, vs. $60.80B Est. from LSEG)

• Cloud Revenue: $35.1B (+23% YoY)

Other interesting metrics: Linkedin revenue increased 10%, search and news advertising revenue (excluding TAC) jumped 12%, and GitHub Copilot now has 1.8M paid subscribers.

CEO Satya Nadella emphasized that Microsoft Copilot is enhancing business outcomes across various roles and industries.

During the earnings call, CFO Amy Hood highlighted the surging demand for AI, noting that current AI demand slightly exceeds available capacity.

As a result, the company plans to increase its AI investments, anticipating higher cash flow expenditures next year to support this growth.

Looking forward, Hood projects next quarter's revenue at $64B, slightly below the analyst expectation of $64.5B.

However, the projected operating margin of 42.3% exceeded the analyst forecast of 41.5%.

Dividend investors are going to love this.

Alphabet’s board approved of its first ever cash dividend of $0.20 per share during its Q1 FY24 earnings release.

On top of this, the company authorized an additional share repurchase of up to $70B.

Here are other key figures:

• Earnings: $1.89 (vs. $1.51 Est. from LSEG)

• Revenue: $80.54B (vs. $78.59B Est. from LSEG)

• YouTube Ad Revenue: $8.09B (vs. $7.72B Est. from StreetAccount)

• Cloud Revenue: $9.57B (vs. $9.35B Est. from StreetAccount)

Overall, the quarter was marked by strong growth across most of its segments.

The company's operating margins widened from 25% to 32% YoY, and headcount was reduced by 5% to 180,895.

Google Cloud's operating income saw a significant leap, jumping from $191M to $900M—a 371% increase YoY.

With total cash, cash equivalents, and marketable securities at $108B, Alphabet's financial health remains robust.

Following these results, the stock, already up 13% for the year, surged an additional 11% after hours.

📚 Recommended Reading

Austin Hankwitz's newsletter Rate of Return shares the internet's best summary of what moved the markets last week, as well as what to keep an eye on this week. Their author is also publicly building a $2M Dividend Growth Portfolio from scratch. 

Twice-weekly market updates, in-depth stock analysis, as well as access to a growing investment portfolio. 

Join 13,000+ other readers for free by dropping your email here.

Notable Companies Reporting Earnings Next Week:

• Monday (4/29):

  • NXP Semiconductors $NXPI, Welltower $WELL, ON Semi $ON, MicroStrategy $MSTR, Domino’s Pizza $DPZ, SoFi $SOFI

• Tuesday (4/30):

  • Amazon $AMZN, Eli Lilly $LLY, Coca-Cola $KO, AMD $AMD, McDonald’s $MCD, Stryker $SYK, Starbucks $SBUX, PayPal $PYPL, MMM $MMM, Super Micro $SMCI, Pinterest $PINS

• Wednesday (5/1):

  • Mastercard $MA, Qualcomm $QCOM, Pfizer $PFE, ADP $ADP, CVS Health $CVS, DoorDash $DASH, Kraft Heinz $KHC

• Thursday (5/2):

  • Apple $AAPL, Novo Nordisk $NVO, Linde $LIN, Coinbase $COIN, Block $SQ, DraftKings $DKNG

• Friday (5/3):

  • Hershey $HSY, XPO $XPO

All of the companies that are reporting earnings next week can be viewed here.

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Buys

• Michael McCaul (R)

  • Company: JPMorgan Chase & Co ($JPM)

    • Amount Purchased: $2M - $4M

  • Company: Meta Platforms ($META)

    • Amount Purchased: $495K - $1.15M

  • Company: Arista Networks ($ANET)

    • Amount Purchased: $150K - $350K

• Jonathan Jackson (D)

  • Company: Applied Materials (D)

    • Amount Purchased: $50K - $100K

Sells

• Michael McCaul (R)

  • Company: JPMorgan Chase & Co ($JPM)

    • Amount Sold: $2M - $4M

  • Company: Alphabet ($GOOG)

    • Amount Sold: $700K - $1.5M

  • Company: Microsoft ($MSFT)

    • Amount Sold: $500K - $1M

  • Company: Meta Platforms ($META)

    • Amount Sold: $500K - $1M

  • Company: Amazon ($AMZN)

    • Amount Sold: $500K - $1M

• Ted Cruz (R)

  • Company: Goldman Sachs (R)

    • Amount Sold: $250K - $500K

🤝 Review of the Week