🌩️ Google Cloud Breaks Records

MARKET UPDATE

Good Morning Investor! The two major indices, the Nasdaq and S&P 500, took a nosedive, dropping 3.29% and 2.18% respectively. This financial free-fall came in the wake of Alphabet, Visa, and Tesla's earnings releases. Shares of tech titans Nvidia, Tesla, Alphabet, Amazon, and Microsoft all took a tumble, performing a synchronized belly flop, concluding what can only be described as the worst trading day of the year.

TODAY’S BIG HEADLINES

Google Cloud Reignites Growth

Tesla’s Earnings Collapse Sending its Shares Down

Spotify, the Sensational Turnaround

MEGA CAPS

Google Cloud Reignites Growth🌩️

Death, Taxes and Google Profits Rising: Despite cloud-security startup Wiz giving Google ($GOOG) the cold shoulder over its proposed $23 billion acquisition, Google managed to wow investors this week. They reported a beat on both the top and bottom line on Tuesday in after-hours trading, proving once again that Google's ability to make money is about as reliable as a politician's ability to avoid straight answers.

Bullseye in Silicon Valley: The tech giants reported strong earnings across all of its various business segments including YouTube, Search, Subscriptions, Android, and Google Cloud. Here’s the rundown:

• The tech behemoth reported $84.74 billion in revenue for the quarter, up 14% year-over-year, and above analyst expectations of $84.37 billion. It's as if they found loose change in the couch cushions of the internet and it amounted to billions.

• Earnings per share (EPS) came in at $1.89, beating the forecast of $1.84 and surpassing last year's $1.44 per share, which represents 31.25% growth year-over-year.

• Looking at individual segments, Google's ad business totaled $64.62 billion, slightly ahead of the expected $64.53 billion, up an impressive 11.2% year-over-year. Notably, YouTube ads rose 13% year over year to $8.6 billion, proving that cat videos are indeed the backbone of the internet economy.

• The division including subscriptions, platforms, and devices made $9.3 billion. Additionally, the “Other Bets” category, which includes various experimental ventures, reported revenues of $365 million, up from $285 million a year ago.

Cloud is Eating the World: The company's main focus right now was the real standout of this report, that being Google Cloud. Cloud saw revenues rising 28.8% year-over-year to $10.35 billion, exceeding expectations of $10.09 billion. This is a continuation of the reacceleration trend we are seeing across the crowd sector, indicating that we could see a similar trend in both Microsoft & Amazon’s earnings later this month.

When AI Meets Q&A: Despite a rocky launch of Google's LLM that was about as smooth as a teenager's first attempt at parallel parking, CEO Sundar Pichai says AI Overviews have led to "increases in Search usage and increased user satisfaction with the results." Google's search business has continued to grow in spite of all the fear surrounding AI replacing search, with the Search business alone raking in $48.5 billion for the quarter, up 13.8% year-over-year. It seems people still prefer to ask Google rather than ChatGPT - perhaps because Google doesn't talk back.

Coming Soon to a Pocket Near You: Looking ahead, Google will likely see another big boost in business following its earlier-than-usual hardware event coming in August, where it's going to launch the already-revealed Pixel 9 and Pixel 9 Pro Fold. It's like Christmas for tech geeks, but instead of Santa, it's Sundar Pichai sliding down the chimney with shiny new gadgets.

MEGA CAPS

Tesla’s Earnings Collapse Sending its Shares Down🔥

Battery-Powered Dumpster Fire: Despite Tesla's ($TSLA) stock riding high on a wave of optimism since its late April slump, the company's earnings report came in like a wet blanket at an electric campfire, sending shares plummeting faster than a lead-footed driver in a Cybertruck, down over 11% yesterday.

The Tesla Halving: CEO Elon Musk, master of understatement, chalked up the second quarter's turbulence to a "minor hangover" from rivals' discounting practices. He insists these challenges are 'fairly short-term’. These discounting shenanigans have squeezed Tesla's margins tighter than Elon's spacesuit, with the company's profits dropping by almost half.

• The automaker reported revenue of $25.5 billion in the latest quarter, slightly ahead of expectations and up 2% year-over-year. Talk about setting the bar lower than a snake's belly!

• The real shocker, however, is that profits dropped 45% year-over-year, down to $1.48 billion. Looks like Tesla's bottom line is experiencing some serious shrinkage.

Distraction Masterclass: In a performance worthy of a Vegas magician, Musk pulled out every trick in the book to divert attention from this quarter's results. He teased the next-generation Roadster sports car, robotaxis, and "genuinely useful" humanoid robots. Musk even went so far as to declare he'd be "shocked" if Tesla doesn't introduce "unsupervised" self-driving software by 2025. One might say he's driving blind with that prediction, but then again, so would the cars.

STREAMING & MEDIA

Spotify, the Sensational Turnaround 🎷

Monopoly in the Making: For the longest time, streaming giant Spotify ($SPOT) has been living in Netflix's ($NFLX) shadow, like a struggling musician opening for a rock star. This was largely due to its lack of growth in profits and cash flows. However, this year, the company has started changing this dynamic and its shares have been rewarded more handsomely than a lottery winner on payday. After its recent 12% jump following Tuesday's earnings report, the stock is now up a whopping 75% year-to-date, making other tech stocks look like they're still playing with cassette tapes.

Chart-Topping Performance: The culprit behind this meteoric rise? Spotify smashed forecasts by adding seven million new Premium subscribers in the quarter, one million more than previously anticipated. There are now 246 million Premium listeners on the platform, on top of the 393 million MAUs in the ad-supported tier. That's more listeners than there are bad cover versions of "Wonderwall." Here's the rundown of the earnings, which hit all the right notes:

• The audio-streaming king reported total revenue for the quarter of €3.81 billion, up 20% year-over-year.

• Fueled by cost-cutting measures including mass layoffs (because nothing says "we care" like showing people the door), the company reported a record net profit of €274 million, versus a net loss of -€302 million in the year-earlier period.

• The increased operational efficiency drove a 16% decline in operating costs. Gross margin for the period was 29.2% (ahead of guidance), compared with 24.1% in the year-earlier period.

A Growing Audience: On the ad-supported tier of Spotify's plans, ad-supported revenue grew 13%, reflecting double-digit growth across all regions. This growth was largely thanks to several price increases implemented by the company, proving that people will pay more for the privilege of skipping ads every 15 minutes. The company's total userbase now sits at 626 million total monthly active users, a sequential gain of 11 million (short of its 16 million projection, but hey, who's counting?).

MORE NEWS

Additional market-moving events🌎

Meta’s Free AI: On Tuesday, Meta debuted the latest version of Llama, the ‘world’s largest' AI large-language model (LLM), and it’s open-source. (TheRegister)

GM Cancels its Robotaxis: General Motors shares tumbled more than 6% Tuesday after the company said its struggling driverless taxi division, Cruise, will suspend production of the Origin robotaxi. (The Verge)

Foldable Iphones Coming: Iphone maker Apple is looking likely to release a foldable iPhone as early as 2026. (Reuters)

Chipmakers' China Surge: Due in part to tighter US export controls, the share of Chinese revenue for major chip equipment makers, including Lam Research ($LRCX), ASML ($ASML), KLA Corp ($KLAC), and Applied Materials ($AMAT), more than doubled from 17% to 41% by Q1 2024. (CNBC)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection.

Here’s how the stocks have performed since:

• Hims & Hers Health: $22.60 (📈+56.19%)

• PayPal: $58.26 (📉-3.88%)

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