The tech boom

Alphabet has reported better-than-expected earnings beating out predictions on share per price and earnings. Tech giant Amazon has also reported a considerable increase in sales.

Google’s parent company reportedly earned $27.2 billion for the three-month period ending in September. This is more than $5 billion that it made a year earlier for the same period. Additionally, Microsoft and Intel have also posted a rise in their revenue and sales.

Background

Alphabet Inc. is an American multinational conglomerate created in a corporate restructuring of Google on October 2, 2015. It is the parent company of Google and several former Google subsidiaries. It has over 75,606 employees as of 2017. Google was founded in 1998 by Larry Page and Sergey Brin while they were Ph.D. students at Stanford University

Amazon is an American electronic commerce and cloud computing company that was founded on July 5, 1994. It started as an online bookstore and later diversified to sell various commodities like electrical appliances and apparel. Today, it also produces consumer electronics like the Kindle e-Readers, tablets and more. It’s market value had exceeded $500 billion by July 2017.

Alphabet declared that it made $3.5 billion in net income and saw sales of $26 billion in the second quarter of 2017. The profit would have been larger had it not been for the fine levied on the company by the European Union this year. The year-on-year profits also fell by almost 30%. Details of its earnings in the previous quarter can be found here.

Amazon posted earnings for the second quarter of 2017 that fell dramatically short of investor expectations, even as the ecommerce giant boosted revenue 25%. Net sales roles to $38.0 billion in the second quarter.

Analysis

Alphabet has reported better-than-expected earnings beating out predictions on share per rice and earnings. Tech giant Amazon has also reported a considerable increase in sales. Google’s parent company reportedly earned $27.2 billion for the three-month period ending in September. This is more than $5 billion that it made a year earlier for the same period.

Alphabet’s Chief Financial Officer, Ruth Porat, said the firm was happy with the way it was performing. "We had a terrific quarter, with revenues up 24% year on year, reflecting strength across Google and Other Bets. Our momentum is a result of investments over many years in fantastic people, products and partnerships."

In case of Amazon, the tech giant reported $43.7 billion in earnings. This beat market expectations considerably as investors projected earnings of $42.1 billion. The Amazon sales leaped by 34 percent over the previous quarter.

Despite Amazon's sales growth, the firm's profits were nearly flat. This is because as it ploughed money into tech gadgets, streaming video, data centres and warehouses to support its growing empire. The firm said profits in the three months to the end of September were $256m, up from $252m in 2016. Chief executive Jeff Bezos said the Amazon sales increase was in part down to the growing demand for the firm's smart home products. He said, “In the last month alone, we've launched five new Alexa-enabled devices, introduced Alexa in India, announced integration with BMW, surpassed 25,000 skills, integrated Alexa with Sonos speakers, taught Alexa to distinguish between two voices, and more.”

Another tech giant with a strong imprint in Cloud technology, Microsoft has also reported a surge in its earnings. It $24.5bn in the three months to end-September. This is a year-on-year increase of 12%.

All three of these companies are major players in cloud computing. Amazon Web Services is on track to earn a revenue of $18 billion in 2017. Microsoft’s Azure is building momentum and Alphabet has heavily invested in Google Cloud and is trying to keep up with the other two companies in this sector.

The higher than expected earnings reported by these companies resulted in the value of their stocks rising. Amazon’s The stock soared more than 7 percent after hours and Shares in Alphabet jumped above $1,000. Microsoft’s shares rose by 3.1% hours after it reported its earnings.

A fourth tech company which has also posted a rise in its profits is Intel. The company is the world’s largest chip maker. Its revenue rose by 2% during this quarter.

Assessment

Our assessment is that in 2017 tech companies like Apple, Google, and Amazon continue to beat investor expectations with considerable increase in sales and revenues. This has also resulted in a robust and bullish stock market. We believe that the healthy performance of Google, Amazon and Microsoft will be a boost for cloud computing.