The Rundown - Microsoft Sales Fueled by AI, Snap Soars as Ad Demand Returns

Episode Date: April 26, 2024

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Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Friday, April 26th. In today's episode, we dive into the latest GDP report and tell you why the U.S. economy grew at its slowest pace in two years. Also, Google and Microsoft reported earnings last night, and they crushed it. We'll get into it. Then stick around to the end of the show to find out how much money the first overall pick in last night's NFL draft is expected to make on his first contract.

All right, let's go. Well, stocks were down on Thursday after some not-so-great economic data. The Dow, S&P, NASDAQ, all fell, likely reacting to the GDP report. According to the GDP report that came out on Thursday morning, the U.S. economy only grew by 1.6% in Q1, which was much less than the 2.2% that was expected. In fact, it's the slowest economic growth in two years. This report was kind of a shocker, especially when you compared to last quarter. In Q4, the GDP grew by 3.4%. So going from 3.4 down to 1.6 is a pretty significant drop.

Now, when you dive into the numbers, the big reason for the drop was a pullback in consumer spending. Consumer spending only grew by 2.5%, which was much less than what was expected. Also, the U.S. had wider trade deficits in Q1, meaning the U.S. imported more than they exported. And then to make matters worse, the inflation data in this report wasn't great either. PCE inflation in Q1 was 3.4%. That's nearly double the 1.8% that it was in Q4. So growth is slowing down and inflation is picking up. Not a great combo. And I wonder what this means for the Federal Reserve.

Like, what are they going to do with interest rates? Now, the good news is we don't have to wait too long to get their thoughts because the Federal Reserve is meeting next week. And we're going to get a press conference from Jerome Powell on Wednesday. Make sure you guys tune in next week because we'll be recapping Jerome Powell's comments on the rundown. Let's run through some headlines. There was a ton of action after the bell yesterday. Let's start with Google's earnings. Google reported strong earnings last night, pushing the stock up more than 12%.

So let's go through some of the numbers. Google's revenues were up 15% to $81 billion. Their profits were up 57% to $23.6 billion. Both those numbers were better than what Wall Street was expecting. Google also saw a huge jump in their YouTube and Cloud Division. YouTube's revenue jumped 21% to $8.1 billion. And Google Cloud was up 28% to $9.6 billion. Both those numbers also beat Wall Street estimates.

And the cherry on top, Google announced they're going to be paying dividends for the first time in the company's history. They're going to pay 20 cents per share on June 17th and intend to pay quarterly dividend in the future. Oh, and they also announced $70 billion in share buybacks. So overall, huge quarter for Google. Their business is growing. Their profits are growing. YouTube and Cloud are growing. going to start paying a dividend too. No wonder investors were hyped. Google stock is up more than

12% at the time of this recording and Google's market cap is now above $2 trillion for the first time in their history, making it the fourth U.S. company to be in the $2 trillion club, joining Microsoft, Apple, and Nvidia. So a huge day for Google and their investors. Let's talk more about Microsoft, the biggest company in the world with a market cap of over $3 trillion. They reported their Q1 earnings and also beat estimates. Microsoft revenues were up 17% to 16%. $22 billion and profits were up 20% to $21.9 billion. Both those numbers beat Wall Street estimates. Microsoft has been investing a lot of money in AI over the last couple of years,

and investors were hoping to see some returns on all that AI investment. And Microsoft delivered. Microsoft's Azure Cloud Division grew by 31%. And 7% of that growth was because of AI services, like Microsoft's co-pilot. In fact, Microsoft's CFO, Amy Hood, said the demand for AI is actually higher than their capacity. and she said the company will continue to increase their spending on AI. But unlike with META, would say the same thing earlier this week when they reported their earnings and saw their stock drop more than 10% because of it, Microsoft investors don't seem to have a problem with Microsoft increasing their AI spending.

Probably because Microsoft is already starting to see a return on their AI investments today. As a result, Microsoft stock is up more than 4% after their earnings. So last night, it was a pretty good day for big tech earnings. Let's talk about some more stocks making moves today. Starting with SNAP. Shares and Snap are up more than 25% this morning after they reported their Q1 earnings last night and beating expectations for revenue and user growth. Snap's revenues were up 21% versus a year ago, which Snap said was driven by upgrades

it made to their advertising system. And the additional demand for its ad platform are expected to roll forward into the second quarter because Snap delivered revenue guidance that was above analyst expectations. Snap's daily active users jumped 10% to 422 million. I mean, that's pretty impressive. 422 million people using Snapchat every day. So a great quarter for Snap and a rare dub for Snap investors. I feel like Snap stock is either up big or down big every time they report earnings.

Never, never in between. It's pretty volatile stock on earnings day. Stock not doing so good this morning is Intel. Shears and Intel are down more than 10% after reporting a weak forecast for their second quarter. Intel says the demand for PC chips are being pulled down by enterprises, which are now shifting their spending towards AI. chips made by their rivals like Nvidia. Intel's had a pretty tough year. Their stock is out more than 30% for the year, but they say they're in the middle of a turnaround plan. Intel's plan is to invest $100 billion to build and expand their factories. And earlier this year, they unveiled a new

AI chip. But, you know, there's a lot more work that Intel needs to do to convince investors that it can thrive in this new era of chip making. Because right now, it's behind their competitors like Nvidia and AMD. All right, let's wrap the show with a fun fact. Today's fun fact is about the NFL draft. The NFL draft started last night and the Chicago Bears selected USC quarterback Caleb Williams as the first overall pick. And for being the first overall pick, Caleb is going to sign a four-year $38.5 million contract with the Chicago Bears. And he's going to get $24.8 million of that upfront as a signing bonus. So not bad for a first job after college. Congratulations to Caleb Williams and hopefully the Chicago Bears have their future quarterback. All right, guys,

that's the rundown for today. What an action pack week it was. Hope you guys enjoy the episodes this week. If you did, please consider giving us a five-star rating on Spotify and Apple Podcasts. Next week's going to be a big one, too. We're going to get earnings from Apple, Amazon, and we got the Fed meeting next week as well. So make sure you guys tune in and stay in the loop. Thank you guys so much for listening. Have a great weekend.

We'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in this show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Run down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries.

You should make your own financial and investment decisions or consult. Respective professionals. Learn more at public.com disclosures. In partnership with Zayid Mani, brokerage services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated,

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