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Alphabet – missing on Cloud

Autor: Jarosław Jamka

Alphabet generally showed solid results in Q4, but slightly below expectations for total revenue (0.16% miss) – see Figure 1. But the most important thing was the miss on Google Cloud (a whopping 1.93%) – see Figure 2.

The main reason for lower revenue was supply constraints, which prevented Alphabet from meeting the high demand related to AI (negative in the short term, however positive in the long term).

Anat Ashkenazi, CFO:

“On the Cloud question, first, I’m excited that we ended the quarter at $12 billion and a 30% year-over-year growth. Very impressive growth. And as I’ve mentioned in the prepared remarks, GCP grew at a much higher rate than overall Cloud. Two items to think about from a deceleration perspective, the first is we are lapping a very strong quarter [in] AI deployments in Q4 2023. The second is the one you’ve alluded to. We do see and have been seeing very strong demand for our AI products in the fourth quarter of 2024. And we exited the year with more demand than we had available capacity.

So we are in a tight supply-demand situation, working very hard to bring more capacity online. As I mentioned, we’ve increased investment in CapEx in 2024, continuing to increase in 2025. And we’ll bring more capacity throughout the year”.

Alphabet spent $14 billion on CapEx in Q4 2024, but Capex will increase significantly in 2025.

Anat Ashkenazi, CFO:

“Ss we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking.

We expect to invest approximately $75 billion in CapEx in 2025, with approximately $16 billion to $18 billion of that in the first quarter.”

Finally, Sundar Pichai, CEO, commented on DeepSeek:

“A couple of things I would say are, if you look at the trajectory over the past three years, the proportion of the spend towards inference compared to training has been increasing, which is good, because obviously inference is to support businesses with good ROIC. And so I think that trend is good.

I think the reasoning models, if anything, accelerates that trend, because it’s obviously scaling upon inference dimension as well.

And so, look, I think part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases, because the cost of actually using it is going to keep coming down, which will make more use cases feasible, and that’s the opportunity space. It’s as big as it comes, and that’s why you’re seeing us invest to meet that moment.”

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Apple Intelligence – a game changer?

Autor: Jarosław Jamka

In general, Apple showed weak results for the calendar 4th quarter of 2024 (some say better than feared). The most disappointing were sales in China… where revenues fell 11% YoY.

Nevertheless, the next quarter may be a bit better… the company expects YoY revenue growth of “low to mid single digits” – and this is after deducting the effect of the strong dollar, which will take away as much as 2.5 points from the annual change in sales.

Kevan Parekh, CFO:

“The color we’re providing today assumes that the macroeconomic outlook doesn’t worsen from what we’re projecting today for the current quarter. As the dollar strengthens significantly, we expect foreign exchange to be a headwind and to have a negative impact on revenue of about 2.5 percentage points on a year-over-year basis. Despite that headwind, we expect our March quarter total company revenue to grow low to mid single digits year over year. We expect services revenue to grow low double digits year over year.”

Apple… on the negative side there is lack of revenue growth + problems in China, but on the positive side we have a strong brand, 2.35 billion of active devices (customer base) and the ability to offer this customer base AI services (Apple Intelligence).

Can Apple Intelligence trigger another sales upgrade wave of the latest iPhone models? At least that’s what investors are counting on.. and introducing Apple Intelligence to the market will take some time (e.g. preparing different language versions). In addition (or maybe it’s a good thing) Apple Intelligence is only available on the latest iPhones.. (iPhone 15 Pro or iPhone 16). The next release of Apple Intelligence iOS 18.4 will be in April. Additionally, DeepSeek breakthrough can help with AI adoption on phones.

Tim Cook:

“In October, we released the first set of Apple Intelligence features in U.S. (…) And we were excited to recently begin our international expansion with Apple Intelligence now available in Australia, Canada, New Zealand, South Africa, and the U.K. We’re working hard to take Apple Intelligence even further. In April, we’re bringing Apple Intelligence to more languages, including French, German, Italian, Portuguese, Spanish, Japanese, Korean, and simplified Chinese, as well as localized English to Singapore and India.

(…) we did see that the markets where we had rolled out Apple Intelligence that the year over year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available. In terms of the features that people are using, they’re using all of the ones that I’d referenced in my opening comments, from Writing Tools to Image Playground and Genmoji, to visual intelligence and more.”

Figure 1 shows TTM revenues and 3 growth waves… can Apple Intelligence cause a 4th wave? For a complete picture, Figure 2 shows quarterly revenues.

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Komentarz poranny 03.02.2025

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Microsoft disappointed – a little bit.

Autor: Jarosław Jamka

Although Microsoft once again beat expectations for total revenue ($69.63B vs EST. $68.92B – see Figure 1), yet the most important thing for the market was the growth in Azur cloud revenue – which once again disappointed a little.

In Q2/Dec 2025, Azure revenue grew only 31% (vs. expected 31.8%). Additionally, Microsoft’s guidance for Q3/Mar 2025 was olny 31.5% (mid point of 31-32% range) vs. the Street expectation of 33-34%. Previously, Microsoft had talked about accelerating Azure growth in 2H 2025FY – i.e. in 1H 2025CY. See Figure 2.

According to the company’s commentary, the lower than expected growth is related to sales execution. This disappointment caused the share price to fall by about 6% since the print.

Capex was $22.6B in Q2/Dec – see Figure 3. Microsoft expects a slower rate of Capex growth in 2026FY.

Amy Hood, CFO:

“We expect quarterly spend in Q3 and Q4 to remain at similar levels as our Q2 spend. In FY26, we expect to continue investing against strong demand signals including customer contracted backlog we need to deliver against across the entirety of our Microsoft Cloud. However, the growth rate will be lower than FY25 and the mix of spend will begin to shift back to short-lived assets which are more correlated to revenue growth.”

Interestingly, China’s DeepSeek is good news… as per Satya Nadella’s comment:

“I think DeepSeek has some real innovations. (…) now that all gets commoditized, and it’s going to get broadly used. And the big beneficiaries of any software cycle like that is the customers, because at the end of the day, if you think about it, what was the big lesson learned from client server to cloud? More people bought servers, except it was called cloud.

And so, when token prices fall, inference computing prices fall, that means people can consume more. And there will be more apps written. And it’s interesting to see that when I referenced these models that are pretty powerful, it’s unimaginable to think that here we are in the beginning of ‘25, where on the PC, you can run a model that required pretty massive cloud infrastructure. That type of optimizations means AI will be much more ubiquitous. And so, therefore, for a hyperscaler like us, a PC platform provider like us, this is all good news as far as I’m concerned.”

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Meta’s strong earnings!

Autor: Jarosław Jamka

Meta showed strong Q4 2024 results – with Q4 revenue of $48.4B beating the Street by 3.2% – see Figure 1. It was also above Meta’s previous quarter guidance ($45-48B) – see Figure 2. Nevertheless, the company’s Q1 guidance was below market expectations (mid-range of only $40.65B vs. Street expectations of $41.7B).

Meta is an example of rapid adoption of AI tools (Meta AI)… currently there are around 500m MAU (monthly active users) of Meta AI, but there is also a strong growth from the advertisers side:

Susan Li, CFO:

“Advantage+ creative is another area where we’re seeing momentum. More than 4 million advertisers are now using at least one of our generative AI ad creative tools, up from one million six months ago.”

But within the company’s business model, AI solutions will be monetized only once a large scale is built.

China’s DeepSeek doesn’t seem to be a problem for the company either, quite the opposite:

Mark Zuckerberg:

“I can start on the DeepSeek question. I think there’s a number of novel things that they did that I think we’re still digesting. And there are a number of things that they have advances that we will hope to implement in our systems. And that’s part of the nature of how this works, whether it’s a Chinese competitor or not. (…) And that’s sort of how the technology industry goes. I don’t know — it’s probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and CapEx and things like that. There are a bunch of trends that are happening here all at once. There’s already sort of a debate around how much of the compute infrastructure that we’re using is going to go towards pretraining versus as you get more of these reasoning time models or reasoning models where you get more of the intelligence by putting more of the compute into inference, whether just it will mix shift how we use our compute infrastructure towards that.”

After the DeepSeek events … Meta does not intend to reduce capital expenditures. CAPEX in 2025 will remain at the previously (before the DeepSeek revelations) announced level of $60-65B – a significant increase from 2024 – see Figure 3 and 4.

More from Mark Zuckerberg on CAPEX and DeepSeek:

“The field continues to move quickly. There’s a lot to learn from releases from basically everyone who does something interesting, not just the ones over the last month.

We’ll continue to kind of incorporate that into what we do as well as making novel contributions to the field ourselves. And I continue to think that investing very heavily in CapEx and infra is going to be a strategic advantage over time.

It’s possible that we’ll learn otherwise at some point, but I just think it’s way too early to call that. And at this point, I would bet that the ability to build out that kind of infrastructure is going to be a major advantage for both the quality of the service and being able to serve the scale that we want to”.

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Tesla – a self-driving wolf?

Autor: Jarosław Jamka

Elon Musk on the earnings call: “I know people have said, „Well, Elon, the boy who cried like a wolf like several times.” But I’m telling you, there’s a damn wolf this time and you can drive it. In fact, it could drive you. It’s a self-driving wolf”.

Analysts have a problem with Tesla’s valuation, which is so high that Tesla cannot be classified as a car manufacturer.. but it is easier to classify it as an AI company… or you can also compare Tesla to Bitcoin.. and Tesla has delivered a higher rate of return than Bitcoin counting from Trump’s election victory – see Figure 1.

Besides, Tesla is also investing in Bitcoin.. and it had a significant impact on the Q4 earnings… Vaibhav Taneja, CFO: “the net income in Q4 was impacted by a $600 million mark-to-market benefit from Bitcoin due to the adoption of a new accounting standard for digital assets”.

The company’s Q4 2024 results were weak, but investors value optimistic prospects more, especially when Elon himself talks about them, and they concern FSD and the humanoid Optimus …

Elon Musk: „I see a path of Tesla being the most valuable company in the world by far. (…) there is a path where Tesla is worth more than the next top five companies combined. (…) And that is overwhelmingly due to autonomous vehicles and autonomous humanoid robots. (…) Optimus has the potential to be north of $10 trillion in revenue.”

Positives for Tesla in 2025:

1) Robotaxi service to start in Austin in June 2025,

2) Low-cost model to start production in H1 2025,

3) Energy storage deployments to grow at least 50% in 2025 – see Figure 2.

But there is a whole list of risks:

1) Risk of low growth in total deliveries (previously Elon spoke of a 20-30% increase in 2025, and now only about a „return to growth” in 2025) – see Figure 3,

2) Further decline in margins (Figure 4), and lower sales prices,

3) Possible withdrawal of US subsidies for EVs (JPM estimates that this could even result in a loss of around 40% of 2024 Tesla profits),

4) and anything that could negatively affect investor sentiment as Tesla’s valuation is really high..