Tech giants report a mixed bag

Tech giants, Amazon and Alphabet Inc, parent of Google both reported after the bell on Thursday with varying degrees of success.

Alphabet beats on earnings

Alphabet defied expectation and posted a 20% rise in revenue as it dominates the mobile ad market and although shares in after-hours trading jumped 2%, they soon settled to trade up just 0.5%.

Amazon, on the other hand, painted a much more volatile picture.

Amazon share price tanks as earnings miss

Amazon saw its share price tank in after-hours trading after reporting a miss on profits and a disappointing guidance for the holiday season quarter. After initially falling over 7% the stock regained some ground, however investors are clearly nervous.

6 straight profitable quarters and 70% rally since February

Net income rose to $252 million, from $79 million a year earlier in the firm’s sixth straight profitable quarter. However, the online retailer posted earnings per share of $0.52 versus an expectation of $0.78, representing a two- thirds miss. Going in to the release this stock has been priced on perfection, it has rallied around 70% since February. Expectations were high, especially given that the last two quarters had been very strong, so this disappointment in the figures could naturally bring if down some percentage points towards $750, away from its all-time high which was reached as recently as October 5th.

Rising expenses whilst in serious investment mode

On closer examination, the central problem at Amazon seems to be rising expenses. Third quarter sales of $32.7 billion, were almost completely eradicated by total operating expenses of $32.1 billion, an increase of 29% from the year previous, with shipping costs alone increasing 43% to $3.9 billion.

The CEO was quick to remind us that the company is in serious investment mode and this does seem to be paying off. Just one example is Amazon Web Services, the cloud computing division, which was up 55% with an operating margin of 27%. Amazon has created a name for itself in the past for heavy spending and losses, yet with AWS Amazon seems to have now found consistent profit from selling storage and services in the cloud.

Going forward Amazon forecasts net sales of $42.0 billion – $45.5billion for the fourth quarter, a range that is disappointing given that it includes the all-important holiday shopping season.