NASDAQ Q4: The Season's Biggest Winners and Losers
The NASDAQ earnings season unfolded against a backdrop of a market downturn, with the NASDAQ-100 index falling by 2.68%. The results were marked by a clear divide: tech giants capitalizing on the artificial intelligence boom stood in contrast to companies held back by weak forward guidance. Many strong results were met with stock sell-offs, signaling high investor expectations and nervousness.
Results: Revenue grew by 73.2% year-over-year, and operating profit by 83.6%. The company once again surpassed analyst expectations.
Reasons: Growth continued to be driven by seemingly unstoppable demand for artificial intelligence (AI) chips in the data center segment.
Market Reaction: The stock fell 5.5% on the day of the results due to profit-taking. The decline has since deepened, with the stock down a total of 7.9% since the announcement.
Results: Operating profit grew by an impressive 101.1%, and revenue also exceeded expectations.
Reasons: The strong performance was backed by high demand for chips in both the data center and gaming segments.
Market Reaction: Despite a strong quarter, weaker-than-expected forward guidance caused a sharp 17.3% drop in the stock. The selling pressure has continued, and the decline has deepened to 21.1%.
Results: Revenue fell by 3.7%, but operating profit grew by 40.8% due to cost-cutting, not business growth.
Reasons: Sales were hampered by weakness in the client computing segment. The weak forward guidance was a major disappointment for investors.
Market Reaction: The stock plummeted 17.0% on the day of the results and has remained at a low level, down a total of 20.7% since the announcement.
Results: Operating profit grew steadily by 20.9%, beating analyst expectations.
Reasons: The growth engine remained the Intelligent Cloud business segment, driven by high demand for Azure cloud services.
Market Reaction: Despite strong results, the stock fell 10.0% as investors worried about the costliness of massive investments in artificial intelligence. The decline has since deepened to 15.9%.
Results: Operating profit growth accelerated to 16.0%, supported by a strong advertising and cloud business.
Reasons: Growth was driven by revenue from Google's search services and especially its fast-growing cloud services.
Market Reaction: The initial reaction was modest (-0.6%), but the stock has fallen a total of 8.9% since the announcement. Similar to Microsoft, investors were concerned about the huge expenses related to AI development.
Results: Operating profit grew explosively by 132.0%, showing strong growth acceleration.
Reasons: The main driver of growth was revenue from cloud-based subscription services, which grew by 15.7% year-over-year.
Market Reaction: Despite management's warning about slowing growth, the market received the results well. The stock initially rose 2.2% and has since climbed a total of 10.3%.
Results: The company turned from a loss to a small profit, exceeding analyst expectations.
Reasons: The positive turnaround was driven by strong 29.2% growth in sales revenue for the company's Atlas cloud service.
Market Reaction: The strong results were completely overshadowed by disastrously weak forward guidance and the announcement of two top executives' departure. The stock plummeted 22.2% on the day of the results.
Results: The operating loss narrowed by 17.0%, and revenue grew by an expected 23.3%.
Reasons: The result was supported by robust growth in cloud services revenue, which helped reduce the loss.
Market Reaction: Investors focused on the disappointing growth forecast for the cloud business. The stock initially fell 3.7% and has since dropped a total of 20.4%.
Results: The company reported an astronomical operating loss of $17.4 billion.
Reasons: The loss was caused by a new accounting rule that required the company to recognize the decline in value of its massive Bitcoin holdings on its balance sheet.
Market Reaction: Ignoring the accounting loss, the stock surged 26.1%. As the market views the company as a proxy for Bitcoin, the stock followed the cryptocurrency's price. The rally has held, with the stock up a total of 24.0%.
Results: Revenue grew robustly by 44.6%, but operating profit growth slowed sharply to just 8.4%.
Reasons: Profitability was hampered by large investments in marketing and increased provisions for loan losses related to the growing loan portfolio.
Market Reaction: Investors reacted negatively to the profitability concerns, sending the stock down 8.1%. The decline has since deepened to 10.8%.
Results: Revenue grew by an impressive 38.4%, but at the same time, the operating loss also widened.
Reasons: Demand for security technology was strong, but operating expenses grew even faster than revenue, leading to an increased loss.
Market Reaction: The market focused entirely on the strong growth and ignored the loss. The stock jumped 17.6% on the day of the results and has continued to rally, rising a total of 30.9%.
Results: The company swung from a loss last year to a profit of $1.08 billion.
Reasons: The result was deceptive. The profit was due to the absence of last year's massive asset impairment charge. The company's actual sales fell by 3.4%.
Market Reaction: The market saw through the apparent profit. The stock fell 2.7% on the day of the results and has remained consistently low, down a total of 3.1%.
Results: Revenue grew by 12.0%, but operating profit fell sharply by 37.4%.
Reasons: Profitability was undermined by rapidly increasing costs, especially sales and marketing expenses, which grew significantly faster than revenue.
Market Reaction: Despite the drop in profit, the market reacted positively, likely focusing on booking trends. The stock rose 4.6% and has since climbed a total of 14.7%.
Results: The decline in operating profit halted, remaining nearly flat compared to the previous year (-0.4%).
Reasons: Strong sales revenue growth of 29.2% helped to almost completely offset the increase in operating expenses, which stabilized profitability.
Market Reaction: The stock fell 1.8% on the day of the results and has continued to decline, down a total of 13.8%. Investors were likely disappointed by the company's modest forward guidance.
Conclusion
The season was characterized by three main themes. First, the artificial intelligence (AI) narrative dominated the market, creating a clear divide. NVIDIA continued its extraordinary growth, while even strong players like AMD, Microsoft, and Google faced investor concerns over high expectations and the costs of massive AI investments. Second, forward guidance proved to be more important than past quarterly results. Several companies, such as AMD and MongoDB, reported strong numbers, but their stocks fell sharply due to weak outlooks. Third, profitability was under intense scrutiny. Companies with robust revenue growth but deepening losses, like MercadoLibre and Airbnb, received mixed reactions, indicating that investors are carefully weighing the price of growth. Overall, it was a nervous season where even strong results did not guarantee a positive reaction, reflecting market uncertainty and high expectations.
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