💸 Google Becomes a Dividend Stock and Passes $2T!

Plus, Tesla jumps 16% despite worst revenue decline since 2012...

📈 Alphabet Passes $2 Trillion Market Cap & Announces First-Ever Dividend

📈 Alphabet soared 10% on Friday to an over $2T market cap after reporting a strong quarter on both revenue and earnings, sparking a bounce back in the tech sector.

The giant also delighted investors with the announcement of its first-ever dividend, following in the footsteps of Meta three months ago.

Let’s dive in…

📊 A Strong First Quarter for Google

First off, the quarterly results.

With a 15% increase in quarterly revenue and 24% higher earnings per share than expected, investors had a lot to be smiling about:

  •  Revenue: $67.59 billion vs. $66.07 billion expected

  •  Earnings per share: $1.89 adjusted vs. $1.53 expected

Looking at the breakdown across Google’s business lines, the clear standout was Google Cloud - with a 28% revenue increase.

While search continues to be Alphabet’s largest revenue driver, accounting for 57% of revenue, the Cloud business benefits heavily from AI.

☁️ Will Someone Please Tell me What the Cloud Is?

As a refresher for the non-techies, the ‘cloud’ essentially powers every app/website on the internet (including Blossom, which runs on Amazon’s AWS cloud). It provides on-demand data storage, computing power, and more. It also makes up some of the highest-margin business lines for many of the tech giants, including Microsoft (Azure), Amazon (AWS), and Google.

AI has given these companies a major chance to differentiate their cloud offerings, as the companies can build compelling cloud-based AI services to attract customers. This can make a big difference - with Microsoft Azure recently winning a 5-year $1.1B contract with Coca-Cola for its cloud needs, beating our AWS and Google due to its AI advantage.

🥇 Microsoft Still in the Lead

It’s widely known that Alphabet is a bit ‘behind’ in the AI race and has been playing catch-up to Microsoft ever since the launch of ChatGPT.

Microsoft’s earnings this week showed the company is losing no ground to Alphabet in the cloud race, and is gaining on AWS, with a 31% increase in Cloud revenue (compared to Google’s 28%). Overall, Microsoft also beat earnings:

  •  Earnings per share: $2.94 adjusted vs. $2.83 expected

  •  Revenue: $61.9 billion vs. $60.88 billion expected

Cloud is a much more significant business line for Microsoft than Google, making up ~38% of its revenues, compared to only 14% for Google.

📈 Tech Bouncing Back

Google and Microsoft’s results drove a much-needed bounce back for tech and the markets overall, with the tech-heavy NASDAQ 100 jumping ~3.3% this week after falling ~3.8% last week.

As discussed last week, Advanced Micro Devices’ earnings on Tuesday will be the next big signal for the market and likely determine whether this week was just a temporary bump or if we’re back to the good times we’ve grown used to this year.

💸 The Era of Tech Dividends

The other interesting news from Alphabet’s earnings was the announcement of its first dividend. The company will now start paying a $0.20/share quarterly dividend, dipping into its massive ~$110B cash reserve to start rewarding investors.

This makes Alphabet the 5th of the ‘Magnificent 7’ stock to pay a dividend:

  • 💻 Microsoft: 0.74% yield

  • 🍎 Apple: 0.57% yield

  • 🔍 Alphabet: 0.46% yield

  • Meta: 0.45% yield

  • 🤖 Nvidia: 0.02% yield

While the dividends are quite small compared to what dividend investors are used to, it does mark a big shift from the years and years the tech giants invested every cent back into growth.

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🚘️ Tesla Jumps 16% Despite Brutal Earnings Report

What do you think Tesla’s most significant revenue decline since 2012 would do to the stock price? A 5% drop maybe? Plummet 15%?

Nope… after Tesla reported a 9% drop in its first-quarter revenue, the stock rose 16% over the week 🤯

The Blossom community was understandably a bit confused, so let’s unpack the reasons for the mismatch…

🚗 Accelerating Development of Lower-Priced Model

In simpler terms, Tesla will be working to bring the lower-priced ‘Model 2’ to market as fast as possible. One of Wall Street’s biggest concerns with Tesla (and Elon) was around the unfocused strategic priorities, and these comments signaled all hands on deck to bring the Model 2 to the finish line.

The quarter was a disaster, but that was well known, the big takeaway is that Tesla is not focused solely on autonomy/robotaxis and is accelerating the lower-cost Model 2 vehicle…finally, a smart strategic plan Street wants to see.”

Wedbush analyst Dan Ives

🤖 Robots Coming Soon

Many times when I’ve seen criticisms about Tesla’s falling deliveries/revenue numbers, increased competition in China, or the general state of the EV market, Tesla investors are quick to point out that Tesla is not just a car company.

The biggest example? Optimis, Tesla’s humanoid robot, which can already walk around and perform basic tasks.

The robot was another big reason for Tesla optimism this week. In the works since 2022, Elon commented that they have "got a good chance of shipping some number of Optimus units next year" and while he points out uncertainty given it’s a new product, Elon has high hopes about the new product:

“The Optimis has potential to be the most valuable product of any kind ever”

Elon Musk

Despite the surge this week, Tesla is still down 32% year to date, driven by sluggish vehicle deliveries, increasing competition in China, and continued price reductions.

🎙️ Top Discussions this Week

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