Earnings Amazon (and AWS) results blow it out of the water while Twitter sinks; IBM buying into the cloud with Turbonomic acquisition for $1.5 billion
Amazon and AWS just continue to run like a thundering money machine
Amazon and AWS are crushing the market with exceptional business performance as they report phenomenal earnings. Amazon stock hits an all-time high as Jeff Bezos heads into his last quarter as CEO of the firm he started. In Q4, Bezos will pass to Andy Jassy the CEO of AWS.
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Amazon and AWS are becoming an unstoppable huge business and continues to be profit machines thanks to COVID-19 spurring a business imperative to move operations to the cloud — and not even the easing of the pandemic in some parts of the world has slowed its momentum.
That was apparent today when the retail and cloud computing giant reported first-quarter results that blew away expectations. It earned a profit of $8.1 billion, or $15.79 a share, more than triple the $2.5 billion it earned a year ago, even in what’s traditionally a slower quarter following the holidays. Revenue jumped 44%, to $108.52 billion, thanks to strength in both retail and cloud computing.
Amazon Web Services saw revenue rise 32%, to $13.5 billion. Analysts had expected AWS revenue of $13.2 billion, up 29%. The growth represents an acceleration from the fourth quarter, possibly because companies continue to move their computing infrastructure to cloud services as the pandemic has forced them to enable people to work from home.
Amazon Chief Executive Jeff Bezos called out Amazon’s Prime Video operation as well as AWS in his prepared remarks. “In just 15 years, AWS has become a $54 billion annual sales run rate business competing against the world’s largest technology companies, and its growth is accelerating — up 32% year over year,” he said. “Companies from Airbnb to McDonald’s to Volkswagen come to AWS because we offer what is by far the broadest set of tools and services available, and we continue to invent relentlessly on their behalf.”
Amazon’s stock rose more than 3% in after-hours trading following the earnings report. It had risen a fraction of a point in regular trading, to $3,471.31 a share. Shares are up 46% from a year ago.
In the clouds
As usual, Amazon’s cloud computing unit AWS produced a large portion of the overall company’s profit. It earned an operating profit of $4.16 billion, up 35% from a year ago. That sum constituted 47% of Amazon’s overall operating profit.
In February, Amazon said AWS CEO Andy Jassy will take over the whole company in August as Bezos works on special projects as executive chairman.
Overall, said Constellation Research Inc. analyst Holger Mueller, “At the level AWS is, growing a third+ is super impressive and shows the fabled AWS flywheel is spinning in overdrive.”
Challenges within and without
There’s little sign of big challenges on the business side, and analysts expect Amazon to continue to show positive results the rest of this year. “We expect a significant amount of the new shopping behavior to stick so that Amazon benefits from a permanent shift to online for many categories of shopping,” said analysts.
Twitter squawks as user growth and guidance come up light
Twitter Inc. took a beating in after-hours trading today, its stock down more than 11% after missing expectations on user growth and offering lower-than-expected guidance for the next three months.
Twitter Chief Financial Officer Ned Segal said in a letter to shareholders that the company’s “solid start” to 2021 was thanks partly to the acceleration of its recent initiatives around app promotion and brand advertising. “Advertisers continue to benefit from updated ad formats, improved measurement, and new brand safety controls, contributing to 32% year-over-year growth in ad revenue,” Segal said.
Twitter also reported a net profit of $68 million, contrasted with a loss of $8.4 million a year ago.
Analyst Charles King of Pund-IT Inc. told SiliconANGLE that Twitter did well from a financial perspective and deserves congratulations for turning last year’s loss into a profit.
Unfortunately for Twitter, it seems that its shareholders are more concerned with its growth prospects than anything else, and in that respect, the company was perceived to have underachieved. Twitter said it had 199 million monetizable daily active users, its preferred metric, up from 166 million a year ago, but below the 200 million figure that analysts were looking for.
The company’s second-quarter guidance also came up light. Twitter said it’s expecting to pull in revenue of between $980 million and $1.08 billion over the next three months, the midpoint of which came below Wall Street’s consensus of $1.06 billion. Officials also forecast a net operating loss of between $120 million and $170 million.
Investors may have been rankled further by Twitter’s warning that its costs and expenses related to new staff hires are expected to rise by 25% this year. The company said adding more staff would increase its stock-based compensation costs. As such, it now expects full-year stock compensation of $600 million, up from an earlier estimate of between $525 million and $575 million.
Twitter also spoke about the recent privacy changes implemented by Apple Inc. in iOS 14.5. The company said it’s too early to understand the full impact of those changes. However, it said its integration of Apple’s SKAdNetwork enabled it to increase by 30% the total number of iOS devices it can reach with its Mobile Application Promotion offering.
King said investors may well be concerned about Twitter’s lower-than-expected guidance and its slow user growth, but he noted that much of the focus in today’s shareholder letter was about what the company is doing to increase transparency, curtail abuse, and ban users who attempt to use its platform to spread misinformation.
“Coming just days after Apple introduced iOS features that hamstring the advertising and tracking technologies of Facebook and other social sites, that seems notable,” King said. “If investors are looking for companies willing to do virtually anything to monetize their daily active users, they should look beyond Twitter. But for investors who are seeking profitable companies that are also trying to do the right thing, Twitter may be worthy of consideration.”
IBM to acquire cloud optimization provider Turbonomic for reported $1.5 billion+
IBM Corp. is acquiring Turbonomic Inc., a Boston-based company with a platform that helps enterprises reduce cloud expenses and improve their applications’ performance.
IBM didn’t disclose the value of the deal, which was announced this morning. But sources told Reuters that the transaction values Turbonomic at between $1.5 billion and $2 billion. That’s a significant premium over the $963 million private valuation that the company is said to have received after its last funding round.
Turbonomic offers a so-called application resource management platform that uses artificial intelligence to help enterprises optimize their public cloud environments. The platform focuses on two main use cases. The first is optimizing cloud applications’ performance, while the other is reducing the infrastructure costs they incur.
Turbonomic’s AI models analyze a company’s cloud environment to see if any workloads are allocated fewer hardware resources than they require to operate optimally. Turbonomic can, for example, detect if an e-commerce website’s database needs to be given more network bandwidth during weekend traffic spikes. The AI models then provide administrators with recommendations on how to fix the identified issues.
The platform provides similar recommendations for reducing wasteful cloud spending, Turbonomic’s other major focus. For example, Turbonomic can show information technology teams when they’ve provisioned more storage capacity for a workload than it needs. The platform can likewise detect if an application is running on an unnecessarily large and expensive cloud instance.
The acquisition advances IBM’s ongoing effort to refocus from its legacy business areas, such as professional services, to the high-growth cloud and AI markets. As part of the strategy, the company late last year announced plans to spin off its $19 billion managed infrastructure services unit. IBM Chief Executive Officer Arvind Krishna (pictured) stated at the time that the transaction will free up the company to focus on the “$1 trillion hybrid-cloud opportunity.”
“IBM continues to reshape its future as a hybrid cloud and AI company,” Rob Thomas, the senior vice president of IBM’s Cloud and Data Platform group, said in a statement today. “The Turbonomic acquisition is yet another example of our commitment to making the most impactful investments to advance this strategy.”
The company also pointed to the broader industry trend towards AIOps, the practice of automating repetitive IT tasks with machine learning, as a factor behind the deal
IBM expects the acquisition of Turbonomic to be completed in the second quarter.
Thank you
Best regards, cheers, ttl —John Furrier
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