Cloud computing drives massive growth for big U.S. tech firms

SAN FRANCISCO (Reuters) – Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O), Alphabet Corp’s (GOOGL.O) Google and Intel Corp (INTC.O) are all putting their chips on the cloud computing business, and it is booming.

All four companies posted stellar quarterly earnings on Thursday, showing the strength of the shift in corporate computing away from company-owned data centers and to the cloud.

Microsoft’s Azure business nearly doubled, with year-over-year growth of 90 percent. The company does not break out revenue figures for Azure, but research firm Canalys estimates it generated $2 billion for Microsoft.

“The move to the cloud was one we felt Microsoft could always benefit from, and they’re showing us that they can,” said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.

Highlighting the quarter for Microsoft was a deal securing retailer Costco (COST.O) as an Azure customer. That came just two months after the close of Amazon’s acquisition of grocery chain Whole Foods, which has heightened unease among retail and e-commerce companies about working with Amazon, said Ed Anderson, an analyst with Gartner.

Tim Green, analyst with the Motley Fool, said Amazon could find it needs to make changes at some point at Amazon Web services. “Spinning off AWS at some point down the road might become necessary to prevent an exodus of customers,” he said.

Amazon Web Services is still delivering far more revenue than any of its peers. For the quarter, AWS raked in nearly $4.6 billion — a year-over-year increase of 42 percent. AWS may have missed out on Costco, but the company secured deals with Hulu, Toyota Racing Development, and most notably, General Electric.

Google Cloud Platform landed deals with the likes of department store retailer Kohl’s and payments processor PayPal. Like Microsoft, Alphabet does not break out revenue for Google Cloud Platform, but Canalys estimates the business generated $870 million in the quarter, up 76 percent year-over-year.

Google Chief Executive Officer Sundar Pichai said Google Cloud Platform is a top-three priority for the company. He said Google plans to continue expanding its cloud sales force.

Canalys estimates the cloud computing market at $14.4 billion for the third quarter of 2017, up 43 percent from a year prior. Amazon holds 31.8 percent of the market, followed by Microsoft at 13.9 percent and Google with 6 percent, according to Canalys’ estimates.

The “cloud market will keep growing faster than most of the traditional information technology segment, as the market is still in the developing stage,” said Daniel Liu, research analyst with Canalys.

Reflecting the overall growth of the market was the strong performance by Intel, which sells processors and chips to cloud vendors. In July, Intel launched its new Xeon Scalable Processors, which drove 7 percent year-to-year growth for the company’s data center group.

The big three cloud vendors also benefit from the decision by many enterprises to build their applications using more than one cloud vendor. Retailers Home Depot Inc (HD.N) and Target Corp (TGT.N), for example, told Reuters they use a combination of cloud providers.

“Our philosophy here is to be cloud agnostic, as much as we can,” said Stephen Holmes, a spokesman for Home Depot, which uses both Azure and Google Cloud Platform.

Some analysts expect cloud services growth to slow over time as competition increases.

Amazon, for instance, has said that price cuts and new products with lower costs on average are a core part of its cloud business. Additionally, Amazon Web Services saw usage growth outpacing that of revenue growth, said Amazon Chief Financial Officer Brian Olsavsky.
“Going forward, cloud services will become more of a commodity, and the prices will quickly compress,” said Adam Sarhan, CEO of 50 Park Investments, an investment advisory service. “For now though, it’s a great business with plenty of room for all to grow.”
Link: http://www.reuters.com/article/us-cloud-results/cloud-computing-drives-massive-growth-for-big-u-s-tech-firms-idUSKBN1CW05H

Read here: https://www.forbes.com/sites/adamsarhan/2017/06/29/a-near-term-top-the-v-word-has-returned-to-wall-street/#5d72016e1ebd

We are still in the heart of earning season and a lot can change. But so far, it appears the earnings recession is over and that bodes well for the major indices.
Here’s a Snap Shot of Q4 Earnings… So Far
Earnings growth for the SPX the third quarter is 5.6% vs expectations of 4.5%
Ø  Worth Noting: Earnings growth for the 115 non-financials that reported is 3.4%
Revenue growth for the SPX the third quarter is 2.4% vs expectations of 3.88%
Q4 Earnings Summary:
70.3% have POSITIVE EPS surprise
11.5% have NEUTRAL EPS surprise
18.2% have NEGATIVE EPS surprise
 
77.7% have HIGHER EPS year over year
1.4% have NEUTRAL EPS year over year
20.9% have LOWER EPS year over year
 
Q4 Sector Performance (percentage of Positive Surprise):
 
Utilities: 100%
Information Tech: 96.2%
Materials: 87.5%
Consumer Discretionary: 70.5%
Financials: 70.0%
Industrials: 65.5%
Healthcare: 61.5%
Energy: 57.1%
Consumer Staples: 55.6%
Real Estate: 0%
Telecom Svcs: 0%
Source: Courtesy of Our Friends At RealMoney.com
 

Tuesday, January 3, 2017
Stocks rose sharply on Tuesday, the first trading day of 2017, as stronger-than-expected data out of China and the U.S. and rising oil prices lifted investor sentiment.
The S&P 500 gained 1 percent, with energy rising more than 1.5 percent to lead advancers. The Nasdaq composite also advanced around 1 percent.
“Traders likely woke up this morning a bit surprised. Most portfolio managers likely surmised that last week’s sell-off marked the start of a modest pullback for the broader indices that would dominate the early part of 2017 as institutions normalize their risk and many investors clip profits in an effort to defer capital gains,” said Jeremy Klein, chief market strategist at FBN Securities.
The Dow Jones industrial average gained about 160 points, with Goldman Sachs contributing the most gains.
“That puts again into question the Dow reaching 20,000. I’m not suggesting we’ll get there today, but with Brent near $60 and WTI around $55, that should be a cushion for the [stock] market,” said Peter Cardillo, chief market economist at First Standard Financial. “The first couple of days of the year set the direction for the market. I don’t see anything interfering here. I think enthusiasm is still there.”
The Dow failed to break above 20,000, a key psychological level, before 2016 ended, as U.S. stocks closed the year with a three-day losing streak.
In U.S. economic news, the final read on December IHS Markit manufacturing PMI came in at 54.3, hitting a 21-month high. A number above 50 signals expansion, while a number below 50 shows contraction. The ISM manufacturing index read for December, meanwhile, came in at 54.7, above November’s read of 53.2. and construction spending hit its highest level in more than 10 years in November.
“We’re seeing the exact opposite of what happened last year, in terms of investing and sentiment,” said Adam Sarhan, CEO at 50 Park Investments. “The macro picture is improving and the stock market is forecasting better economic data and stronger earnings. That bodes well for Main Street and Wall Street.”
Overseas, China’s Caixin Manufacturing Purchasing Managers’ index (PMI) rose to 51.9, compared with 50.9 in November and beating forecasts for 50.7, on the back of increased demand. A reading above 50 represents expansion in a sector, whereas a reading below 50 represents contraction.
Chinese equities closed higher on the back of the data and of crude’s spike, with the Shanghai composite rising 1.04 percent. European equities also rose, with the Stoxx 600 Europe index advancing around 1.1 percent.
Crude prices, meanwhile, hit 18-month highs amid hopes that a deal struck between OPEC and non-OPEC countries to cut production will reduce excess supply. As of 10:31 a.m. ET, U.S. oil prices were up 2.12 percent at $54.88 per barrel.
“With prices already rushing to 18 month highs during trading on Tuesday one can see how the expectations of a production cut continues to provide a lifeline to the commodity,” Lukman Otunuga, research analyst at FXTM, said in a note. “While the current gains in oil are undeniably impressive, gains are at risk of being limited if any complications or delays arise from the proposed cut deal.”
In corporate news, President-elect Donald Trump attacked General Motors in a tweet, claiming the auto giant is making a Chevy Cruze model in Mexico and then sending them to U.S. dealers tax free. GM later responded by saying that most of its Cruze models are in fact built in the U.S.
U.S. Treasurys fell on Tuesday, with the benchmark 10-year note yields rising to 2.507 percent and the short-term two-year note yield trading at 1.25 percent. The U.S. dollar rose more than 1 percent against a basket of currencies, with the euro trading near $1.036 and the yen around 118.4.
— CNBC’s Aza Wee Sile contributed to this report.
On tap this week:
Wednesday
Earnings: Sonic
Monthly vehicle sales
2 p.m. FOMC minutes
Thursday
Earnings: Monsanto, Walgreen Boots Alliance, Constellation Brands, Ruby Tuesday, PriceSmart

8:15 a.m. ADP employment
8:30 a.m. Initial claims
9:45 a.m. Services PMI
10 a.m. ISM nonmanufacturing
Friday
Earnings: Azz
8:30 a.m. Employment
8:30 a.m. International trade
10 a.m. Factory orders
11:15 a.m. Chicago Fed President Charles Evans
1:00 p.m. Richmond Fed President Jeffrey Lacker
3:30 p.m. Dallas Fed President Robert Kaplan
Saturday
11:15 a.m. Federal Reserve Governor Jerome Powell at AEA annual meeting
11:15 a.m. Minneapolis Fed President Neel Kashkari at AEA
Link: http://www.cnbc.com/2017/01/03/us-markets.html