Tech Earnings Are a Reflection of the Postpandemic Economy. Facebook’s Parent Is Next. | #microsoft | #hacking | #cybersecurity


Google’s ad sales were hurt by economic turmoil. With consumers reluctant to spend big amid surging energy prices—not to mention the Russia-Ukraine war and rising interest rates—it makes sense that companies are also reluctant to splash out on advertising campaigns.

Yet Google’s cloud-computing products, which help people in the new hybrid working environment, performed well.

Likewise for Microsoft’s Azure cloud business. That is running strong and is projected to keep doing so, boosting the company’s stock while Alphabet’s slipped.

What does that mean for Facebook parent


Meta Platforms
,
which reports results after the close? Well, like Google, Facebook mainly sells ads. Changes in


Apple
’s
privacy rules give Facebook’s business particular problems. And the previous quarter wasn’t great. With expectations already low, there is still room for a surprise, but it seems unlikely that the news will be as good as it was for Microsoft.


Twitter
,
also reliant on ad sales, reports this week as well. Thanks to


Tesla

CEO Elon Musk’s buyout bid, the company doesn’t have to worry too much about the market’s reaction.

The


Nasdaq

closed at its lowest level since 2020 on Tuesday, but markets appear to have found a floor. What happens next will depend on the balance of the forces shaping the postpandemic world.

Brian Swint

*** Join MarketWatch senior economics reporter Greg Robb today at noon as he talks to Mickey Levy, chief U.S. economist at Berenberg Capital, about the outlook for inflation and what the Federal Reserve must do to get it back under control. Sign up here.

***

Earnings Reports Reveal a Tale of Two Tech Giants

Alphabet and Microsoft kicked off tech earnings by reporting divergent results, with Alphabet delivering a disappointment and Microsoft scoring an unexpectedly strong quarter. Tech investors had been on edge all day, pulling the


Nasdaq

down 4% before the reports came out.

  • Alphabet’s $24.62 earnings per share fell short of the expected $25.91. Revenue also fell slightly short at $68 billion versus $68.1 billion expected. Sales growth of 23% slowed compared with the same quarter last year as global turmoil hit digital ad spending. It was the lowest growth rate since 2020.

  • Google Cloud sales rose 44% over last year, to $5.8 billion, generating an operating loss of $931 million. Alphabet is spending $5.4 billion to buy cybersecurity firm


    Mandiant

    to better automate cyber defenses, The Wall Street Journal reported.

  • Microsoft reported EPS of $2.22 and revenue of $49.4 billion. Revenue in its commercial cloud business, including Azure, Office 365 Commercial, LinkedIn commercial, and Dynamics 365, rose 32%, to $23.4 billion.

  • The company’s personal-computing segment featuring Windows, Surface, and Xbox, reported $14.5 billion of revenue, which surpassed its own guidance and analyst expectations.

What’s Next: Microsoft’s chief financial officer, Amy Hood, projected better-than-expected numbers for the June quarter in its productivity and business processes and intelligent-cloud segments. Her guidance implies a revenue range for the quarter of $52.4 billion to $53.2 billion, in line with analysts’ expectations.

—Liz Moyer

***

Musk’s Twitter Deal Includes $1 Billion Breakup Fee

Elon Musk will have to pay Twitter a $1 billion fee if the Tesla CEO terminates his $44 billion cash deal to buy the social-media platform, Twitter said in a regulatory filing on Tuesday.

  • The fee would have to be paid under certain circumstances, such as if Musk isn’t able to secure enough equity, debt and or margin to finance the acquisition, the Securities and Exchange Commission filing showed.

  • Twitter, which is subject to “no-shop” restrictions preventing it from talking to other suitors, will be required to pay the same $1 billion fee under certain circumstances, according to the same filing. These include Twitter accepting a competing acquisition proposal or recommending shareholders vote against Musk’s offer.

  • On Monday, Twitter’s board agreed to Musk’s $54.20-a-share cash offer for the social-media company in one of the biggest ever leveraged buyout deals. Musk has raised $25.5 billion in debt—including a margin loan of $12.5 billion secured against his shares in Tesla—from a group of banks led by


    Morgan Stanley
    .

What’s Next: Twitter searched all around the globe for a second bidder but failed to discover one, said Dan Ives, a senior equity research analyst at Wedbush Securities, adding: “They came up empty-handed.” So, even without the penalty of a breakup, another bidder would have been unlikely to emerge for Twitter.

Lina Saigol and Luisa Beltran

***

Robinhood Cutting Staff After Period of Hyper Growth


Robinhood Markets

will cut 9% of its full-time staff after a period of extraordinary growth during last year’s meme-stock trading frenzy that helped balloon its employee base nearly six times in 18 months, to 3,800 people.

  • Co-founder and CEO Vlad Tenev said on his blog on Tuesday, in a post that appeared after a companywide meeting, that the rapid expansion resulted in duplicated roles and added complexity.

  • He called the cuts a “deliberate step” to keep Robinhood on track, which includes introducing new products for its brokerage, cryptocurrency, and spending and saving functions. The digital trading company is also continuing to expand internationally.

  • Tenev said Robinhood has been responding to changes in the way customers invest, noting the current climate of geopolitical conflict, economic uncertainty, and inflation. He added the company has prioritized opportunities for automation and operational efficiency.

  • The post also said Robinhood has $6 billion of cash on its books. Robinhood reported $6.25 billion in cash and cash equivalents as of the end of 2021, according to its year-end earnings report.

What’s Next: Robinhood is scheduled to report earnings on Thursday after the closing bell. It will be the quarter that compares to the height of the meme-stock trading of early last year, potentially making difficult comparisons in measurements such as monthly active users.

Liz Moyer

***

Airlines Maneuver on Flight Schedules Ahead of Summer


United Airlines

added international flights, while


JetBlue Airways

curbed its schedule ahead of the busy summer travel season.


Delta Air Lines

will be the first major U.S. airline to start flight attendant pay at the time when boarding begins, instead of starting the clock after the cabin doors close.

  • United Airlines Holdings will start or resume 30 European flights from mid-April through early June, including new nonstops to London, Milan, Munich, Zurich, and Nice, France—the largest trans-Atlantic expansion in its history.

  • JetBlue Airways is trimming its summer schedule by more than 10% to help restore operational reliability and build more flexibility into its schedule. JetBlue plans to increase capacity 0% to 5% in 2022, compared with 2019 levels, down from previous plans for 11% to 15% growth.

  • Delta’s new boarding pay for flight attendants—half their hourly rate—kicks in June 2 and comes amid a unionization effort. Delta also added extra time to board, extending it to 40 minutes for single-aisle aircraft, according to a memo reviewed by Barron’s.

  • The Association of Flight Attendants, representing cabin crews at United Airlines,


    Spirit Airlines
    ,


    Alaska Air
    ,


    Hawaiian
    ,
    and


    Frontier
    ,
    said “management is getting nervous.” Delta said its move is a testament to Delta’s longstanding commitment to deliver industry-leading pay.

What’s Next: JetBlue said it has improved staffing, including 5,000 crew members and 1,100 customer service workers. It will proactively cancel flights ahead of bad weather or air-traffic control issues, and increase preventative maintenance to avoid equipment-related delays and cancellations.

—Janet H. Cho

***

Pfizer Seeks Approval on Boosters for School-Aged Children


Pfizer

and


BioNTech

asked the Food and Drug Administration to approve Covid-19 booster shots for 5- to 11-year-olds, saying data from Phase 2 and 3 trials found the third dose elicited a strong immune response in the age group with no new safety issues. They will also ask the European Medicines Agency.

  • The Biden administration is buying 20 million doses of Pfizer’s Covid-19 pill Paxlovid, which was found to lower the risk of hospitalization or death by 90%, and doubling the number of pharmacies and other sites where people at high risk for severe Covid-19 can get the drug.

  • U.S. hospitalizations are at pandemic lows and daily deaths have declined to about 300, but Covid-19 cases are rising, and the risk of potential surges and new variants remains, White House coronavirus response coordinator Dr. Ashish Jha said. The BA.2 Omicron subvariant is now 96.8% of circulating viruses.

  • The White House repeated its call to Congress to approve additional funding for Covid-19 programs such as purchasing vaccines and treatments to distribute them free. Jha said there is a risk there won’t be enough next-generation, variant-specific vaccines for everyone this fall or winter.

  • The number of deaths in the U.S. from coronavirus disease is nearing one million, at 988,991, according to the Centers for Disease Control and Prevention. Epidemiologists consider the total an undercount.

What’s Next: Vice President Kamala Harris tested positive for Covid-19, but wasn’t in close contact with President Joe Biden. White House press secretary Jen Psaki said Biden still plans to attend the White House Correspondents’ Dinner on Saturday and former Vice President Walter Mondale’s memorial service in Minneapolis on Sunday.

Janet H. Cho

***

Dear Quentin,

I am a retired 62-year-old woman. I was widowed in 2006 at the age of 46 and raised my two children (now 24 and 27) on my own. I used my husband’s life insurance money (about $500,000) to maintain our home, provide child care, and get both children through college without student loans.

I saved through my 401(k) at work. I have a small pension (about $24,000 a year), an investment account valued at $2.5 million (from which I’m drawing about 2% a year for living expenses), a home valued at about $400,000 and no debt.

I remarried six years ago. He was divorced—his wife left him and their three children and he raised them alone. He has a pension that is about 2.5 times the size of mine and is starting to collect Social Security. He also has about $500,000 in retirement.

We split living expenses, but we no longer pay $550 per month as the mortgage is paid off. However, we’ve been doing a lot of improvements to the house. Some are improvements we both wanted.

I’m spending a fortune on home maintenance and improvements. I realize that my second husband is essentially living in my house for free. He is very handy and does a lot of small repairs and maintenance himself, which I greatly appreciate.

I also realize that my net worth is greater than his. What is fair? Should he pay rent or some other costs associated with the maintenance? Or should I suck it up and pay for anything house-related and just appreciate the maintenance work he does for me?

What is your advice for an equitable arrangement?

Thanks so much.

—Second Wife in Virginia

Read The Moneyist’s response here.

Quentin Fottrell

***

—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Rupert Steiner



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