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Today's big stories

Microsoft announced better-than-expected quarterly earnings
A century of data suggests you should sell your biggest tech stocks before it’s too late – Read Now
Caterpillar’s earnings were better than expected, even though they were down from last year

1/3

A Work Of Art

What’s Going On Here?

Microsoft reported earnings late on Wednesday – and judging by the boost its shares received, investors appreciated the je ne sais quoi of the piece.

What Does This Mean?

Microsoft’s quarterly revenue and profit came in above investor expectations, and it wasn’t just down to its all-important cloud business. Its other two businesses played their part too: personal computing – which includes Xbox, Windows, and the search advertising revenue brought in when your grandparents use Bing – and productivity (think Microsoft Office and LinkedIn). Each of them contributes about a third of Microsoft’s total revenue, and they both grew more quickly than analysts had anticipated.

Why Should I Care?

For markets: Fighting talk.
Demand for cloud computing – which gives employees access to business resources from anywhere – has rocketed since the pandemic first herded us all into our homes. That might be why Microsoft’s cloud segment grew by a better-than-expected 20% – even more than the quarter before. That means cloud products now make up a third of its revenue, while the company has said – with a pluck that might make European rival SAP nervous – that it’s only just getting warmed up.

The bigger picture: Too good, too soon.
Microsoft might’ve smashed it, but a few tech companies have struggled to live up to the record-breaking demand they experienced earlier on in the year (tweet this). Just look at Netflix: the streaming giant wooed so many subscribers in the first half of 2020 that it was slim pickings last quarter, leading investors to ditch its stock. Intel ran into the same problem: demand for the chipmaker’s data centers – sky-high just a few months ago – plunged last quarter. Investors will be hoping that doesn’t happen again on Thursday – that busy October day when Alphabet, Amazon, Apple, and Facebook all report their latest earnings.

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3/3

Hip Hip… Hooray?

What’s Going On Here?

Hats off to Caterpillar: the US machinery maker reported better-than-expected third-quarter earnings on Wednesday, even as its sales and profits collapsed.

What Does This Mean?

Caterpillar’s earnings fell 54% in the third quarter compared to the same time last year. That’s a pretty staggering drop, but credit where credit’s due: it’s an improvement on the company’s 70% second-quarter decline.

Caterpillar’s worth paying attention to because it’s an economic “bellwether” – that is, it’s a good way to gauge overall activity. Its machinery, after all, is more likely to be in high demand when the going’s good. But between the ongoing pandemic and the uncertainty around the US-China trade war, the going isn’t good. That’s why customers are holding off on buying Caterpillar’s gear. And while the manufacturer did point out that demand for its smaller machines was improving, its outlook for the future wasn’t enough to get investors to climb aboard.

Why Should I Care?

For markets: Building bridges.
There isn’t much the US presidential candidates agree on, but they’ve both argued they’ll make improvements to the country’s infrastructure – everything from roads to railways. Investors see that as a sign that American industrial companies like Caterpillar could see a bump in demand after the US election – a possibility that's pushed their stocks higher over the last few weeks.

The bigger picture: Speaking of the election...
The closer we get to Election Day – and the louder the political chatter – the less influence company updates will have on stock prices. As for after Election Day, it mightn't much matter who’s in the White House: the three-month period until Inauguration Day has generally been uneventful for the stock market, and share prices tend to rise in an election year no matter which party wins. Then again, who knows? This isn’t exactly a normal year…

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💬 Quote of the day

“Who controls the past controls the future. Who controls the present controls the past.”

– George Orwell (an English novelist, essayist, journalist, and critic)

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🤔 Q&A · RE: Imperfect Storm

“Is Amazon Web Services a major competitor to SAP too?”

– Chaitanya in California, USA

“Cloud computing is a huge industry covering several sub-industries that often get clumped together. SAP’s cloud offering, for instance, centers on enterprise resource planning – or ERP – which helps make general business processes more efficient. Its biggest rivals in that sphere are Microsoft and Oracle. Amazon’s cloud segment, meanwhile, is more focused on storage, analytics, and processing (to name a few) that tech firms specifically might find more useful. And while that pits it against Microsoft and Oracle – as well as Google, Alibaba, and IBM – it generally leaves SAP free to do its own thing.”

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Finimize - 🚀 Microsoft takes off

Today's big stories

A Work Of Art

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Are US Stocks Teetering?

💥 “The next boom has begun”

Hip Hip… Hooray?

What’s Going On Here?

What Does This Mean?

Why Should I Care?

😈 Give ’em Elle

🌍 Become a truly global investor

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🙋‍♀️🙋‍♂️ Let's get to know you

🥇 Goldman goes for gold

"Apple isn’t actually worth $2 trillion”

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🐍 Bank of America slips and slides

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