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Today's big stories

Microsoft and Alphabet both posted strong results, but investors aren't so easily impressed
One Bloomberg analyst thinks the launch of the very first US bitcoin ETF last week is the start of something monumental – Read Now
American delivery giant UPS reported better-than-expected earnings, just in time to start delivering Christmas joy

What’s Up, Docs?

What’s Going On Here?

Microsoft and Google-parent Alphabet reported better-than-expected quarterly earnings late on Tuesday, even if they’d like to request permission to make a few tweaks.

What Does This Mean?

Microsoft went into this update having beaten analysts’ expectations for the previous 10 quarters, and the company’s hot streak continued last quarter. That was partly down to its cloud computing business, which is still benefiting from the working-from-home trend and whose revenue climbed by 36% versus the same time last year. Its productivity segment – which includes workplace staples Office 365 and LinkedIn – likewise stepped up to post a 22% uptick in revenue.

Not one to be left behind, Alphabet reported that its cloud and advertising business revenues were up by a better-than-expected 45% and 43% respectively. The latter is especially encouraging: it proves that advertisers are still willing to spend money on winning new customers – surprising at a time when shortages are making increased demand hard to meet.

Why Should I Care?

For markets: Don’t get too comfy.
Investors practically see it as a given that tech companies like Microsoft and Alphabet will beat analysts’ estimates these days. They’re so hard to please, in fact, that 85% of tech companies that have beaten analysts’ profit forecasts this earnings season have seen their stocks drop by an average of 2.4% the day after their updates, according to Bloomberg. So the fact that Alphabet’s stock initially fell and Microsoft’s stayed flat might not bode well for them either…

Zooming out: FAANGs are getting bitten.
Investors are starting to worry that the aforementioned supply chain issues could impact Big Tech’s growth – and, by extension, their valuations – in the longer term, as could workforce shortages. Hedge funds are among the skeptics: new data shows that they now have less money invested in the “FAANGs” – Facebook, Apple, Amazon, Netflix, and Alphabet – than they have done at any point in the last two years.

You might also like: Alphabet has way more up its sleeve than just Google.

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Analyst Take

The First “Imperfect But Exciting Step” To A Bitcoin ETF Utopia

What’s Going On Here?

Last week saw the first US bitcoin ETF hit the market.

And investors went wild for it: $1 billion worth of trades took place on day one, and another $1.2 billion on day two, which, according to Bloomberg Intelligence’s Eric Balchunas, “is just absurd”.

It really is: it’s about three times more than any other ETF launch in history.

And sure, this ETF – which invests in bitcoin futures contracts, rather than bitcoin itself – isn’t “the most perfect one”, but it has shown the sheer demand for an investor-friendly wrapper.

So this, Eric reckons, is just the first step to “an ETF utopia”.

That’s today’s Insight: why even Eric’s most optimistic expectations were blown away, and what a bitcoin ETF utopia looks like.

Read or listen to the Insight here

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