- From Facebook to Google, the world’s largest tech companies are reporting their Q2 business results.
- In addition to the revenue and profit numbers that Wall Street pays attention to, the latest batch of earnings reports and investor conference calls packed plenty of surprises.
- Revelations about specific products, market trends and deals represent the really valuable news, and often say more about a company’s prospects than its top or bottom line results.
- Here are some of the biggest surprises and takeaways we got from tech’s Q2 earnings reports.
1. One-day shipping for Prime members is costing Amazon a LOT of money.
Ted S. Warren/AP
Amazon has moved to speed up deliveries for members of its Prime service, offering free one-day shipping, instead of the previous two-day shipping, for an increasing number of products for sale on its site.
That’s not cheap.
And even Amazon appears to have underestimated the cost.
Amazon CFO Brian Olsavsky said that the expenses for one-day shipping in Q2 came in higher than the $800 million he had warned investors to expect just a few months earlier. And he warned that the company will see a similar increase in the third quarter.
2. The trade war is actually helping to inject some life into the moribund PC market.
Chipmaker Intel said in its Q2 earnings report that customers buying "ahead of possible tariff impacts" contributed to the sales growth in its PC business.
That echoed comments by Microsoft in its earnings report last week, which said its PC division got a boost from a wave of Windows 7 upgrades and PC makers building up inventory ahead of possible tariffs.
Shipments of desktop and laptop PCs have been sliding for years. But as the Trump Administration threatened more tariffs in recent months, manufacturers scrambled to build PCs ahead of time before component prices go up.
The downside is that those manufacturers might not need to buy as many components in the second half of the year because they have ample supplies. But with the trade wars still far from over, there’s the potential for more surprises in the months ahead.
- Intel stock soars 5% after announcing the $1 billion sale of its smartphone modem business to Apple and reporting numbers that crushed Wall Street estimates
- Microsoft blew away Wall Street estimates in its most recent quarter and grew its revenue by 12% from last year
3. Google’s cloud business is generating $8 billion of revenue on an annualized basis.
Sure, revenue run rates are a self-serving metric. After all, the "run rate" is nothing more than a forward-looking extrapolation based on whatever time period a company chooses (a strong day of retail sales ahead of Christmas, for example, would produce a much higher number if it were projected as a "run rate" for a full year than a day in the middle of the summer would).
But Google’s revelation about the cloud business run rate was still eagerly received on Wall Street since it represents some of the only details we have about the business.
The last time Google said anything about its cloud was in 2017, when CEO Sundar Pichai described it as a $1 billion-a-quarter business. Since then, the cloud business has had a CEO change that put Oracle veteran Thomas Kurian in the driver’s seat, and the group has signed on important new customers.
Google is still far behind Amazon’s AWS and Microsoft Azure in the cloud market, but the latest numbers show the business is gaining momentum.
READ: Google revealed that its cloud business is on run rate of more than $8 billion, and it plans to triple the size of its salesforce
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