This week’s crop of Big Tech earnings has shown that there is a clear need for cost cutting in Silicon Valley. However, Microsoft stands as a stark outlier as it has been granted special permission from Wall Street to continue its ambitious spending on expansion. Microsoft’s success is largely attributed to its massive investments in OpenAI and their leadership in artificial intelligence development. Investor confidence in Microsoft’s growth potential allowed shares to rise significantly this week, while their counterparts disappointed with overall growth.
Meta Platforms Inc., led by the vision of Mark Zuckerberg, far exceeded expectations thanks to their initiatives to reduce operational costs and workforce. What was once a peak of 77,114 employees is now down to its lowest headcount in two years at 69,114. In order to survive, Meta had to make substantial cuts, reducing their estimated expenditure of between $94 billion and $99 billion to $81 billion to $87 billion. This has since triggered share price gains of an enormous 98% since the start of the year.
Similarly, Amazon.com Inc. has noticed success this week in its efforts to dismantle the vacation-era expansion of its logistics network. Through its 27,000 corporate layoffs and natural attrition within its warehouses, its workforce is down 10% compared to last year. This cost-cutting initiative surprised analysts, as its North American retail business that was in deficit last year now has an operating income of $0.9 billion.
On the other hand, Alphabet Inc.’s ad business has seen fragility and its cloud services have fallen short compared to those of Microsoft and Amazon. Despite its efforts to decrease operational costs and headcount, the company has seen operational income decreased by 13%, year-on-year.
Microsoft has a different story, however, as its projected growth in cloud services and AI apps has allowed investors to overlook some potential red flags in its quarterly performance. Microsoft’s headcount has increased 9% year-on-year, despite 10,000 job cuts. Nevertheless, its Chief Executive Officer Satya Nadella promised more investments in the AI sector to remain competitive and he reassured investors that the company will manage their profit and loss carefully.
Microsoft Corp. has become a Big Tech outlier thanks to its ambition in artificial intelligence investments. With their continued successes, Microsoft’s share price has risen 6% this week and hit above the $2 trillion market cap. It is clear that Wall Street is betting big on Microsoft and its vision of new technology.
