Hi All,
Welcome to our brief overview of portfolio news from the past few days.
The Hyperscaler Flywheel: Cloud, Chips, and Capital
Alphabet smashed Wall Street expectations in Q1, reporting a 22% revenue surge to $110 billion and an EPS of $5.11, nearly doubling the prior year’s $2.81. The standout performer was Google Cloud, which skyrocketed 63% to $20 billion as enterprise AI demand intensified. With a massive cloud backlog of over $460 billion and its Gemini AI models processing 16 billion tokens per minute, the company is effectively leveraging its vertically integrated AI flywheel. Highlighting its strong financial health, Alphabet also raised its quarterly dividend and maintained robust operating margins of 36.1%.
Amazon’s revenue grew 17% to $182 billion and net income jumped to $30 billion, driven significantly by a $17 billion gain from its Anthropic investment. AWS was the star of the show, accelerating to 28% growth (its fastest in 15 quarters) while the company’s custom silicon business surpassed a $20 billion annual run rate. Despite negative free cash flow due to a massive $43 billion net CapEx push into AI, Amazon’s strategic partnerships with OpenAI and Meta for its Trainium and Graviton chips underscore its growing dominance in the AI infrastructure layer.
Microsoft delivered a robust performance in the March quarter, with revenue reaching $83 billion (up 18%) and earnings per share of $4.27, both comfortably exceeding analyst expectations. This growth was primarily fueled by cloud and AI momentum, as evidenced by a 123% year-over-year surge in AI-related revenue, which hit a $37 billion annual run rate. The Microsoft Cloud segment generated $55 billion, while Azure specifically grew 40%, outperforming forecasts. In addition, commercial remaining performance obligations (RPO) skyrocketed 99% to $627 billion, signaling long-term revenue visibility through massive multi-year enterprise contracts. Despite heavy investments, Microsoft demonstrated strong operational leverage, expanding its operating margins to 46.3% and reinforcing its dominant competitive stance in the enterprise AI market.
Meta delivered a strong Q1 with revenue surging 33% to $56 billion, driven by robust advertising fundamentals as ad impressions grew 19% alongside a 12% increase in average ad pricing. Despite 35% cost increases, the company maintained a 41% operating margin and generated over $32 billion in operating cash flow. While Meta’s revenue growth outpaced its hyperscaler peers, investors remain cautious due to a significant hike in full-year capital expenditure guidance, now reaching up to $145 billion, reflecting the high costs of data centers and AI infrastructure. This $10 billion CapEx upward revision triggered an 8%+ stock sell-off, wiping out roughly $175 billion as investors punish the company for the unclear AI ROI. Additionally, Meta is proceeding with an aggressive workforce reductions (10% cut) to offset AI investments.
Other Key Updates
PayPal Reorganizes: CEO Enrique Lores (who took over very recently) is simplifying the giant into three units: Checkout, Consumer/Venmo, and Payment Services/Crypto. A key highlight of this move is the elevation of Venmo into its own standalone segment, a decision accompanied by the departure of executives Diego Scotti and Michelle Gill. By making Venmo a standalone segment, PayPal is making it easier for the street to value the asset independently or potentially prepare it for a future sale.
Booking’s Middle East Headwinds: Q1 was mixed as regional disruptions weighed on guidance. While gross bookings expanded 15% to $54B, management lowered full-year guidance to high-single to low-double-digit growth due to increased cancellations and regional headwinds that peaked in March. Despite these pressures, the company maintained strong market share gains and returned $3.6B to shareholders through repurchases and dividends.
Adobe is collaborating with Alluvium and has completed the acquisition of Semrush Holdings. The partnership with Alluvium integrates Adobe Experience Platform’s demand-generation tools with supply orchestration to help healthcare providers align clinical capacity with patient demand. Simultaneously, the Semrush acquisition bolsters Adobe’s ability to drive brand discoverability and conversion, specifically targeting the shift toward AI-driven interfaces and autonomous agents as the primary way customers now engage with brands.
That’s a wrap. See you soon.