 | Oct 30, 2024 | | | | Supported by  | | | | | Good morning! Google's strong cloud revenue is offsetting a slowdown in advertising. Elon Musk's xAI is in talks to raise more money at a $40 billion valuation. Reddit posted its first profit as a public company.
| | | | Alphabet said its revenue grew 15% year-over-year to $88.3 billion in the third quarter, driven by acceleration in Google's revenue from renting out cloud servers, which also includes the sale of artificial intelligence to businesses. The cloud result helped Alphabet overcome a dip of nearly 1 percentage point in Google's ad-sales growth between the second and third quarters. Shares rose nearly 6% in after-hours trading. Google's cloud revenue in the September quarter grew 35% year-over-year to $11.5 billion, compared to 29% growth in the second quarter. Google Cloud's operating income of $1.95 billion was six times higher than in the same period a year earlier and 67% higher than in the second quarter. By comparison, Amazon Web Services revenue rose 19% to $26.3 billion in the second quarter and it generated $9.3 billion in operating income. Amazon reports third quarter results Thursday. Google still generates 75% of revenue from ad sales, and revenue from both search and YouTube ad sales increased around 12%, slightly lower than in the second quarter. Free cash flow fell 22% to $17.6 billion, compared to the third quarter of 2023, reflecting Google's increased spending on data centers and computing for AI: Capital expenditures, which include such investments, rose 62.5% to $13 billion in the September quarter. (CFO Anat Ashkenazi said that cost would be the same in the current quarter and would increase next year.) And losses from "Alphabet-level activities" that include its main AI group, DeepMind, increased 39% to $3.2 billion in the third quarter compared to the second quarter, and was nearly twice as high as the same line item cost in the third quarter of 2023. | | | | Elon Musk's xAI, the developer of the Grok chatbot, is in talks to raise more money at a $40 billion valuation, according to a person with direct knowledge of the fundraising efforts. Wall Street Journal was first to report the news. The company, founded last year, raised $6 billion in a round announced in May that valued it at $24 billion, including the investment. Investors in the round included Vy Capital, Valor Equity Partners, Andreessen Horowitz, Sequoia Capital and Saudi Arabian investor Prince Alwaleed bin Talal, among others. In September, Musk completed a cluster of 100,000 Nvidia H100 chips in just four months, a feat that rattled competitors and inspired new investor interest, according to X investors. On Monday, Musk wrote on X that he plans to double the size of that training cluster, which is already the most powerful cluster of GPUs in the world. | | | | Social media company Reddit posted its first profit as a public company in the third quarter, along with much higher revenue and adjusted earnings before interest, taxes, depreciation and amortization than executives had projected. Shares soared more than 20% in after-hours trading. The company reported net income of $29.9 million on revenue of $348.4 million, marking its first profitable quarter as a public company following its initial public offering in March. Revenue rose 68% from the year-earlier period. Third-quarter EBITDA totaled $94.1 million, 57% higher than the top of the range that executives had projected three months earlier. Reddit, which has historically made most of its revenue from selling ads on its website, has mounted a recent push to diversify in part by licensing user-generated content on its site to search engines and generative artificial intelligence model-builders, including Google and OpenAI. Reddit's ad revenue grew by 56% year-over-year to $315.1 million, reflecting its efforts to target small and medium-sized advertisers. "Other revenue," which includes its data licensing partnerships as well as sales of premium subscriptions to Reddit users, grew more than five-fold to $33.2 million, but remains less than 10% of overall revenue. It's unclear how much OpenAI is paying Reddit. CEO Steve Huffman had said in August that Reddit's second-quarter results did not include much of the benefit of the OpenAI licensing deal, which was announced in May. Tuesday, he said Reddit had signed a licensing deal with data aggregator Meltwater. He called licensing a "nice-to-have" business for Reddit, emphasizing the importance of ad sales to Reddit's future. | | | | Shares of chip designer Advanced Micro Devices fell more than 7% in after-hours trading on Tuesday despite the company's decision to raise its sales forecast for artificial intelligence chips that compete with Nvidia's. Sales of AMD's data center server chips, which includes the Instinct MI300A chip that competes with AI chips from Nvidia, rose 122% to $3.5 billion compared to last year, or 7 percentage points faster growth than in the second quarter. And AMD raised its AI chip sales forecast to more than $5 billion for the full year, up from the $4.5 billion forecast it announced three months ago. But the results showed how far behind AMD is compared to Nvidia, whose data center chip sales rose 154% to $26 billion in the quarter that ended in July. Nvidia stock is up nearly three times so far this year, compared to a 20% rise for AMD shares in the same period. Sales of AMD chips for PCs grew 29% to $1.9 billion compared to last year. Gaming chip sales fell 69% to $462 million. Embedded Systems, which includes chips for cars and connected devices in factories, dropped 25% to $972 million. Overall, AMD's sales grew 18% to $6.8 billion in the third quarter. Gross profit rose 24% to $3.4 billion, and AMD generated $469 million in free cash flow, up 13% from the second quarter and up 67% from the third quarter of last year. AMD projected revenue of $7.5 billion in the December quarter, which would be 22% higher than in the same quarter last year. | | | | Zhang Yiming, the founder of TikTok's parent ByteDance, is China's richest person, according to an annual ranking of the country's wealthiest individuals. Zhang's wealth now amounts to $49.3 billion, according to the 2024 Hurun China Rich List. Last year, he was ranked No. 5 with $33.7 billion. Zhang, 41, founded ByteDance in 2012 in Beijing, and turned it into one of the world's most valuable private companies. ByteDance recently bought back stock from employees at a valuation of about $230 billion. Zhang, who stepped down as ByteDance's CEO and chair in 2021, no longer has any executive title or board seat at ByteDance. But he continues to own a stake and is involved in the company's top-level discussions about its long-term direction and strategies, The Information previously reported. Zhang moved to Singapore in 2022, when China was implementing strict Covid-19 lockdowns and long quarantines. Singapore has become a major global hub for ByteDance and TikTok. ByteDance CEO Liang Rubo and TikTok CEO Shou Zi Chew are also based in Singapore. The second richest person on this year's Hurun China list is Zhong Shanshan, the founder of a major beverage company who also owns a pharmaceutical business. The third is Tencent CEO Pony Ma. | | | | Snap said revenue for the third quarter jumped 15% to $1.37 billion, on the high end of its prior outlook, boosted by a 10% gain in digital advertising and more demand for its subscription product, Snapchat+. The parent of Snapchat also turned cash flow positive for the three months ended in September, and it announced a new $500 million stock buyback plan. The company's shares rose 9% after hours. They're down 33% for the year. Snap, one of the first of the major social media companies to report earnings, said it had benefited from more demand for its direct response ads, which prompt users to take an action, like downloading a game. But the report reflected some of the challenges facing the company, which has been dwarfed by rival apps from Meta Platforms and ByteDance's TikTok. While global users hit 443 million, up 9% from the year ago quarter, North American users have flatlined at about 100 million. | | | | PayPal's revenue growth slowed to 6% in the third quarter, the payments firm reported on Tuesday, as growth in payment volume also slowed. Profit was unchanged at about $1 billion. PayPal's payment volume growth has slowed steadily, from 15% a year ago, thanks to competition from rival payments firms and a lapse in focus at PayPal that triggered executive change last year. PayPal CEO Alex Chriss, who joined the company a year ago, said on Tuesday that the company had "fallen behind on innovation" and had to improve its branded checkout platform for merchants, which enables businesses to sell goods to customers, and reinvigorate its mobile version of the products. PayPal has been striking deals with other companies to increase usage of the checkout platform, which recently became a payments processor for Shopify, previously served solely by Stripe. PayPal's checkout platform now controls 5% of U.S. checkout traffic, according to PayPal. Meanwhile, Chriss said the company was "leaning into marketing Venmo for the first time in years" in a bid to lure customers to its debit card and online payment options for consumers and merchants, amid competition for market share from startups such as Square, Zelle and Stripe and other companies that emerged in the recent fintech boom. | | | | | | | | | Opportunities Empower your teams to stay ahead of market trends with the most trusted tech journalism.
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