So many earnings calls to go through but I did my best to pull out what’s most relevant for the macro angle.
MSFT
There was a lot of ‘AI’ mentions in their earnings call. “In Azure, customers continued to exercise some caution as optimization and new workload trends from the prior quarter continued as expected.” Their commercial business saw 19% revenue growth in constant currency with help from Microsoft 365.
“In our consumer business, PC demand was a bit better than we expected, particularly in the Commercial segment, which benefited Windows OEM and Surface even as channel inventory levels remain elevated, which negatively impacted results.”
“Advertising spend landed in line with our expectations.”
GOOGL
AI here too was mentioned a lot.
“In Google Advertising, Search and other revenues grew 2% y/o/y, reflecting an increase in the travel and retail verticals, offset partially by a decline in finance as well as in media and entertainment. In YouTube Ads, we saw signs of stabilization and performance, while in Network, there was an incremental pull back in advertiser spend.”
“Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain.”
With their cloud business, they had still strong growth but “we continue to see slower growth of consumption as customers optimized cloud costs, reflecting the macro backdrop, which remains uncertain.”
On hiring, “In terms of the outlook for headcount for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023, while still investing in priority areas, particularly for top engineering and technical talent.”
On capital spending, “we do now expect that total CapEx for the year for 2023 will be modestly higher than in 2022…And as we discussed last quarter, AI is a key component. It underlies everything that we do and we’re continuing to invest in support of AI, support of our users, advertisers and our cloud customers.”
V
After going through all the business opportunities, the CEO said “While the current environment still feels uncertain, we have contingency plans ready and are prepared to take action as needed. We’re constantly seeking the right balance between the realities of short term with the enormous opportunities ahead.”
“US payments volume was up 10% y/o/y, again helped by lapping the Omicron impact last year…The cross-border travel recovery continues at the pace we expected…As expected, the rebound in Asia is now the primary driver. Travel in and out of Asia reached 2019 levels in the quarter and travel into the US was very close. We believe there is more recovery to come. Travel from Mainland China has mostly benefited other parts of Asia so far, but early bookings suggest strong interest in Europe as the summer approaches.”
“Ticket size is up over 1% y/o/y in Q1 and it’s down about 2% in March through April 21. Ticket sizes are declining as inflation moderates. Most notably, starting in March and through the summer, we will be lapping the peaks in fuel prices last year.” See below as they talked about lower tax refunds y/o/y as another reason for the ticket size slowdown.
“Across other categories of spend in the US, payments volume growth remains strong in services, in particular, travel and entertainment. Non-discretionary spend growth in categories like food and drug is also holding up well. Another factor that is the potential drag on US payments volume growth starting in March and through April is the impact of lapping higher tax refunds. Refunds are largely spent in the few weeks post receipt. Based on IRS reported data through April 14, tax refunds are 11% lower this year.”
TXN
“During the quarter we experienced weakness across our end markets with the exception of automotive, as expected.” I say, with auto inventories now normalizing, this business should slow from here, as the last shoe to drop.
DOW
Net sales were down 22% y/o/y and volumes lower by 11% as “Declines in all operating segments were driven by continued soft global macroeconomic activity.”
On guidance, “In the 2nd quarter, we expect to continue navigating challenging macro conditions around the world. While the pace of inflation has slowed, elevated levels continue to pressure both input costs and demand, particularly in industrials, durable goods and housing. On the bright side, demand in agriculture and energy markets remains resilient, as does consumer demand for personal care and household items.”
WHR
“If you look at the drivers of this improved performance, we did not get a lot of help from the macro environment. The global industry demand was down, but frankly, that is what we expected. It was instead our consistent and disciplined execution of our operational priorities that drove this improvement.” They gained market share too.
“Across the globe, we’re still seeing lower demand due to softer consumer sentiment impacting discretionary appliance purchases, which resulted in a revenue decline of 5.5%.”
UPS
“In the US, relative to our base plan, volume was higher than we expected in January, close to our plan in February, and then moved significantly lower than our plan in March, as retail sales contracted and we saw a shift in consumer spending.”
“Outside of the US, export activity out of Asia remained weak, which negatively impacted revenue in both international and supply chain solutions. In response, we focused on controlling what we could control. We remained disciplined on price.”
“On the consumer side of the US economy, the growth rate on services spending is continuing to outpace the growth rate of goods spending. And within the goods bucket, consumers spent more on essential items like groceries, which tend to be purchased in store. These factors plus a 5 pt drop in consumer sentiment from February to March contributed to the reduction in our volume levels.”
In addition to Asian exports being weak as said above, “Europe narrowly avoided a winter recession.”
Moving to some data. The average 30 yr mortgage rate was up 12 bps w/o/w to 6.55% but mortgage apps rebounded with purchases up 4.6% w/o/w and refis higher by 1.7% w/o/w. It’s obviously the important spring season where inventories of existing homes remain lean and builders are trying to fill the gaps with new homes.
Consumer confidence in Germany and France improved in April. The German figure rose to the best in a year, though still is well below zero at -25.7. Lower energy prices was a key reason. “In addition, the government has introduced various programs both for households and companies to compensate for the high energy prices – at least partially. Together with the expected growth in tariff-based income, more and more households are anticipating that the loss in purchasing power originally feared due to inflation will be much lower.”
The ECB will hike again at their May meeting and Governing Council member Boris Vujcic said as much today, “Inflation is falling, but core inflation is stubbornly high. We have no choice but to continue raising interest rates. We’ll have to do this until we see a change in the trend.” The euro is back above $1.10 vs the USD.
Finally, for the all the talk of bearish sentiment, last week Investors Intelligence said the Bulls got above 50 and the bears were below 25. This week they said Bulls slipped about 2 pts to 48.6 while Bears rose 1 pt to 25.