Until a few weeks ago, we were talking about Amazon’s potential to become the first company to reach $1 trillion in market cap.
It was Apple who managed to achieve that milestone first and Amazon, even though it briefly touched this during intraday trading in September, needs now to look at its back since it is on the way of being surpassed by Microsoft.
Amazon share price closed yesterday's session with a gain of 7% yesterday but this is all being wiped out in after-hours trading following Amazon’s earnings report after third quarter revenue and fourth-quarter guidance missed expectations.
Amazon did report healthy third-quarter profit of $2.9 billion, or $5.75 a share, and was expecting on average to report earnings of $3.08 a share, according to FactSet.
More concerning for investors though was Amazon’s forecast of sales in the fourth quarter — the all-important holiday-shopping quarter for retailers — of $66.5 billion to $72.5 billion. Analysts on average had been projecting fourth-quarter sales of $73.8 billion for Amazon.
Amazon’s forecast would mean sales growth of 10% to 20% from the 2017 holiday quarter, well lower than the 30% growth Amazon showed last year and had maintained this year.
While Apple and Amazon get a lot of publicity, Microsoft is considered more conservative however it has been slowly clocking cloud gains on path to potentially reach the $1 trillion milestone.
On Wednesday Microsoft managed to beat expectations on both earnings and revenue with the price jumping 4%. Key figures below:
• Earnings: $1.14 per share, excluding certain items, vs. $0.96 per share as expected by analysts, according to Refinitiv.
• Revenue: $29.08 billion, vs. $27.90 billion as expected by analysts, according to Refinitiv.
The company's biggest business segment, which includes Windows, devices, gaming and search ads fetched $10.7 billion in revenue, up 15 percent. The segment came in above the FactSet consensus estimate of $10.18 billion.
Another important sector is business focused cloud services with Microsft’s Azure challenging market leader Amazon Web Services. Commercial Cloud ultimately came in at $8.5 billion, up 47 percent year over year, while analysts were expecting it at $8.3 billion. (see table showing YOY % change in revenues).
As at today, Amazon is worth $869 bn and Microsoft is worth $831 bn, that is just a difference of 4%. If we now consider the after-hours trading too, Amazon would be worth $808 bn whilst Microsoft will be slightly higher at $818!