Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Microsoft’s revenue from cloud-computer business rose, but sales of Windows sagged.

Kiyoshi Ota/Bloomberg

Investors have started to reward Internet companies that can show both financial discipline and a path to long-term growth, making Amazon.com Inc. and Google Inc. the clear winners of the technology earnings season.

Google kept costs in check in the second quarter, and shareholders cheered with a 16-per-cent stock gain after the search giant released better-than-expected results. Amazon also surged after posting a surprise profit, demonstrating that the Web retailer is capable of making money when it puts a brake on spending.

"Internet investors are focused more on growth in users and revenue," said Paul Sweeney, an analyst at Bloomberg Intelligence. "Amazon is the best example of this investor mindset. However, whenever a company throttles back its expenses and drives profits, as Amazon and Google did this quarter, investors are pleased and drive the stock higher."

Story continues below advertisement

By contrast, Facebook Inc., which vowed to keep its brisk pace of investments to lure users and advertisers, fell after chief executive officer Mark Zuckerberg cooled down expectations about when apps such as WhatsApp, Instagram and Messenger could start making money on their own. LinkedIn Corp. and Twitter Inc. slumped over concerns that user growth is slowing. Microsoft Corp. posted its largest-ever quarterly loss. And Apple Inc. failed to meet analysts' predictions for iPhone sales and growth for the current quarter.

Technology companies in the Standard & Poor's 500 Index beat analysts' earnings estimates at a 71-per-cent pace so far in the season, data compiled by Bloomberg show. The rate is lower than for the S&P 500 index – at 74 per cent – with notable misses including Yahoo Inc. and Oracle Corp.

"The second quarter was very much a mixed bag," Mr. Sweeney said.

Here's a look at the companies:

Google, Amazon

Google's shares surged after chief financial officer Ruth Porat signalled plans to bring more restraint to spending at the Internet search giant.

"The priority is revenue growth," Ms. Porat said on a conference call after the report, her first at Google. "We have a breadth of opportunity, but pursuing revenue growth is obviously not inconsistent with expense management."

Story continues below advertisement

For Amazon, a day of sales on July 15 to mark the company's 20th anniversary, called Prime Day, exceeded expectations. The promotion, designed to drive Prime membership sign-ups, generated orders surpassing Black Friday. Revenue for the company's cloud-services business rose 81 per cent year over year, and 49 per cent from the previous quarter.

On the cost side, operating expenses grew slower than sales, rising 17 per cent to $22.7-billion (U.S.), Seattle-based Amazon said. Spending on marketing and fulfilment centres were unchanged as a percentage of sales compared with a year earlier, according to Brian Olsavsky, Amazon's CFO.

Facebook, Microsoft

Facebook reported second-quarter revenue that beat analysts' estimates, but investors were disappointed by the growth of the company's applications that could be making billions on their own. The focus for the three apps – WhatsApp, Instagram and Messenger – was still on expanding their communities, Mr. Zuckerberg said. Messenger has 700 million users, more than double the size of Twitter; WhatsApp has 800 million; and Instagram has more than 300 million. Instagram started to sell advertising, but it's not going to have an impact on Facebook's bottom line for a long time, chief operating officer Sheryl Sandberg said.

Microsoft posted its largest-ever quarterly loss and offered a disappointing sales forecast. Net loss amounted to $3.2-billion due to a $7.5-billion writedown of Microsoft's Nokia handset unit.

While revenue from Microsoft's cloud-computing business rose, sales of Windows to PC makers and corporate customers sagged. The writedown was an acknowledgment that the Nokia deal had lost almost all its value after failing to rescue the company's smartphone business.

Story continues below advertisement

Microsoft shares fell 3.7 per cent the day after the company reported, the biggest single-day decline since late January.

Twitter, LinkedIn

While Twitter's second-quarter sales topped analysts' estimates, the company posted disappointing numbers on user growth. CEO Jack Dorsey and CFO Anthony Noto took a critical tone on the pace of expansion on their earnings call with analysts, saying they don't expect significant progress any time soon.

LinkedIn increased its annual revenue forecast, topping analysts' estimates, but said most of the gain will come from the acquisition of the education website Lynda.com. Shares of the professional-networking website slumped on concerns that the company's core growth areas were slowing.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies