This is part of the the full newsletter for Week 4 of October 2023, which you can find on LinkedIn here.

Alphabet’s Cloud Division Disappoints for 3Q 2023

The alphabet for Alphabet is L for its cloud division this quarter. 3Q 2023 overall results were fine, and within expectations but investors are all heated up about its cloud division not performing as well as it could have been. Here’s a quick summary

• Overall revenue growth is in line at 11% and US$76.7 billion (consensus: US$76.0 billion)
• Cloud service revenue at US$8.4 billion (consensus: US$8.6 billion)

You see, investors had high hopes that Alphabet’s cloud division can ramp up its operations considering that AI is in full swing now and requires much more computing power. Currently, Alphabet’s Google Cloud division is at third place (11%) behind Microsoft Azure (22%) and Amazon Web Services (32%).

For you: Many investors are betting on Alphabet’s catch up to the two big players in the cloud space, and the recent results seem to have shown it has a long way to go. You might want to wait a bit for at least two more quarter of results to see whether it is worth investing in.

On the Other Hand, Meta Beat Expectations

After the bloodbath in 1H 2023, Meta seems to be back on its feet. Its 3Q results beat expectations on the back of higher revenue from its advertising segment.

• Overall revenue growth at 23% and US$34.2 billion (consensus: US$33.6 billion)
• Daily active users at 2.09 billion (consensus: 2.07 billion)

Meta is up by 150% since the beginning of the year despite the hiccup of its Reality Labs division which focuses on the metaverse. This puts Meta one of the best-performing stocks for the year, even beating Alphabet (which has gained by 55% year-to-date). Threads was one of the most significant development this quarter, entering into X’s (formerly Twitter) market in short messaging.

For you: While the 3Q 2023 results beat is positive for Meta, its Reality Labs division is still posting operating losses, bringing total loss from this division to US$25 billion currently. Investors need to pay close attention to this division as its losses could compound significantly.