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Google, Amazon, Microsoft: The Big Day Arrives

There will also be some smaller, newer companies, including recently public cloud name Mulesoft (MULE), which provides a network for programmers’ “APIs," and network test equipment maker Gigamon (GIMO).

As far as expectations for the top names, for Amazon, the Street is at $41.58 billion in sales and 7 cents per share in earnings.

Of course, one big focus will be Whole Foods, the purchase of which closed in the quarter.

MKM PartnersRob Sanderson wrote the other day that Amazon “has about 5 weeks of contribution from Whole Foods,” and that “it is unclear whether management will disclose results from the division as a separate segment or include in the North America segment and the Retail products line."

Goldman Sachs analyst Heath Terry was on CNBC earlier today talking about Amazon, and in particular the likely outlook for this quarter.

Terry, a bull on the stock, writes that the outlook will “come in below where consensus Ebitda estimates are,” but added that the buy-side won’t be disappointed.

"That’s clearly already well known out there,” he noted.

"Revenue guidance is likely to come in above where consensus is, almost certainly because of Whole Foods integration, but even beyond that, and Ebitda is going to come in below because they’re investing."

When Amazon invests, that’s a good thing. This is a company with the highest cash returns on cash invested in the Internet."

For Alphabet analysts are looking for $21.94 billion in net revenue, after extracting “traffic acquisition cost,” or TAC, and $8.35 per share in net income.

As Kip Paulson with Cantor Fitzgerald noted the other day, rising TAC will still very much be a focus on this report.

Overall, we expect broad-based global momentum to continue, driven once again by strong growth in mobile search, YouTube, and programmatic advertising revenue. However, we will keep a close eye on the trajectory of TAC, which was a bit higher than expected in 2Q17 (+28% Y/Y) due to rapid growth in higher-TAC areas (mobile and programmatic).

For Microsoft’s fiscal Q1 quarter, the Street is looking for $23.52 billion in revenue and 72 cents a share in net income.

Evercore ISI’s Kirk Materne, who has an Outperform rating on Microsoft stock, and a $90 price target, is modeling revenue and earnings slightly below consensus, at $23.4 billion and 70 cents.

But he’s very upbeat about the trends he’s hearing. For one thing, Microsoft Azure cloud computing is picking up customers in retail defecting from Amazon:

Our conversations with MSFT’s partners in the quarter suggest Azure and O365 momentum remained robust. Specifically, Amazon’s acquisition of Whole Foods is acting as a catalyst for Azure within the retail and broader consumer vertical as one partner noted, “any CPG company we talk to now defaults to Azure instead of AWS.” We model Azure growth at 89% y/y (vs. 97%% in F4Q) on more difficult compares for F1Q. While we have heard a few comments about the recent sales re-org creating a slower start to the quarter, we believe the overall momentum behind Microsoft's Commercial Cloud offerings remains strong and the release of Azure Stack in September further enhances the company's hybrid cloud offering.

For the personal computer software side of the business, expect no major surprises, he writes:

As it relates to the Windows business, IDC reported a -0.5% decline in PC's (vs. -1.4% expectations) so we expect that there should not be any major surprises on that front, but we are anticipating that the F2Q guide will incorporate a higher ramp in op-ex due to the Xbox launch and this will likely keep FY18 estimates in check. Overall, we remain very constructive on Microsoft's positioning when taking a 6-12 month view and believe that the long- awaited inflection in EPS growth should start to play out in 1H CY18 as the Commercial Cloud business continues to ramp, F/X starts to shift back into MSFT's favor (hopefully), and some of the incremental costs associated with Xbox and the consumer businesses start to normalize. Maintain Outperform and up our PT to $90 or 23x CY19 EPS, as we roll forward onto CY19 estimates.


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