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APRIL 26, 2023

MICROSOFT REPORTS STRONG EARNINGS FUELED BY CLOUD AND AI SERVICES

Microsoft Corp (MSFT) announced a favorable quarterly profit and sales – above analysts’ expectations, due to strong demand for its corporate cloud-computing services. The software company also offered a positive outlook for its developing artificial intelligence services, investing heavily in systems for itself and partner companies like OpenAI. Furthermore, in the fiscal third quarter ended in March, MSFT recorded $2.45 per share earnings on $52.9 billion in revenue. On the other hand, total sales growth has slowed to single digits, however, MSFT’s Azure and Office 365 cloud-based services continue to retain customers, even in a challenging economy. The company’s renewed focus on AI initiatives is driving optimistic growth, with shares increasing by 20% in the past quarter compared with a 7% rise in the S&P 500 Index.

ALPHABET EXCEEDS EXPECTATIONS

Alphabet Inc. (GOOG) has reported earnings of $1.17 per share for the last quarter, exceeding the expected earnings of $1.06 per share, but falling behind last year’s $1.23 per share. The report also highlighted that the company’s revenue for the last quarter was $58.07 billion, which surpassed the predicted revenue estimate. Furthermore, Alphabet’s cloud-computing business was profitable and its YouTube ad revenue beat expectations. However, the overall ad revenue was lower than the previous year due to an advertising pullback that is affecting the tech and media industry. Despite this, Alphabet managed to surpass the earnings expectations. In addition, the company’s stock has gained 20.3% this year and announced its buyback plan, approving shares worth $70 billion.

MORNING EARNINGS REPORTS

Boeing’s first quarter financial results revealed a loss of $425 million due to production problems in building passenger planes and a write-down for a military tanker. However, revenue rose by 28% from previous year, as airlines continued to purchase new jets to keep pace with increasing travel demand. Boeing’s CEO, David Calhoun, stated that the company remains confident in meeting its goals for the year, and reassured customers that the fuselage issue on the Max does not compromise the safety of its planes.

Meanwhile, Norfolk Southern Corporation’s first-quarter report showed income from railway operations of $711 million – a significant decline of 34% compared to last year’s figures. The results included an initial $387 million charge for the Eastern Ohio incident. However, while the figures may seem discouraging, Norfolk Southern’s CEO, Alan H. Shaw, remained positive about the company’s long-term priorities and value.

FIRST REPUBLIC BANK’S STRATEGY TO STABILIZE AMID ECONOMIC TURMOIL

First Republic Bank is considering selling $50 billion to $100 billion in assets, including long-dated mortgages and securities, in an attempt to address its asset-liability mismatch. Potential buyers will be incentivized by receiving warrants or preferred equity at a price higher than their market value. The bank’s value dropped 49% to a record low after its full-extent difficulties were revealed in its earnings report on Tuesday. The San Francisco-based bank aims to raise capital, avoid seizure by the Federal Deposit Insurance Corp., and stabilize itself by facilitating negotiations with other banks to execute a turnaround.

PACWEST BANCORP OVERCOMES LIQUIDITY CRISIS WITH DEPOSIT STABILIZATION AND ASSET SALES

PacWest Bancorp (PACW) experienced a liquidity crisis due to numerous customer withdrawals in March. However, the latest statement from the company indicates that deposits stabilized in late March and rebounded well in April after the bank received $1.4 billion from a financing facility from Atlas SP Partners. Consequently, the bank’s shares rose by 21% in the U.S. premarket. Furthermore, PACW has also sold its $2.7 billion lender finance loan portfolio, and is taking necessary steps to shore up liquidity as the total assets are expected to drop to $35 billion in the next few months once asset sales are completed.

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