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The pandemic-induced tech boom is already waning (for some)

April 28, 2021, 2:10 PM UTC

At least for the first quarter, the pandemic-induced tech boom is still strong. Microsoft reported that its sales grew 19% to $41.7 billion, better than analysts forecast, led by its Azure cloud unit and sales of Xbox gaming consoles (which could have been even better if not for the global chip shortage). “Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating,” CEO Satya Nadella said.

At Google, advertising is booming as more people 49 and under watch YouTube videos than old-fashioned TV. Overall sales rose 34% in the quarter to $55.3 billion, led by a 49% increase at YouTube and 46% gain from Google Cloud. Some analysts now think YouTube could match Netflix’s expected annual revenue of $30 billion this year. But CFO Ruth Porat was a little more conservative in her outlook than Nadella. “It’s too early to forecast the extent to which these changes in consumer behavior and advertising spend will endure,” she said on a call with analysts. Noting sales of work-from-home gear probably wouldn’t continue, she added, “We think it’s premature at this point to really assess how durable this consumer behavior trends are.”

At Advanced Micro Devices, however, the laptop trend is still going strong and all the cloud growth from the likes of Microsoft and Google is also fueling server chip sales. Revenue almost doubled from a year ago to $3.4 billion and AMD forecast it would grow about 50% in 2021, considerably higher than the 37% growth it projected just a few months ago. CEO Lisa Su was bullish on the rest of the year. “What we’ve seen over the last 90 days is consistent strong demand (and) very strong visibility from our customers on what they need throughout the year,” she told analysts. “We saw actually strong signals in the first quarter that it would be a strong data center year for us.”

But, as we saw in the disappointing results of Netflix last week, there were some warning notes on Tuesday in the results of tech services. Music streaming service Spotify, which grew tremendously last year, said sales for the past quarter increased 14% to $2.3 billion, but it forecast as few as 4 million additional paid subscribers in the next quarter while analysts were looking for double that amount. And the slowdown at Pinterest is already starting. Revenue increased 78% to $485 million but monthly active users grew only 30% to 478 million, less than Wall Street expected. And analysts probably didn’t want to hear this from CEO Ben Silbermann:

“As pandemic lockdowns were eased in some parts of the world during mid-March, we began to see signs of less engagement and user growth on Pinterest, and we assume this means people are spending more time off-line. While it’s impossible to say how people act as we enter the summer months, we anticipate this trend will continue.”

The stock market’s reaction has been fairly predictable, except perhaps for Nadella’s team. Shares of Google, previously up 31% this year, jumped another 5% in premarket trading on Wednesday. AMD shares, down 7% in 2021 so far, gained 4%.

But Spotify shares, already down 7%, fell another 7% on Wednesday. And Pinterest shares, which had gained 18% in 2021, plunged 11% in premarket trading.

Microsoft seemingly should have been a winner, doing better than expected, but perhaps narrower profit margins or warnings that the chip shortage could hit hardware sales further spooked investors. The company’s stock, already up 18% in 2021 and putting the company’s market value within spitting distance of $2 trillion, slipped 3% in premarket trading.

Sorry, Satya, maybe it will take one more quarter to get you over the $2 trillion mark.

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

NEWSWORTHY

Justin in the sky with diamonds. At Fortune, we use the Iterable platform to disseminate our newsletters. It's not the most logical software I've ever used and it can be glitchy at times. In the category of "oh, now that makes so much sense," Iterable on Tuesday fired CEO Justin Zhu for microdosing LSD while at work. Speaking of weird internal controversies, Casey Newton had some of the inside scoop on Basecamp's new office policies. Some of the debate goes back to a 12-year-old list employees started keeping making fun of customer names. Apologies and recriminations about the list erupted this month, with co-founder David Heinemeier Hansson posting an explanation that some employees found wanting, Newton reports in his newsletter.

Eve of destruction, tax deduction. The death of Samsung chairman Lee Kun-Hee last year triggered a massive $11 billion estate tax bill for his family, which is turning into a bonanza for a couple of art museums. To cover part of the bill, the family is donating to two South Korean state-run museums thousands of pieces of art, including works by Picasso, Dali, Gauguin as well as modern Korean artists Park Soo-keun and Lee Jung-seop.

App for forgiveness, not permission. There were some semi-juicy filings in the Apple versus Epic Games case on Tuesday. The biggest nugget was that SVP Eddy Cue wanted to make an Android version of Apple's iMessages app back in 2013 but fellow SVP Craig Federighi shot down the idea, saying it would just enable "iPhone families giving their kids Android phones." And while we have long known that Steve Jobs never wanted to let third party apps on the iPhone, we learned yesterday that then-software boss Scott Forstall not only opposed Jobs but also had his engineering team already working on enabling outside apps before Jobs gave the okay.

NFT and me. Some female sports stars are getting in on the non-fungible token boom. Artist Lauren Nipper is designing digital artworks linked to NFTs highlighting WNBA star Sue Bird, soccer ace Megan Rapinoe, and skateboarder extraordinaire Mariah Duran, among others in an initial release on May 10 on the Zora platform. Seems a lot more desirable than Nyan cat but what do I know?

Where's the beef. Reflecting the need to change even our most basic habits to address climate change, recipe site Epicurious says it will no longer publish new recipes that include beef. "Our shift is solely about sustainability, about not giving airtime to one of the world’s worst climate offenders," editors Maggie Hoffman and David Tamarkin explained in a post. "We think of this decision as not anti-beef but rather pro-planet."

FOOD FOR THOUGHT

We have been tracking the debate over hot startup Clubhouse for months, but signs are emerging of a slowdown (despite a deal this week for exclusive NFL chats). Nick Bilton's reporting offers a downbeat assessment of Clubhouse's prospects in a piece for Vanity Fair.

Even the most vociferous users I’ve spoken to—those who say Clubhouse changed their lives during the pandemic, and who spend countless hours a week listening or talking on the platform—have said they are using the app less now that they are going back out into normal society. “I think the app is changing. People may spend an hour or two on there instead of six straight hours. It feels more like people will tune in for programming occasionally, as opposed to using it as an online community to cure the loneliness of quarantine,” one super-user of the platform told me.

IN CASE YOU MISSED IT

Apple earnings preview: Are services sales at risk from greater regulation? By Aaron Pressman

Women operate differently in the C-Suite, according to new research By Sheryl Estrada

23andMe wants to use genetic data to fight ‘Long COVID’ By Marco Quiroz-Gutierrez

LVMH launches luxury deadstock resale site—making good on the fashion industry’s past mistakes By Sophie Mellor

The battle for your corporate cards heats up By Lucinda Shen

The inclusion revolution in leadership: Changing who leads will transform how we do business By Halla Tomasdottir

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BEFORE YOU GO

I hope whoever wins those female sports star NFTs takes good care of them. The winner of an NFT auction linked to a drawing by the late, great street artist Jean-Michel Basquiat will be given the option of destroying the original. The 1986 work on paper known as Free Comb with Pagoda was last sold in 2015 for an undisclosed sum. This may be one of the worst ideas I've heard. Let's do better, people.

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