Key points:

  • Starbucks beats earnings estimates, shares rally.
  • AMD: AI chip sales guidance raised, revenue growth, especially in data center segment.
  • Pfizer: COVID-19 revenue declines, shares decline.
  • Procter & Gamble: consumer spending power declines, price hikes ineffective.
  • PayPal: earnings guidance raised, payments volume and revenue growth.

This week is full of quarterly reports — Tuesday, July 30, brought results from several large companies at once. Among them are Starbucks, AMD, Pfizer, Procter & Gamble, PayPal.

Starbucks efficiency boosts profits

Coffee chain Starbucks beat Wall Street’s quarterly profit expectations despite a decline in global sales, thanks to improved operating efficiency. However, it is worth noting that the company’s results were weighed down by continued weakness in consumer spending in key markets such as the U.S. and China.

Starbucks shares, which have been down 22% this year, showed positive dynamics, rising 5% in extended trading. Such a reaction from investors was provoked by the company’s management reaffirming its previously announced full-year forecasts.

This year, Starbucks is actively implementing a large-scale Siren System plan aimed at upgrading equipment to speed up customer service at its retail outlets. At the same time, the company is taking steps to attract budget-conscious consumers by offering various discounts and promotions.

The trend towards reducing consumer spending and the growing popularity of home cooking against the backdrop of high inflation have forced American fast food chains, including Starbucks, to reconsider their strategy. Companies are actively introducing limited offers and promotions in an effort to bring budget-conscious consumers back to their establishments.

AMD raises AI chip revenue forecast

Advanced Micro Devices raised its 2024 AI chip sales forecast by $500 million during its Q2 earnings call. The company also said it would continue to have a supply shortage of these chips through 2025. AMD shares rose 7.5% in after-hours trading on the news.

AMD’s AI chips are in high demand among major cloud computing companies. Analysts and industry experts see AMD’s chip line as one of the few real alternatives to Nvidia, which currently dominates the market. Nvidia shares also rose 4.7% after AMD’s report.

In the second quarter, AMD’s data center revenue, the company’s largest, jumped 115% to $2.8 billion, slightly above the average analyst estimate of $2.79 billion. Meanwhile, AI revenue, which is largely concentrated in the data center segment, topped the $1 billion mark.

Overall, AMD is forecasting revenue of $6.7 billion, plus or minus $300 million, for the third quarter, slightly above the average analyst estimate of $6.61 billion.

Pfizer raises profit forecast

Pfizer raised its full-year profit forecast in its second-quarter earnings report, buoyed by strong sales of oncology drugs acquired through a major deal with Seagen and robust demand for cardiovascular drugs. It should be noted that the company experienced a significant decline in revenue from COVID-19-related products.

The market for COVID-19 vaccines and drugs, where Pfizer had been a leader, has shrunk significantly. Investors have become less interested in the company’s stock as concerns about the pandemic have abated. As a result, Pfizer’s stock price has fallen by about half from its peak during the pandemic.

Despite these challenges, the company reported quarterly sales growth of 3% on an operating basis to $13.3 billion, the first quarter in which sales have grown since the company’s COVID-19 revenue peaked in late 2022.

P&G reports unexpected sales drop

Procter & Gamble (P&G) reported an unexpected drop in fourth-quarter sales. Despite the company’s efforts to soften the blow of years of price increases, it failed to attract consumers. As a result, P&G shares fell 4.8% on Tuesday.

P&G’s competitors are in similar trouble. Nestle and Unilever also reported below-expected first-half sales growth. PepsiCo missed sales forecasts in early July, and its management said consumers across all income groups were experiencing financial difficulties.

Consumers have become more selective in their purchases, especially among lower-income consumers. In response to changing consumer behavior, P&G has increased promotions and offered discounts, which has led to lower prices on some products. However, this has hurt organic sales growth, especially in the company’s largest unit, which produces detergents and other household products.

PayPal paises 2024 profit forecast

PayPal raised its full-year adjusted profit forecast for the second time Tuesday, after its core payments business beat expectations and reduced competitive concerns. The news sent PayPal shares up 9% in morning trading.

Tech giants like Apple and Google (parent company Alphabet) have been aggressively expanding their digital payments offerings in recent years, raising concerns among analysts and investors that the companies would eat into PayPal’s core business.

However, PayPal’s second-quarter results showed that its total payment volume increased 11% to $416.81 billion, while revenue rose 9% (on a currency-neutral basis) to $7.89 billion, showing that PayPal continues to show strong growth despite increasing competition.

US consumers have also shown unexpected resilience, continuing to shop despite rising utility bills and rising credit loads. PayPal expects this trend to continue during key periods such as the start of the school year and upcoming holiday shopping.