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| Here’s your daily business briefing. - 🤖 Arm revenue forecast disappoints, shares drop amid AI boom
- 🔍 Deep Dive: Euro 2024 to boost beer sales
- 🍔 McDonald's introduces $5 meal deal to attract customers
Thanks for reading! Shriram
p/Shriram | |
| 1 | | Despite a 47% surge in fourth-quarter revenue to $928M, Arm's shares fell up to 10% last week after projecting revenues for the year to March 2025 between $3.8B and $4.1B, missing analysts' expectations of $4.01 billion. The U.K. chip designer's market capitalization dropped from about $117B in February to $109B before the earnings announcement. More: - CEO Rene Haas emphasized the pivotal role of AI software models such as OpenAI's ChatGPT and Meta's Llama in propelling the company's remarkable expansion.
- Arm's CFO, Jason Child, anticipates sustaining a minimum 20% YoY growth in total revenue for fiscal years 2026 and 2027.
- Revenue in the recent quarter was driven by a substantial increase in royalties from its V9 chip designs, leading to a 37% rise in royalty revenue to $514M.
- Arm's V9 technology chips now make up 20% of its royalty revenues, up from 15% in the prior quarter.
- According to a report by Nikkei Asia, SoftBank Group's Arm Holdings intends to establish an AI chip division and unveil its initial products by 2025.
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What the numbers say: The Euro 2024 football tournament is expected to boost European beer sales, particularly in countries like the U.K., France, Spain, Italy, and Germany. Countries such as England, Germany, the U.K., and Spain, which are top beer consumers, are favored to progress in the tournament, potentially further driving beer sales. Relevance: The beer and spirit industries' performance in Europe and the U.S. signals trends in consumer preferences and economic conditions. The Euro 2024 tournament and better weather offer beer companies a chance to rebound while spirit makers grapple with pandemic-induced challenges, emphasizing the importance of strategic adaptation. Where to see the impact: Investors in the beverage sector should track leading beer and spirit firms amid events like Euro 2024 and evolving consumer behaviors. Analysts and policymakers can gauge the broader economic effects of changing beverage preferences, impacting spending, trade, and industry competitiveness. | | | |
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| 3 | | McDonald's aims to introduce a $5 meal deal in the U.S. to appeal to cost-conscious consumers, possibly featuring a McChicken or McDouble with fries and a drink. CEO Chris Kempczinski stressed the importance of affordability during the first-quarter earnings call, leading to a 2.7% increase in McDonald's shares and declines for Wendy's and Restaurant Brands International Inc. More: - Franchisees overseeing 95% of U.S. stores had previously turned down the $5 meal deal over profitability worries, especially in states with elevated minimum wages.
- McDonald's obtained financing from Coca-Cola Co. to offset profit losses and allay franchisee worries.
- McDonald's seeks to provide value and affordability to customers amidst shifting consumer preferences and competition from rivals such as Burger King and Wendy's.
- McDonald's U.S. operators will soon be required to contribute to a new digital marketing fund to bolster the company's competitive advantage in mobile ordering and digital operations.
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| 4 | | Alibaba is supporting China's AI startups with its cloud computing infrastructure, offering computing credits instead of cash-for-equity funding, mirroring Microsoft's approach with OpenAI. Notably, it's investing in key startups like Moonshot, Zhipu, MiniMax, and 01.ai, focusing on localized versions of popular U.S. applications such as OpenAI's ChatGPT. More: - In February, Alibaba spearheaded a $1B fundraising round for Moonshot AI, appraising the startup at $2.5B, with almost half the investment provided as cloud computing credits.
- Alibaba's investment model echoes that of Microsoft and Amazon, involving cash transfers to AI startups with the condition that the funds be utilized for training and operating models on their servers.
- Chinese AI startups prioritize computing-for-equity arrangements due to limited cloud resources resulting from U.S. restrictions on advanced chip exports.
- Alibaba's AI investment strategy dovetails with its acquisition of top-tier Nvidia GPUs to maximize their value amid tightening export controls.
- Alibaba's substantial support for AI startups in China has led some industry insiders to jest that investing in Alibaba stock is like buying into a China AI ETF.
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| 5 | | According to Just Capital's research, Goldman Sachs, American Express, Deckers Outdoor, S&P Global, and Splunk emerged as the leading companies for parents in 2024. These companies provide extensive benefits such as 20 or more weeks of paid parental leave for primary and secondary caregivers, parental leave equality for all caregivers, and subsidized backup dependent care. More: - S&P Global distinguishes itself with a 26-week paid parental leave policy, highlighting its dedication to nurturing employees as a cornerstone of corporate achievement.
- SHRM states that parental leave costs include employee salaries during leave and expenses like productivity loss and temporary replacements.
- Although costly, investments in paid parental leave are essential for retaining valuable employees and promoting fairness in the workplace.
- Companies such as Deckers Outdoor and Goldman Sachs strive for gender balance in leadership roles, with Deckers targeting achievement by 2030.
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| 6 | | SMIC cautioned about fierce competition in the chip sector after reporting a first-quarter profit that fell short of expectations. Despite a 19.7% YoY increase in revenue to $1.75B, net income plummeted 68.9% to $71.79M, below analysts' projections, with gross margin hitting a nearly 12-year low at 13.7%. More: - SMIC observes a semiconductor industry recovery in the first quarter, noting customers' gradual inventory level improvements.
- More than 80% of SMIC's income comes from Chinese clients, and its chips are utilized in a wide range of applications, including computers, cell phones, cars, and IoT technologies.
- The organization intends to prioritize investments in R&D and capacity building to boost market share and competitiveness.
- Second-quarter revenue is projected to rise 5-7% from the first quarter, while gross margin may decrease to 9-11% due to increased depreciation and capacity.
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| 7 | | Quick Hits: - Sherry House, formerly of Lucid Motors, is set to join Ford in June, initially assuming a different role before transitioning to CFO in 2025, while John Lawler, the current CFO, will serve as vice chair until then.
- Apple issued a rare apology for a brief promotional video showcasing their new iPad Pro tablet, following widespread social media backlash.
- GameStop's shares jumped 74% on Monday following a meme posted by Keith Gill on X, the account's first activity in three years, with the stock rising over 110% earlier and experiencing multiple halts due to volatility.
- A Delaware federal jury ordered Microsoft to pay $242M to IPA Technologies for patent infringement, finding that Microsoft's Cortana virtual-assistant software violated IPA's patent rights in computer-communications software.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Shriram Jeevakumar | |
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