On Thursday, Google (NSDQ: GOOG) posted an impressive 19 percent jump in quarterly sales, as it benefited from a resurgent search-ad market — but investors didn’t think it was good enough and have sent the company’s stock down since. This week, two other online bellwethers — Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) — will have their own chance to impress when they report their results. Here’s a run-down of what to look for.
— Yahoo: Yahoo, which has reported five straight quarters of declining revenue, provided guidance that included the possibility of year-over-year revenue growth during the quarter. Analysts think that will happen — but just barely. On average, they expect a one percent increase in sales.
Last quarter, Yahoo said its search revenue plummeted 15 percent year-over-year. That drop should shrink, considering the company actually increased its search market share last month and overall search ad spending has rebounded nicely. The improving online ad market — which Google said led to strong results in “all major verticals” it tracks — should also help boost Yahoo’s display ad revenue. Citigroup, for instance, expects Yahoo’s display revenue to jump a respectable 13 percent.
The Yahoo earnings call, as well as that of Microsoft later in the week, should also include some new details on the integration of Microsoft and Yahoo’s search technology, because the deal was finally approved during the quarter. Also expect questions on Yahoo’s M&A strategy especially now that it is widely thought to be chasing FourSquare — a company that doesn’t seem to fit with the criteria for acquisitions the company outlined earlier this year (“Small to medium acquisitions where we acquire important technology and the people behind it; Content related: acquire a company for their audience, content or communities, Geographic: where we make an acquisition to move into or strengthen markets.”)
— Microsoft: Microsoft blew past analyst estimates when it last reported its quarterly financials in January. It was the first time in nine months that Microsoft had reported increases in both net income and revenue — and analysts expect the company to grow once again this quarter.
That’s not much of a surprise, considering that PC sales jumped 24 percent over the last three months. During last quarter’s conference call, however, executives took a glum view of business spending, saying that while consumer demand was once again “healthy,” enterprise spending had not come back yet. Look for any changes in outlook there.
Also, expect some improvement in the performance of Microsoft’s online division. Microsoft’s online revenue dipped 4.6 percent last quarter, as increasing search revenue was offset by slumping display ad sales. The number should move into the black this quarter — or some eyebrows will definitely be raised. After all, Microsoft’s Bing search engine has continued to gain share — and executives have publicly talked about improvements in the online ad market.