Major technology companies needed strong Q2 earnings. In the lead-up to the first prints of the mega-cap tech names, the Nasdaq Composite index tanked, declining more than 2% in a single day and worsening the rotation out of technology stocks that have been ongoing since the year’s second half began in July.
The good news is that the results, so far, have been quite good. Prints from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) have managed to beat Wall Street forecasts on the top and bottom lines, prompting a relief rally in the market. The day after Microsoft’s Q2 results were announced, the Nasdaq Composite index rose 2.55% (more than 400 points).
However, it has not just been the mega-cap tech companies that have announced better-than-expected Q2 earnings. Several tech companies have been surprised by the upside, helping tech stocks to recover. Here are three promising tech stocks to buy after Q2 earnings.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is credited with reviving the entire microchip sector with its Q2 print. AMD stock rose 5% after the semiconductor company reported financial results that showed accelerating sales of its artificial intelligence (AI) microchips. Other chip stocks did even better, with shares of Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) rising 10% the day after AMD’s Q2 earnings report.
AMD announced EPS of 69 cents, which topped Wall Street forecasts of 68 cents. Revenue totaled $5.84 billion, ahead of consensus expectations of $5.72 billion. The strong results were attributed to sales of the company’s AI chips, with sales of its new MI300X chip exceeding $1 billion during the quarter. Owing to the brisk Q2 sales, AMD raised its projection for sales of its AI chips this year, saying it now expects revenue to exceed $4.50 billion in 2024. Last fall, AMD forecasted 2024 AI chip sales of $2 billion.
AMD’s AI chip sales are reported in the company’s Data Center unit, which rose 115% year-over-year to $2.80 billion during Q2. AMD is now the world’s second largest vendor of data center graphics processing units (GPUs) used to train AI models, behind only Nvidia. Additionally, AMD reported that revenue for its core business, making processors for laptop computers and servers, rose 49% from a year earlier to $1.50 billion. AMD stock is up 27% in the last 12 months.
Microsoft (MSFT)
Microsoft’s just released Q2 financial results were actually very strong. The stock fell 2% immediately after the print because the company reported revenue for its cloud computing unit that missed Wall Street targets. However, a closer look at the numbers shows that Microsoft is firing on all cylinders, even when it comes to the cloud. The company reported an EPS of $2.95, which exceeded the analysts’ forecast of $2.93. Total revenue came in at $64.73 billion, which topped consensus expectations of $64.39 billion.
Sales at Microsoft were up 15% from a year earlier. While cloud computing revenue of $28.52 billion did miss the $28.68 billion forecast on Wall Street, sales within the cloud segment were still up 19% from a year ago. Revenue from Azure cloud services grew 29% year-over-year. Elsewhere, Microsoft’s personal computing unit, which houses the Windows operating system, devices and search advertising, saw sales of $15.90 billion, up 14% from the same period of 2023.
Microsoft now has over 500 million monthly active users in gaming from consoles, personal computers and mobile devices following last year’s Activision Blizzard acquisition. The Q2 results confirm that Microsoft is a highly diversified technology giant that dominates nearly every market it competes in. Despite the dip in post-earnings, MSFT stock has been up 24% over the last 12 months.
PayPal (PYPL)
Financial technology company PayPal Holdings (NASDAQ:PYPL) came out of nowhere to deliver a great Q2 print. The results sent PYPL stock up more than 10% and suggested that a long-awaited turnaround at the company might finally be taking hold. PayPal announced EPS of $1.19, which beat Wall Street’s forecast of 99 cents. Revenue of $7.90 billion topped the $7.80 billion expected on the Street.
PayPal also highlighted that its total payment volumes rose 11% to $416.80 billion during the quarter, while transaction dollars increased 8% to $3.60 billion. The strong financial results come as PayPal undertakes a turnaround strategy focused on payment innovations such as faster checkout times and AI-generated recommendations from merchants.
With nearly 400 million consumer accounts and 35 million merchant accounts, PayPal handles about 25% of the world’s e-commerce transactions yearly. In terms of guidance, PayPal said that, for the current third quarter, it expects mid-single-digit revenue growth and high-single-digit earnings growth, both ahead of Wall Street forecasts. Thanks to its post-earnings bump, PayPal stock is now up 8% yearly.
On the date of publication, Joel Baglole held long positions in NVDA, GOOGL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
