Big tech companies like Amazon and Alphabet are ramping up capex spending in 2025.
From Nasdaq: 2025-02-19 09:38:00
In a Motley Fool podcast, analysts discuss the macro impact of the jobs report and tariff head fake, Amazon and Alphabet earnings, PayPal’s quarter, Spotify’s dominance, and Chipotle’s expansion plans. They also highlight Academy Sports and Outdoors and Uber as stocks to watch.
The discussion continues with an investing angle on legalized sports betting and parlays. Stock Advisor reveals the 10 best stocks to buy now, excluding Amazon. The service has outperformed the S&P 500 since 2002 and offers a blueprint for success with regular updates and new stock picks.
The podcast delves into the $300 billion capex plans of big tech, the implications of tariffs on Canada and Mexico, and the potential economic impact. Analysts advise staying the course with index funds and consider adjusting asset allocation for at-risk stocks. Stay tuned for more insights on the macro picture. Amazon and Alphabet report strong earnings, with Amazon’s sales up 10% and earnings up 89%. However, future guidance and capex spending have investors spooked. Alphabet sees revenue of $96.5 billion, Cloud revenue up 30%, but a modest miss on revenue and slower cloud growth. Both companies are ramping up capex spending for AI investments.
Amazon’s first quarter guidance is lower than expected, with sales growth expected to be 5-9%, the slowest on record. Operating income is also lower than expected. Capex guidance for 2025 is $105 billion, driven by AI investments. Alphabet reports revenue up 12%, YouTube revenue up 13.8%, and Cloud revenue up 30%, with capex spending of $75 million for AI infrastructure in 2025.
Big Tech companies like Amazon, Alphabet, Microsoft, and Meta are collectively spending over $300 billion on capex in 2025. Despite concerns, the companies are investing heavily in AI and data centers to remain competitive in the tech space. The Deep Seek development had little impact on these companies’ capex plans, highlighting the necessity of these investments for their future growth. PayPal reported strong Q4 results with revenue at $8.4 billion, transaction dollars up 7%, and non-GAAP earnings per share up 5%. CEO Alex Chris has focused on small to medium-sized businesses and Venmo monetization, with Venmo total payment volume up 10%. Despite concerns on growth, PayPal remains a payment juggernaut.
Spotify posted its first-ever annual profit, leading to a market reaction with shares up 170% over the past year. Monthly active users increased by 35 million to 675 million, and revenue grew by 16%. Gross margins widened to 32.2%, and operating income beat expectations at 477 million euros. Despite the stock not being cheap, guidance is strong.
Spotify is in a strong customer retention and loyalty position, with 263 million users compared to competitors like Apple Music and SiriusXM/Pandora. The company’s dominance in the music streaming space makes it unlikely for users to switch, similar to Costco’s customer loyalty. The outlook remains positive for Spotify’s continued growth and success. Chipotle reported strong numbers with total revenue growth of 13.1% totaling $2.8 billion for the quarter. Comps were up 5.4% fueled by digital sales comprising 34% of total sales. Despite some margin contraction due to food cost inflation, the company remains optimistic about new store openings and increasing average unit volumes to capitalize on market opportunities.
Legal sports betting continues to surge with $1.3 billion in legal bets on the Super Bowl in 2021, a one billion dollar increase from the previous year. The growth can be attributed to more states legalizing sports betting and heavy marketing efforts by sports media. Companies offering sports betting options are seeing increased interest and investment opportunities. A recent study by St. Bonaventure University and Sienna College found that around 40% of Americans now participate in sports betting, which was previously prohibited. However, concerns have been raised about a potential rise in gambling problems, with about 10% of young men possibly experiencing issues. The debate continues on whether sports betting is a viable investment option.
Investing expert Nick Sciple believes that the gambling industry, including sports betting, is here to stay due to its long history and popularity. While some uncertainties exist, such as fluctuating state taxes on sports betting, the industry continues to attract capital. However, the evolving landscape of online gambling, or iGaming, presents new challenges and opportunities for investors.
The success of online gambling operators like Flutter and DraftKings compared to physical casino operators like Wynn and MGM can be attributed to the significant growth of online sports betting in recent years. The online sector has seen immense growth, with licensed sportsbooks generating nearly $150 billion in handle in 2024, compared to $13 billion in 2019. Companies like DraftKings and FanDuel have capitalized on this growth, dominating the online sports betting market. Physical casino companies, on the other hand, are struggling to keep up with their online counterparts and remain reliant on their brick-and-mortar establishments for revenue. Visitors in Las Vegas and Macau are still below pre-pandemic levels, with Vegas having 41.7 million visitors in 2024 compared to 42.5 million in 2019. Online gambling growth may be affecting in-person visits. Investment in the industry is influenced by stability in tax rates and regulations, as well as competitive intensity and consolidation trends.
Parlays, multi-leg sports bets, accounted for 27% of all sports bets last year but made up more than half of the betting revenue. However, they are considered sucker bets due to the low chances of winning and higher profits for sportsbooks. Optically appealing, parlay bets exploit cognitive biases and are heavily promoted in sports betting ads.
Despite the appeal of potential high rewards, parlay bets are about three times more profitable for sportsbooks than straight bets on average. Sportsbooks heavily promote parlays to increase profits, targeting bettors through personalized bets and ads. While betting on the Super Bowl can be fun, it is advised to stick to straight bets with better odds and not bet more than you can afford to lose.
For a fun bet on the Super Bowl, consider wagering on the shortest touchdown in the game being under 1.5 yards, with odds at -166. While the Chiefs are a popular pick to win, prop bets offer an opportunity to add excitement to the game beyond just the final outcome. Consider bets that align with your interests and budget for a more enjoyable betting experience. The Eagles’ signature play, the Tush Push, is a reliable way to score with QB Jalen Hurts. Betting on Hurts to score exactly one rush touchdown could pay out at plus 170 odds. Analysts predict a Tush Push touchdown in the upcoming game, making it a tempting bet for Sunday’s game.
Motley Fool Money analysts Nick Sciple and Ricky Mulvey predict the Tush Push will be a key play in the Super Bowl. Listeners are encouraged to stay tuned for more insights on the game and stock picks. Nick and Ricky share their favorite game day snacks, while Ron Gross and Jason Moser discuss their stock picks for the week.
Jason Moser is bullish on Uber, citing strong quarterly results with gross bookings up across the board. CEO Dara Khosrowshahi highlighted the company’s focus on autonomous vehicle technology, a long-term growth opportunity. Uber recently received a $2 billion investment from Bill Ackman, signaling confidence in the company’s future prospects.
Ron Gross recommends Academy Sports and Outdoors (ASO) as his stock pick of the week. ASO, a sporting goods retailer, has shown impressive growth with 298 stores in the sun belt region. The company generates significant cash flow and is positioned for further expansion, making it an attractive investment opportunity. 1. Dylan Lewis and Ron Gross discuss Academy Sports and Outdoors, a strong business not well-known. Rick Engdahl questions brand importance, opting for delivery wings. The trio jokes about “Fool food” and radar stocks. Mackey, Zuckerberg, and Frey are board members. Various stocks are mentioned.
2. Dylan Lewis wraps up the Bountiful Money radio show with Jason, Ron, and Rick. Board members include Mackey, Zuckerberg, and Frey. Positions in various stocks are disclosed. The Motley Fool has positions in and recommends several companies and options. Disclaimer: Views expressed are the author’s and not Nasdaq, Inc.’s.
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