iftttwall – Page 23629

Amazon Tumbles: Misses Revenues, AWS Disappoints, Guides Lower

Jeff Bezos magic may be running out, because one quarter after the stock plunged when the company missed earnings (with revenues in line) and guiding lower, moments ago AMZN did a twofer, and despite beating the bottom line, it posted a big miss on the top line. As a result, the reason why Amazon is tumbling some 4% after hours is because despite reporting Q4 EPS of $1.54, on expectations of $1.40, or a 55% increase in profit, is that Q4 revenue of $43.7 billion in its strongest quarter missed expectations of $44.9 billion, if 22.4% higher than a year ago.

Amazon’s operating income of $1.26 billion was just above the high end of its guidance of $1.25, and beat Wall Street estimates of $1.13 billion. Also troubling: Amazon’s “holy grail”, AWS, reported sales growth of 47%, however, it was not enough and led to $3.54 billon in high margin sales, below the $3.61bn in consensus estimates, suggesting that the cloud wrs are finally starting to impact Jeff Bezos too.

The guidance was also troubling, with the company now expecting Q1 operating income between $250 and $900 million, below the street’s expectation of $1.3 billion, on revenue of $33.3 to $35.8 billion, below the street’s consensus of $36 billion.

with the company now expecting Q4 operating income between $0 and $1.25 billion, below the street’s expectation of $1.7 billion, on revenue of $42 to $45.5 billion, roughly in line with consensus of $44.6 billion.

The full guidance:

Net sales are expected to be between $33.25 billion and $35.75 billion, or to grow between 14% and 23% compared with first quarter 2016. This guidance anticipates an unfavorable impact of approximately $730 million or 250 basis points from foreign exchange rates.
Operating income is expected to be between $250 million and $900 million, compared with $1.1 billion in first quarter 2016.

Digging into the number we find that while the all important AWS generated net sales of $3.54 billion, below the $3.61 billion expected by the street, with growth slowing again, printing at 47% in Q4, down from 58%Y/Y last quarter. In the quarter, AWS generated $1.1 bilion in profit, suggesting a 31.3% margin, below the 31.6% last quarter. AWS’ profit of $1.1 billion was far more than the rest of the entire business combined generated.

Another curious highlight is that Amazon expects to create 120,000 seasonal jobs in customer fulfillment and customer service this holiday season. We hope the BLS keeps track of this and adjusts accordingly for the surge in temp-workers.

Jeff Bezos was as usual optimistic:

“Our Prime team’s customer obsession kept them busy in 2016,” said Jeff Bezos, Amazon founder and CEO. “Prime members can now choose from over 50 million items with free two-day shipping — up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 new cities, which means millions more members now get one and two hour delivery. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more. And customers noticed — tens of millions of new paid members joined the program in just this past year.”

Amazon also announced that it will create more than 100,000 new, full-time jobs in the U.S. over the next 18 months, and will include positions across the country for all types of experience, education, and skill levels.

Despite the disappointing revenue, cash flow hit a record $9.7 billion in Q3.

Additionally, after dipping in Q3, AMZN’s operating margin rebounded from 1.8 to 2.9%.

Also notable, as of Dec. 31, Amazon employed some 341,400 mostly part-time workers.

The stock is down 4% after hours.

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Gold Gains As Stock Market Volatility Collapses To 10-Year Lows

Gold is up, stocks are dead, vol is dead, bonds are flat, mcro data is disappointing, and Trump is rattling sabres…

Small Caps and Trannies remain red post-Fed, Dow, Nasdaq and S&P are barely green…

Gold is the biggest gainer post-Fed…

It has now been 78 days (Oct 11th) since the S&P 500 fell 1%…

The Dow traded in a range less than 100points today

Realized Volatility collapsed to a 10-year low…

Small Caps briefly dropped into the red year-to-date…

Facepalm…

Banks are now in the red for 2017…

Treasury yields were mixed again, after yesterday's smallest Fed-Day range in 4 years)…

With the long-end underperforming modestly…NOTE – this narrow rangeless trading has occurred amid massive high-quality bond issuance.

But notably, only Swiss bonds remain negative yielding in the 10Y segment of the sovereign bond curve…

The dollar index rebounded intraday but ended lower once again…

Cable tumbled (Article 50 vote and BoE)…

As The Dollar Index has collapsed in the last months, so Bitcoin has taken off – topping $1000 again…

Gold continued to gain (best ofthe commds on the week) though as the USD bounced late on, so PMs leaked lower… (NOTE Gold is the only commodity higher post-Fed +0.9%)

And we note that Gold/Silver appears to be set for a surge…

Notably interest in gold calls have soared in recent weeks…

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What Are Donald Trump’s Peak Tweeting Hours

With political journalists, traders, analysts – and virtually everyone else according to Arnold Schwarzenegger – losing sleep over the unpredictability of Trump’s next decree by Twitter, many of which move markets, or result in diplomatic scandals, sleep cycles across America, and the globe, have been decimated. To provide some clarity on what has emerged as the most erratic pattern driving capital politics, markets and socioeconomics, Citigroup has compiled a chart showing how often in any 24 hour period, Trump tweets.

As the chart below shows, over the history of his @realDonaldTrump account, President Trump has a trimodal tweeting pattern, with peaks around 9am, 7pm, then dipping for the next two hours, and then peaking again at 11pm.

And, for those who have a few month of sleep to catch up on, your best bet would be to turn twitter off between 2 and 5 am, especially since now that he is officially president, Trump has a tendency to start tweeting just after 6am.

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JPM’s Kolanovic Warns Complacency Has Set In, Expects A Market Pullback As Volatility Returns

After a phenomenal 2015, in which JPM’s head quant Marko Kolanovic as if by magic managed to correctly call every major market inflection point ahead of time, he found 2016 far more challenging, although toward the end of the year, he did get a second wind, and his key predictions since the Trump election have panned out, as he himself note in his latest note:

One day after the US election, we set a January 2017 S&P 500 price target of 2300. Now that this target was achieved a week ago, we want to assess the prospects for stocks and market volatility. We maintain that in 2017 we will likely see further equity gains (our 2017 YE target is 2400).

Of course, there are 11 months until the end of the year, and what happens inbetween could have a major impact on the final December 31 S&P500 print. So what does Kolanovic think will happen next? As he says, “we believe the market will be more volatile and note that two-thirds of our projected target have already realized. This means that the market risk-reward has deteriorated.” And, in taking the opposite view of Goldman which predicts markets will keep rising until the end of the first half only to turn lower into the second half, Kolanovic expects the most likely downside scenario “would be a short lived ~5% pullback on the back of a hawkish Fed and deleveraging of systematic investors during the first half of this year.”

So only a 5% move?

Considering the market hasn’t had a 1% down day since October 11, a 5 % drop may end up as a shock to the latest generation of hedge fund managers and robots, who increasingly are exposed to a market that no longer has any drawdowns or down days.

Kolanovic continues why a market drop is overdue: “Following the recent rally, a level of risk complacency has started to set in. The ratio of S&P 500 Puts to Calls has dropped to a ~3 year low, and the VIX reached near-record lows of ~10. Option (gamma) positioning was heavily tilted towards the calls. This has historically led to a suppression of realized volatility (e.g. long gamma exposure likely softened/reverted the first meaningful pullback of the year on Monday and Tuesday). Equity exposure of various systematic strategies is also quite high as a result of positive price momentum, and record-low levels of volatility for bond-equity portfolios.”

And the rest of his take:

CTA investors currently have high equity exposure, and their assets continue to grow . Volatility targeting funds likely have record high equity exposure given that the volatility of bond-equity portfolios reached record lows. Similarly, elevated equity exposure is likely true for Risk Parity strategies (although this may vary between hedge funds, asset managers, pension funds, structured products and other investors that employ different implementations of this simple allocation method). In addition to systematic strategies, there are indications that discretionary investors are long as well: mutual fund cash balances are near cycle lows, and the beta of equity long-short hedge funds is in its 95th percentile (all hedge funds beta is in its 98th percentile). While the risks of systematic selling have substantially increased, this may not cause a market selloff on its own. For instance, momentum would turn substantially negative with a greater than 5% drop in equities. There is however more sensitivity to an increase in realized volatility in relation to volatility targeting strategies, and option gamma hedging will likely start adding to market volatility if the market drops by only ~1%.

Despite the complacency and risks around high leverage, a potential pullback would likely be relatively shallow, e.g. ~5%. There are still good reasons for investors to stay constructive – in particular, the pro-business agenda of the new administration (de-regulation, tax reform, repatriation, infrastructure, domestic manufacturing, etc.). In our view, this bullish argument can only be derailed by a stronger USD and higher interest rates – both of which are largely influenced by the Fed. The goal of the new administration – bringing back manufacturing, and shifting the trade balance towards the US – can also be achieved with a weaker USD, and the administration will likely try to engineer a lower USD. A more hawkish Fed could easily derail these goals.

A likely outcome of this tug of war is a lower USD and higher equity prices by the end of this year. The most likely downside scenario would be a short lived ~5% pullback on the back of a hawkish Fed and deleveraging of systematic investors during the first half of this year. An upside surprise to our view would be a powerful combination of a dovish fed, fiscal reforms and pro-growth policies that could result in the market surpassing our target.

In other words, should the BAT pass, which would send the dollar soaring, stocks would be poised to drop providing yet more ammo for those US retail producers who are against the border tax adjustment. It also means that jawboning in which foreign currencies are slammed for being “devalued” will likely continue, resulting in even more volatility in FX markets, where if Kolanovic is right and the stocks are poised for mostly smooth sailling for the rest of the year, is where the bulk of vol is to be found.

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Kellyanne Conway Dispenses Parental Advice to Rioting Antifa Snowflakes

Today on Fox & Friends, Trump advisor Kellyanne Conway, mother of four, had some harsh words for tantruming liberal snowflakes across the country:

I don’t even know if they know what they’re protesting. What’s got you so in a lather? Really? Is it free speech? Having somebody maybe on your campus who has a dissenting point of view?

Kellyanne goes on to remind them that when they eventually grow up, they will face divergent opinions!

In the real world, when these kids grow up and try to find jobs, which they will in the Trump economy – life doesn’t work that way, folks. You’re going to work with people who disagree with you, you’re going to encounter people who aren’t just cosseting you in this protective environment.

Watch here:

toolate

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Reality Vs. The “Recovery” Narrative

Submitted by C.Jay Engel via The Mises Institute,

As Jeffrey Lacker leads the pack on the Fed’s “concern of overheating” front, last Friday’s 2016 fourth quarter GDP numbers completely contradict the narrative. Coming in at a paltry 1.85% growth rate, the Fed was handed yet another excuse to push off the so-called “normalization of interest rates” further into the future. The Fed's FOMC again confirmed as much at its February meeting.

The Fed has stated for years — since 2008 — that it needed to keep interest rates low in order to support a sustainable recovery. The Fed was allegedly paying close attention to it’s Congressionally-sourced dual mandate to determine when it could start allowing rates to rise.

But now it is 2017 and the Fed’s bureaucratic statistics relating to unemployment and price inflation say things are just dandy. But the GDP numbers, which purport to measure growth, scream the opposite.

This is the Fed’s predicament. They’ve held that the dual mandate was their only guide, but it’s becoming quickly evident how irrelevant those numbers are. As it turns out, the third quarter’s 3.5% GDP number was not a sign of coming paradise, but was rather a mocking anomaly. In the past six quarters, only once (third quarter 2016) did the GDP growth rate come in above 2%.

Moreover, things are getting worse, not better. 2016’s average growth rate was worse than both 2014 and 2015. Needless to say, Yellen’s credibility, to use a word of the mainstream, should be absolutely shattered. Stimulus and quantitative solutions have been an epic failure.

In light of this, the Fed’s decision to raise the target Federal Funds rate over the coming months is especially painful. Should they choose to do so, they do it in the face of a growth rate that is barely treading water. But if they choose to prolong these target rate hikes, they do so as their own dual mandate components tell them they should be normalizing monetary policy by now.

Of course, these PCE (personal consumption expenditure) and Official Unemployment numbers tell us almost nothing about the real economy. But then again, the Fed can’t admit this either can they?

Finally, all the above doesn’t even take into account that Fed Funds rate itself is just a smoke-and-mirrors target that is actually not very important. What truly matters, as Joe Salerno points out, is the expansion of the money supply. That is the true villain in all this.

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Feds Ignored Court Order to Stop Enforcing Trump Immigration Ban, Lawsuit Argues

The Commonwealth of Virginia is asking a federal court to force the federal government to show why it should not be held in contempt for violating the court’s orders to stop enforcing President Trump’s executive order on immigration.

In a court filing late Wednesday night, Virginia and the Legal Aid Justice Center, a Virginia-based legal aid group, argued news reports and first-hand accounts by members of Congress show Customs and Border Protection agents refused to abide by a temporary restraining order issued by the U.S. District Court for the Eastern District of Virginia over the weekend suspending Trump’s executive order for seven days and allow lawyers access to lawful permanent residents of the U.S.—more commonly known as green card holders—who were being detained at Dulles International Airport.

The ongoing legal drama began last Friday when President Trump issued an executive order temporarily suspending immigration and travel to the U.S. from seven majority-Muslim countries. The order appeared to initially include permanent lawful residents of the U.S., but the White House later said it did not.

Judge Leonie Brinkema issued the temporary restraining order Saturday night, but lawyers spent Sunday trying to figure out how many, if any, detainees were left at Dulles, and if green card holders were still being removed from the country.

In an amended complaint filed Monday and joined by the Commonwealth of Virginia on Tuesday, the Legal Aid Justice Center and the law firm Mayer Brown, LLP allege that two Yemeni brothers who arrived at Dulles were coerced into signing forms—without any access to legal counsel—relinquishing their status as permanent U.S. residents.

According to the complaint, customs officials “lied to immigrants arriving after the Executive Order was signed, falsely telling them that if they did not sign a relinquishment of their legal rights, they would be formally ordered removed from the United States, which would bring legal consequences including a five-year bar for reentry to the United States. Because respondents knew that there was no valid, legal basis to remove these individuals from the United States, these were material, false representations.”

The brothers, Tareq and Ammar Aqel Mohammed Aziz, were forced to purchase tickets back to Addis Ababa.

In a signed affidavit to the Monday filing, U.S. Sen. Cory Booker said his staff presented a Department of Homeland Security agent with the temporary restraining order. According to the affidavit, the DHS agent said that detainees were that “lawyers are looking at the order.” Booker and several other members of Congress say they were blocked from speaking with CBP officials at Dulles.

The Department of Homeland Security maintains that it followed all court orders. “Just to be clear, to the best of our knowledge, no CBP officer knowingly, intentionally violated the court order,” Homeland Security Secretary John Kelly told The Daily Beast.

Whether DHS immediately complied with the order appears to be an open question, and one Virginia, the Legal Aid Justice Center, and Mayer Brown, LLP say they haven’t been able to get a clear answer on, which is why they’re asking the court to force DHS to provide proof.

The strict security in airport terminals, the lack of transparency from DHS officials, and the total confusion surrounding the surprise rollout of Trump’s immigration order make it hard to know what really happened. The numbers provided by the White House on how many travelers were detained or turned back from entering the U.S. turned out to be significantly low-balled. There were unconfirmed but widely circulated reports that U.S. Marshals and the U.S. Attorneys Office were refusing to enforce a court order regarding detainees at Los Angeles International Airport. Paul Hughes of Mayer Brown, LLP told Reason that one plane turned around on the runway to return a green card holder who was about to be removed from the country. At least one Iranian man who was removed from the country is was on his way back to the U.S on Thursday. The Department of Homeland Security Inspector General announced late Wednesday night that it will investigate the implementation of Trump’s immigration order.

The weekend chaos raised the ugly specter of a constitutional showdown between the judiciary and an executive branch backed by recalcitrant law enforcement.

“So far, the refusal by CBP to abide by some court orders is troubling, but there’s some hope that this is the fog of war and that no one knew what was happening,” says defense attorney and legal blogger Ken White. “On the other hand, it bears watching closely because this is an administration that ran on shots against courts and judges—particularly those of Mexican heritage—and continues to do so. The rule of law is largely dependent on the executive having some fear of other branches, so if the executive basically says we’re not going to obey court orders we don’t like, how do you vindicate your constitutional rights?”

In the airport terminals where this national drama played out, where volunteer lawyers worked through the weekend to secure the release of detainees and convince courts to put the brakes on Trump’s executive order, there was a more hopeful atmosphere. Mirriam Seddiq, a Maryland immigration lawyer who was staked out at Dulles International Airport, told Reason on Monday that, despite the frustration and government obfuscation, she can see the rule of law at work.

“We’re in the airport. We don’t go outside until it’s dark, and then we come back again at 8 a.m.,” Seddiq said in an interview with Reason on Monday. “If you’re here in this bubble, where you’re fighting this fight and winning some battles, little by little, we still do have the rule of law, because we can see it. Our congresspeople are coming here. Our system is working. Is it shocking that the executive branch is refusing to comply? Yes, but you may actually see some real power by our judiciary, maybe by some members of Congress who are willing to come forward. Things are happening. In here, it doesn’t feel that dire.”

The legal challenges to Trump’s order continue to mount in federal courts across the country. There are currently 10 lawsuits challenging it. However, Trump enjoys the support of rank-and-file federal law enforcement. In a joint statement released over the weekend, the National Border Patrol Council and ICE Council, the unions of Border Patrol and ICE agents, applauded Trump’s executive orders:

As representatives of the nation’s Frontline immigration officers and agents responsible for enforcing our laws and protecting our borders, we fully support and appreciate President Trump’s swift and decisive action to keep the American people safe and allow law enforcement to do its job. We applaud the three executive orders he has issued to date, and are confident they will make America safer and more prosperous. Morale amongst our agents and officers has increased exponentially since the signing of the orders. The men and women of ICE and Border Patrol will work tirelessly to keep criminals, terrorists, and public safety threats out of this country, which remains the number one target in the world – and President Trump’s actions now empower us to fulfill this life saving mission, and it will indeed save thousands of lives and billions of dollars.

Customs and Border Protection did not return multiple requests for comment for this article.

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US Plans To Impose Additional Iran Sanctions As Early As Friday; Would Not Violate Nuclear Deal

Just out from Reuters:

U.S. EXPECTED TO IMPOSE ADDITIONAL SANCTIONS ON IRANIAN ENTITIES AS EARLY AS ON FRIDAY, SOURCES FAMILIAR WITH THE MATTER SAID
U.S. PLANS TO IMPOSE THE SANCTIONS IN A MANNER THAT WOULD NOT VIOLATE IRAN NUCLEAR DEAL, SOURCES FAMILIAR WITH THE MATTER SAID
U.S. SANCTIONS HAVE BEEN UNDER CONSIDERATION FOR SOME TIME, ARE EXPECTED TO BE IMPOSED PARTLY BECAUSE OF RECENT IRANIAN BALLISTIC MISSILE TEST, SOURCES SAID
U.S. SANCTIONS EXPECTED TO INCLUDE ABOUT EIGHT IRANIAN ENTITIES UNDER EXISTING TERRORISM-RELATED EXECUTIVE ORDER AND ABOUT 17 UNDER EXISTING WEAPONS OF MASS DESTRUCTION-RELATED ORDER, ONE SOURCE SAID

While we await more details, the fact that the Trump administration is in no hurry to scrap Obama’s Nuclear Deal is likely a suggestion that this particular draconian step will not be taken in the near future, if at all, and thus a potential major risk factor for higher oil prices can be eliminated for the time being.

Developing

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New Secretary of State Rex Tillerson Asks Staff to Apply Lessons of Changing World Conditions to Domestic Changes

Secretary of State Rex Tillerson talked about reforming the State Department to make it more efficient, accountability, honesty, and mutual respect as core principles, and safety a core value for the department, in welcoming remarks on his first day on the job.

Tillerson called State Department staff “among the finest public servants in the world,” saying that “when people see you they see America.” Tillerson said the safety of State Department personnel is the first thing he thinks of when he wakes up in the morning.

“The safety of every single member of our State Dept family, regardless of where he or she is posted, is not just a priority for me, it’s a core value,” Tillerson said, saying that included foreign and civil service, other support staff, contractors, “implementing partners,” and families of staff. “And it’ll become a core value for this department.”

Tillerson asked staffers to put their talents to use dealing with the transition. “One of the great challenges and thrills for the State Department staff is deciding how to confront changing conditions in every corner of the world, and I encourage all of you to use your natural and well-developed skills to adapt to changes here at home as well,” he told them.

“I know this was a hotly-contested election, and we do not all feel the same way about the outcome,” Tillerson continued. “Each of us is entitled to the expression of our political beliefs, but we cannot let our personal convictions overwhelm our ability to work as one team.”

Tillerson said he was interested in deploying “the talent and the resources of the State Department in the most efficient ways possible,” which “may entail making some changes to how things are traditionally done in this department.” He promised not to implement “change for the sake of change,” which he described as counterproductive, but warned that the department could not “sustain ineffective traditions over optimal outcomes.” Tillerson told staffers he’d “gather information on what processes should be reformed and do my part to make sure we are functioning in the most productive and efficient way possible.”

Tillerson described department employees’ duties as “to faithfully represent our nation in the arena of foreign affairs,” and told them they should stay focused on that mission “regardless of the circumstances shaping our country or our department.”

“If we stay focused on the work before us, I promise I will work to ensure you achieve your own personal success and your professional satisfaction in what you are doing,” Tillerson told staffers, continuing with an outline of three “core principles” he expected everyone to abide by—accountability, honesty, and respect.

“I ask that everyone strive for excellence and assume responsibility for their actions and their decisions,” Tillerson said, insisting that organizations run best “when all of its members embrace accountability,” and using the New England Patriots’ “do your job” motto as an example.

“I want us to be honest with one other,” Tillerson told staffers. “Honesty will undergird our foreign policy, and we’ll start by making it the basis of how we interact with each other.” It’s unclear what that means policy-wise—the president’s approach to foreign policy thus far has been marked largely by ambiguity.

Tillerson’s last point about department principles was about respect. “We’re going to treat each other with respect,” Tillerson told staffers. “No one will tolerate disrespect of anyone. Before we are employees of the State Department, we are human beings first.”

Tillerson noted that there were more than 75,000 members of the State Department workforce with an average of more than 11 years of department service. “I have 25 minutes,” Tillerson continued. “Your wisdom, your work ethic and patriotism is as important as ever and as your secretary I will be proud to draw upon all these qualities in my decision-making.”

Tillerson warned that while there would “undoubtedly be times of victory,” there’d “also be many times of difficulty,” and asked staffers to “go forward as a team through all of it.”

The State Department has not yet held a briefing under the new administration, and only the ambassadors to China, Israel, and the United Kingdom have been nominated so far. None of the dozen or so positions of representatives to various international organizations, with the exception of Nikki Haley’s nomination to the United Nations, have been filled either. Other than Tillerson, no nomination has been made for any of the other high-level State Department positions requiring Senate confirmation. While reporting before inauguration day said the incoming administration was dismissing all ambassadors, more than 100 ambassadors from the Obama administration remain at embassies around the world although, unsurprisingly all but one political (as opposed to career) appointment from the previous administration remains.

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How Facebook “Beat” 2016 Earnings On A $1 Billion Tax Benefit From Accounting Change

Yesterday evening we noted that Facebook’s stock soared in after-hours trading after the company announced inline revenue results for 4Q 2016 but blew away street EPS estimates of $1.34 with an actual EPS of $1.44. But, like with most tech company earnings, a slightly deeper dive into the results reveals that a conveniently timed accounting change created $214 million of extra net income in 4Q and drove about 73% of the earnings “beat” for the quarter.

On an annual basis, the earnings farce is even more drastic. For the full year of 2016, the tax accounting changes added $934 million in net income to Facebook’s P&L, or roughly $0.32 per share.

So what changed? Well, turns out that the Financial Accounting Standards Board suddenly figures that tech companies should be allowed to run the “excess tax benefits” derived from stock option exercises through their P&L. Here’s how it works per the The Wall Street Journal:

The Financial Accounting Standards Board, which sets U.S. accounting rules, approved the change in an attempt to simplify companies’ accounting for employee stock payments. The accounting is changing in several different ways, but most of the effect on earnings has to do with the tax benefits that companies get when their employees exercise the stock options they’ve been granted.

That is a compensation cost to the company, and it is tax-deductible. When options are exercised, it is typically after the company’s stock price has risen, making them more valuable, and so the company recognizes “excess tax benefits”—the deductions over and above those it expected to realize when the options were first granted.

Under the old rules, those excess tax benefits go into the company’s shareholder equity. But under the FASB change, they will be recognized on the income statement immediately—and that reduces the company’s provision for taxes, boosting net income.

As an added bonus, the FASB change also boosts Facebook’s operating cash flow, because the excess tax benefits are now classified as cash flow from operations instead of from financing. Even though total cash flow is not impacted at all, we’re sure this is positive in some way.

Just so we’re all on the same page, here is how the process works:

Employee is issued stock options
Stock soars (because what else would a tech stock do?)
Employee feels stock is fully valued and exercises options
Bubbly stock price creates “excess tax benefits” upon option exercise and drives earnings “beat”
Earnings “beat” drives stock even higher
Process is repeated quarterly in perpetuity

In summary, bubbly stock price necessarily equals even bubblier stock price.

* * *

For those who missed it, here’s our summary of Facebook earnings from yesterday.

So much for worries about tech companies rolling over.

After yesterday’s AAPL beat which nonetheless resulted in one of the biggest intraday jumps in its stock in history, sending it highest over 6% today, moments ago Facebook reported results which crushed expectations, and have sent the company higher as much as 3%. The street was expecting $8.81 billion in revenue and EPS of $1.34. Instead it got revenue of $8.81 billion, a 51% increase from 2015 – 84% of which came from mobile – and EPS of $1.44, a 78% increase.

It achieved this with Daily Average Users of 1.23billion, above the 1.21billion expected, up 18% Y/Y, while Monthly active users soared to 1.86 billion, also above the 1.84 billion expected, and up 17% from a year ago. This means that as of this moment more than a quarter of the world’s population logs in to Facebook at least once a month.

Putting Facebook’s results and unprecedented user growth in context, in one year, Facebook added some 269 million monthly active users, roughly all of Twitter’s user base, in just the past year.

Here are the details reported by Facebook.

Daily active users (DAUs) – DAUs were 1.23 billion on average for December 2016, an increase of 18% year-over-year.
Mobile DAUs – Mobile DAUs were 1.15 billion on average for December 2016, an increase of 23% year-over-year.
Monthly active users (MAUs) – MAUs were 1.86 billion as of December 31, 2016, an increase of 17% year-over-year.
Mobile MAUs – Mobile MAUs were 1.74 billion as of December 31, 2016, an increase of 21% year-over-year.

Finally, the biggest factor was Mobile monthly users, which soared to 1.74 billion as of Dec. 31, an increase of 21% Y/Y. Also, if there was any concern about ad revenue slowing down, that too can be ignored for now: Mobile advertising revenue represented approximately 84% of advertising revenue for the second quarter of 2016, up from approximately 80% in Q4 2015.

* * *

All the record breaking detail in charts (source):

DAUs: