Microsoft jumps as Azure growth and AI demand beat expectations

Market Commentary

South African Market Summary

South African equities edged lower yesterday, with the JSE All Share declining 0.06% to 109,759.05 and the Top 40 slipping 0.04% to 101,566.62. The IMF said fiscal credibility was improving despite geopolitical risks, but urged faster reforms and greater public investment to strengthen growth. Its assessment followed a medium-term budget projecting declining debt, supported by stronger revenue collection and restrained spending. Heineken is reviewing its South African wine portfolio, including Nederburg and JC Le Roux, three years after acquiring the business. Northam gained 2.11% after GCR upgraded its long-term national-scale credit rating to AA(ZA). Vodacom fell 0.38% despite forecasting interim headline earnings growth of 22%–27%. With limited domestic data, global economic releases and geopolitical developments remained central to local market direction.

European Market Summary

European equities ended little changed on Wednesday as disappointing earnings and higher oil prices tempered sentiment ahead of the European Central Bank’s rate decision. The STOXX 600 edged up 0.07% to 644.14, with media and mining stocks among the weakest performers. Banks offered support as Deutsche Bank, BNP Paribas, Standard Chartered and Santander exceeded quarterly profit forecasts, while UBS accelerated buybacks after broadly meeting expectations. Santander’s Brazilian operations nevertheless faced weaker earnings and higher provisions. Stellantis narrowed its quarterly net loss to €500 million and maintained annual guidance. Britain’s FTSE 100 finished marginally higher after the Budget. The government increased planned bond issuance by £4.4 billion and Treasury bill sales by £3 billion, with the modest upward revision broadly matching dealer expectations.

US Market Summary

US equities advanced on Wednesday after the Federal Reserve left interest rates unchanged, while signalling readiness to respond to persistent inflation. Policymakers strengthened their assessment of economic activity, and markets priced an 85% probability of a quarter-point increase in December, up from 78.3% on Tuesday. Thursday’s PCE inflation report and preliminary third-quarter GDP figures could reshape those expectations. Corporate results highlighted contrasting returns from artificial intelligence investment. Microsoft reported 48% Azure revenue growth and $18.6 billion in free cash flow, while Alphabet recorded a $9.1 billion cash outflow despite Google Cloud revenue more than doubling. Ford increased adjusted operating profit by 3% to $2.7 billion despite lower revenue. FedEx raised its annual earnings outlook after quarterly adjusted earnings reached $3.74 per share.

Asian Market Summary

Asian equities surrendered earlier gains on Thursday as mixed reactions to artificial intelligence earnings heightened scrutiny ahead of Amazon and Intel’s results. Samsung reported quarterly operating profit of KRW107.4 trillion on revenue of KRW195.3 trillion, supported by AI-related memory demand. Hong Kong’s monetary authority held its base rate at 4.25%, following the Federal Reserve’s pause under the territory’s dollar-linked currency framework. New Zealand central bank governor Anna Breman said a December rate increase was highly likely, although timing would depend on economic and inflation developments. Australia’s securities regulator is examining the failed $5 billion Firmus flotation, but has not launched a formal investigation. Suncorp cut its fiscal 2027 premium growth forecast to around 3%, citing a lost contract and New Zealand dollar weakness.

Currency Market Summary

The rand faced pressure on Wednesday morning as higher oil prices intensified inflation concerns ahead of the Federal Reserve’s policy decision. With limited domestic data, global economic releases and geopolitical developments remained the main influences on the currency. The US dollar steadied on Thursday after the Fed voted 10–2 to leave rates unchanged and upgraded its assessment of economic growth to a strong pace. Chair Kevin Warsh expressed confidence that inflation could return to the 2% target without materially weakening growth or employment, prompting traders to scale back expectations for rate increases in 2027. The dollar had approached two-week highs before the decision but weakened after the press conference offered limited guidance on December. Upcoming inflation figures remain central to the policy outlook.

Commodity Market Summary

Oil prices eased on Thursday as renewed efforts to restart Middle East peace talks tempered supply concerns following escalating regional attacks. Reports of US diplomatic outreach to Iran and a Qatari draft agreement supported hopes for progress, although Iranian officials disputed the proposal’s acceptability. Continued Houthi attacks kept supply risks in focus. US crude inventories fell by 1.9 million barrels in the week ended 23 October, against expectations of a small increase, while petrol stocks unexpectedly rose by 3.9 million barrels. Gold traded lower after three consecutive gains. In agriculture, South African commercial maize farmers intend to reduce 2027 plantings by 12.4% to about 2.4 million hectares, the smallest area since 2019, as higher input costs and anticipated summer drought weigh on planting decisions.

Domestic Company News 

Northam Platinum Holdings Limited (NPH) +2.11%
GCR Ratings has upgraded the national-scale long-term issuer ratings of Northam Platinum and Northam Holdings to AA(ZA) from A+(ZA), and their short-term ratings to A1+(ZA) from A1(ZA), with stable outlooks. The upgrades reflect stronger operations, internally generated production and reserve growth, and a net ungeared balance sheet. GCR expects lower costs and rising volumes to support financial performance following record results for the year ended 30 June 2026. Continued investment through commodity downturns has enabled Northam to increase production, distinguishing it from local peers, while improving efficiency and commodity diversification. Robust liquidity provides financial flexibility. The stable outlook assumes further capacity expansion at existing mines and generally supportive commodity prices, sustaining cash generation to fund higher capital expenditure and further deleveraging.

Vodacom Group Limited (VOD) -0.38%
Vodacom expects headline earnings per share (HEPS) to rise by 22%–27% to 570–593 cents for the six months ended 30 September 2026, from 467 cents a year earlier, consistent with its medium-term growth ambitions. Earnings per share (EPS) are forecast to increase by 272%–279% to 1,756–1,789 cents, compared with 472 cents previously. The substantially larger EPS increase reflects a tax-neutral, non-recurring fair value gain of R23.2 billion, equivalent to 1,199 cents per share, from remeasuring a previously held associate interest in Safaricom. This gain was excluded from headline earnings and therefore had no effect on HEPS. The financial information underpinning the trading statement has not been reviewed or reported on by external auditors. Interim results are expected on or about 10 November 2026.

Southern Palladium Limited (SDL) +0.05%
Southern Palladium advanced its Bengwenyama project during the September quarter, securing a 30-year mining right on 7 August 2026. An updated pre-feasibility study released after quarter-end increased forecast post-tax net present value by 129% to US$1.961 billion on a 100% project basis, using an 8% real discount rate. It indicated a 39.1% post-tax internal rate of return and 2.8-year payback from first production. Metallurgical testing estimated 85.6% chromite recovery, versus 30% previously, and 87.6% overall platinum group metal recovery. The board approved early box-cut and decline development, subject to outstanding permits. Cash of A$20.06 million, excluding subsidiary cash, supports completion of the definitive feasibility study and early development activities. This compares with A$23.88 million at June-end, while subsidiary cash totalled A$1.13 million.

Global Company News

Alphabet Inc. (GOOGL) +1.34%
Alphabet shares fell 10% after hours as weaker-than-expected advertising revenue and mounting artificial intelligence investment overshadowed rapid cloud growth. Third-quarter revenue of $127.6 billion missed the $128.2 billion consensus, while advertising revenue reached $82 billion against expectations of $83.4 billion. Adjusted earnings of $2.67 per share fell short of the $3.02 forecast, and net income declined 25% to $26.17 billion. Free cash outflow widened to $9.1 billion, marking a second consecutive negative quarter. Google Cloud revenue more than doubled to $30.71 billion, exceeding estimates, with its backlog reaching $561 billion. Alphabet expects capital expenditure to increase significantly in 2027 from this year’s projected $195 billion–$205 billion, while third-party cloud capacity and chip inventory investment are expected to pressure near-term margins and cash flow.

Microsoft Corporation (MSFT) -0.06%
Microsoft shares rose more than 3% after hours as strong cloud growth and cash generation supported confidence in its artificial intelligence investments. Fiscal first-quarter Azure revenue increased 48% to $33.17 billion, exceeding expectations, while free cash flow reached $18.6 billion, roughly $10 billion above forecasts. Group revenue totalled $92.28 billion, and adjusted earnings of $4.89 per share beat the $4.73 consensus. Microsoft forecast second-quarter Azure growth of 49%–50% and total revenue of $96 billion–$97.1 billion, both above analyst estimates. Quarterly capital expenditure increased to $45.2 billion but fell below its $50 billion projection because of delayed third-party capacity deliveries. Management said underlying spending plans remained unchanged, while demand continued to exceed supply, highlighting sustained corporate appetite for cloud infrastructure and AI services.

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