Alphabet smashes Q1 expectations, boosted by AI, Search and Cloud

Local Market Commentary

The Top 40 index rose 0.78% to close at 83,257.4 points, while the All Share index gained 0.79% to reach 90,552.8 points. Finance Minister Enoch Godongwana defended his position after the reversal of a planned VAT increase, emphasising his duty to propose revenue measures, regardless of their popularity. President Cyril Ramaphosa held talks with US President Trump on bilateral relations and the Ukraine conflict, agreeing to meet soon. President Zelenskiy cut short his South Africa visit following a Russian missile strike on Kyiv. Meanwhile, the KwaZulu-Natal Department of Public Works halted infrastructure projects due to unpaid debts from the provincial education department, highlighting growing inter-governmental arrears and their potential impact on economic stability.

European Market Commentary

European equities closed higher on Thursday, with the STOXX 600 index up 0.4%, led by automakers and materials stocks amid mixed corporate earnings and fluctuating US trade rhetoric. Germany downgraded its 2025 growth forecast to zero, though April’s Ifo index showed a surprise improvement in business sentiment. In the UK, factory orders remained deeply negative despite a slight recovery, while export demand weakened further, with S&P Global and CBI surveys citing escalating US tariffs as a major headwind for trade across Europe.

U.S. Market Commentary

U.S. stocks rallied for a third straight session on Thursday, led by tech-heavy gains in the Nasdaq as AI optimism lifted megacaps following strong results from ServiceNow. All major indices posted solid advances, with the S&P 500 tech sector up 3.5%. Durable goods data signalled economic resilience, while Fed officials reiterated a patient stance on monetary policy amid ongoing U.S.-China tariff uncertainty. Broader market breadth was strong, with NYSE advancers outpacing decliners nearly 6-to-1.

Asia Market Commentary

Asia-Pacific markets rose on Friday, following Wall Street's tech-led rally, as investor sentiment improved with easing U.S. tariff rhetoric. Focus shifts to China’s April PMI data next week, with ANZ forecasting a slight dip in both manufacturing (49.5) and non-manufacturing (50.5) activity. Meanwhile, Tokyo’s core CPI jumped to 3.4% year-on-year in April—exceeding expectations and marking the first +3% reading since 2023—just ahead of the Bank of Japan’s policy meeting (30 April–1 May).

Commodity Market Commentary

Gold prices held steady on Friday, poised for a third consecutive weekly gain as investors remained optimistic amid ongoing U.S.-China trade negotiations. President Donald Trump confirmed that talks are underway, countering Chinese claims of no discussions. Gold, a non-yielding asset often seen as a hedge against instability, has surged over $700 this year, hitting a record high of $3,500.05 earlier in the week. Meanwhile, oil prices edged higher but were set for a weekly loss, pressured by potential OPEC+ output increases and a possible ceasefire in the Russia-Ukraine conflict, while conflicting U.S. tariff signals dampened demand prospects.

Currency Market Commentary

The South African rand held steady on Thursday after the finance ministry announced it would withdraw a controversial VAT increase set to take effect next month, while investors awaited more clarity on the country’s budget plans. The U.S. dollar drifted higher on Friday, following a brief loss the previous day, as traders weighed the U.S. economic outlook amid President Donald Trump's mixed signals on trade deals and Federal Reserve policy. The dollar experienced volatility this week, initially falling 1% on Monday after Trump threatened to fire Fed Chair Jerome Powell but then rising 1.5% on Wednesday as Trump clarified his stance and hinted at a trade war de-escalation with China.

Anglo American Platinum Limited (AMS) +0.89%

Anglo American Platinum reported an 8% year-on-year decline in Q1 2025 own-managed PGMs production to 462koz, largely due to severe flooding at its Amandelbult operation in February. Excluding the impact of this disruption, production would have been broadly flat, highlighting underlying operational stability. Refined production dropped 30% to 437.1koz, influenced by a combination of seasonal smelter maintenance, a triennial stock count, and Kroondal’s transition to a tolling arrangement. PGMs sales volumes were also 30% lower at 493.7koz, reflecting the reduced refined output. Purchases of PGM concentrate fell 29% to 234.3koz due to lower third-party receipts and structural changes at Kroondal. Despite these headwinds, Anglo American Platinum maintained its full-year guidance for PGMs production at 3.0–3.4Moz, unit costs of R17,500–R18,500/oz, and AISC of US$970–1,000/oz. Management flagged continued risk from Eskom load-curtailment but highlighted strong safety outcomes, with zero fatalities and a 7% improvement in the total recordable injury frequency rate (TRIFR), underscoring ongoing commitment to operational discipline.

Anglo American plc (AGL) +2.19%

Anglo American’s Q1 2025 production performance was mixed across its commodity portfolio, shaped by both weather events and market dynamics. Copper production dropped 15% year-on-year to 168.9kt, with planned lower throughput at Chilean operations offsetting higher grades at Quellaveco in Peru. Iron ore output rose 2% to 15.4Mt, supported by robust performance from Minas-Rio, while Kumba volumes remained stable. Manganese output plummeted 60% to 317kt following severe cyclone-related disruptions at Australian operations, though production and exports are expected to recover in Q2. PGMs production declined 17% to 696.3koz, mainly due to flooding and a reduction in third-party concentrate purchases. Steelmaking coal output was down 41% to 2.2Mt, heavily impacted by the Grosvenor mine fire, but when excluding this and other disrupted sites, production rose 11%, demonstrating the resilience of the broader asset base. Nickel output inched up 3% to 9.8kt, while De Beers reported an 11% drop in rough diamond production to 6.1Mct, reflecting ongoing weak market demand. The update reflects a company navigating complex operational and external environments, with recovery paths varying across divisions.

Kumba Iron Ore Limited (KIO) -0.27%

Kumba Iron Ore delivered a steady Q1 2025 performance, with total production of 9.0Mt, down 3% year-on-year, reflecting a deliberate drawdown of stockpiles as part of operational planning. Sales volumes also reached 9.0Mt, marking a 6% increase and highlighting a 5% improvement in Transnet’s rail service reliability. The company achieved an average realised FOB price of US$98/wmt, representing an 11% premium to the benchmark, underpinned by strong product quality and market positioning. While the total recordable injury frequency rate (TRIFR) increased to 0.92, this was driven by low-severity incidents, and both the Sishen and Kolomela operations continued their long-standing fatality-free records. Kumba reaffirmed its full-year production and sales guidance of 35–37Mt and a unit cost target of approximately US$39/t. The UHDMS (ultra-high dense media separation) project at Sishen remains ahead of schedule, supporting future efficiency and cost competitiveness. Management emphasised continued focus on safety, operational discipline, and infrastructure collaboration with Transnet to maintain sales momentum through the year.

Cashbuild Limited (CSB) -1.79%

Cashbuild posted a 5% year-on-year revenue increase for Q3 FY2025, supported by a 4% rise in turnover from its 308 existing stores and a 1% lift from 11 newly opened outlets. Total transactions were up 7%, while selling price inflation remained muted at just 1.6% year-on-year, reflecting a deflationary pricing environment and competitive market dynamics. Revenue from Cashbuild South Africa, which comprises 82% of group sales, rose 5%, with encouraging store-level performance. The Botswana and Malawi segment saw a significant 26% growth, aided by strong economic activity and better cross-border logistics. Conversely, the P&L Hardware division recorded an 8% decline in revenue, stemming from an 11% decrease at existing stores, partially offset by a 3% contribution from new locations. The total store count rose to 319, following two openings and one closure during the quarter. Cashbuild continues to focus on cost control, footprint optimisation, and enhancing its customer value proposition amid a highly price-sensitive market.

Zeder Investments Ltd (ZED) -4.11%

Zeder Investments posted a 28.6% drop in NAVPS to R1.77 for FY2025, driven by special dividends and valuation write-downs in Zaad’s operations. Losses deepened, but strategic asset disposals, including Capespan Agri’s sale, provided significant cash returns to shareholders. Further disposals are planned, and the company maintains a cautious outlook on dividends due to macroeconomic uncertainty.

Alphabet Inc (GOOG) +2.38%

Alphabet delivered a stronger-than-expected Q1, with revenue rising 12% y/y to $80.54 billion, beating Wall Street’s 10% forecast, while adjusted EPS of $2.27 also exceeded estimates. Net income surged 46% to $34.54 billion, including $8 billion in unrealised gains from private equity holdings. Advertising revenue grew 8.5% to $66.89 billion, driven by a 9.8% rise in the core Search segment, though YouTube ads slightly missed forecasts at $8.93 billion. Cloud revenue rose 28% to $12.26 billion, narrowly missing estimates but with margins improving sharply to 17.8% from 9.4% y/y. AI adoption accelerated, with 1.5 billion monthly users of AI Overviews, and the company announced its largest-ever acquisition in March—cybersecurity firm Wiz for $32 billion—to reinforce its cloud security capabilities.

Nissan Motor Company Limited (7201) +0.58%

Nissan has warned of a record net loss of ¥700–750 billion ($4.91–$5.26 billion) for FY2023, far exceeding its prior forecast of an ¥80 billion loss, primarily due to over ¥500 billion in impairments across key global markets and more than ¥60 billion in additional restructuring costs. The automaker, under new CEO Ivan Espinosa, is undergoing significant operational downsizing as part of a turnaround strategy, including plant closures and job cuts. Operating profit guidance was lowered by around 30% to ¥85 billion, and the company will forego its full-year dividend. Final earnings are due on 13 May.

SK Hynix Inc. (000660) -1.49%

SK Hynix reported a 158% year-on-year surge in Q1 operating profit to ₩7.4 trillion ($5.2 billion), its second-highest on record, significantly outperforming the ₩6.6 trillion LSEG SmartEstimate, driven by sustained AI chip demand and pre-emptive stockpiling of PC and smartphone memory amid potential U.S. tariffs. Revenue jumped 42% to ₩17.6 trillion, as the company, a major supplier of high-bandwidth memory to Nvidia, anticipates only minimal disruption from the U.S. investigation into foreign semiconductor imports.

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