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Stock Market News: Facebook and Microsoft Power Tech Higher

Dan Caplinger, The Motley Fool

Stocks were mixed on Thursday morning as a host of earnings reports kept market participants on their toes. Some downbeat reports from the industrial side of the business world stood in stark contrast to more favorable news elsewhere, and the result was conflict among the major indexes. Just after 11:20 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was down 189 points to 26,409. However, the S&P 500 (SNPINDEX: ^GSPC) was down just 3 points to 2,924, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) gained ground, rising 7 points to 8,110.

On the positive side, some of the largest tech companies in the world gave favorable readings about the state of their respective businesses. Facebook (NASDAQ: FB) launched higher on upbeat results and optimistic views of the future, and Microsoft (NASDAQ: MSFT) followed suit as its initiatives to take full advantage of opportunities in cloud computing continued to pay off.

Facebook logo, in white letters on blue background.

Image source: Facebook.

Thumbs-up for Facebook

Shares of Facebook climbed 5% after the social media giant announced its first-quarter financial results late Wednesday. Revenue jumped 26% from the year-ago period, and after accounting for a one-time charge, adjusted earnings of $1.89 per share were well above the consensus forecast among investors for $1.62 per share.

Facebook made progress in boosting the size of its audience. Active user counts rose 8% on both a daily and monthly basis, with those using the service daily climbing to 1.56 billion and those touching base monthly rising to 2.38 billion. The company now believes that more than 2.1 billion people use Facebook, Instagram, WhatsApp, or Messenger at least once every day.

Weighing down Facebook's good news was the company's assessment of its likely liability stemming from a Federal Trade Commission investigation into its platform and its use of user data. The social media giant took a $3 billion charge to cover potential costs related to the investigation, and it estimates that total liability could end up in a range of $3 billion to $5 billion.

Yet investors focused on Facebook's fundamentals, which remain strong. With continued increases in revenue per user and relative strength even under challenging economic conditions throughout much of the world, Facebook has proven to be resilient in the face of both controversy and the threat of a slowdown in the global economy.

Microsoft aims for $1 trillion

Meanwhile, shares of Microsoft hit new all-time highs, picking up 4% and sending the tech giant's market capitalization toward the $1 trillion mark. The software giant reported its fiscal third-quarter results, and the recent rally in the stock continued to gain momentum as investors liked what they saw from Microsoft's business results.

Just about all of Microsoft's numbers were encouraging. Revenue climbed 14% during the quarter, and net income posted a 19% rise over year-earlier figures. In particular, commercial cloud revenue helped lead Microsoft higher by contributing greater than 40% year-over-year growth. Consistent performance from the Office, Windows, LinkedIn, and gaming products played key roles in helping the company prosper.

Yet cloud computing remains the biggest driver of Microsoft's strategic vision. "We are accelerating our innovation across the cloud and edge," CEO Satya Nadella said, "so our customers can build the digital capability increasingly required to compete and grow." With a 73% rise in revenue from cloud computing platform Azure, the company has exploited a valuable niche.

Microsoft has come a long way in just a few short years, reinventing itself as a subscriber-based business that has found better ways to monetize its expertise in key aspects of business operations. With Nadella at the helm and ongoing efforts to keep growing, Microsoft has the potential to build up its value well beyond the $1 trillion level in the months and years ahead.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Microsoft. The Motley Fool has a disclosure policy.