TIME Earnings

Here’s Why LinkedIn Shares Are Tanking Today

LinkedIn Corp. To File For IPO
Justin Sullivan—Getty Images In this photo illustration, the LinkedIn logo is displayed on the screen of a laptop computer on January 27, 2011 in San Anselmo, California.

LinkedIn may need to do some better networking with Wall Street

LinkedIn announced Thursday that its sales and earnings in the second quarter had beaten analysts expectations. How did investors react? They sold big-time.

Shares of LinkedIn fell $21, or just over 10%, on Friday to just over $205. That’s the company’s biggest one day stock dive since the end of April, when the shares fell nearly $50 in one day.

What happened? Like many résumé writers, LinkedIn seems to have taken some liberties to make its earnings seem more impressive than they actually were.

First of all, the company’s earnings beat was manufactured — LinkedIn told analysts to lower their expectations at the end of April, so when the earnings came out, they were actually better than the most recent expectations, but lower than what people thought the company would earn a few months ago.

Second, the company said by its metrics it earned $71 million in the second three months of the year. In fact, LinkedIn didn’t actually turn a profit in the second quarter. By generally accepted accounting principals, it lost $68 million. (Companies are allowed to report results using their own adjusted accounting as long as they report GAAP results as well, which is what LinkedIn did.) Still, that loss was less than analysts were expecting.

Third, LinkedIn upped what it may earn in the next year. But a good portion of that profit increase is coming from Lynda.com, an online learning platform that LinkedIn bought earlier this year, and not an improvement in LinkedIn’s core business. And Lynda will be adding more profits than expected not because that business is doing better, but because LinkedIn is completing the acquisition sooner. Take out earnings from Lynda, and projections for LinkedIn’s core business appears to be dropping.

But the biggest problem for the company is the rates it can charge for display ads is dropping. Linkedin said revenue from display ads was down 30% in the quarter. Most of the revenue boost that LinkedIn has gotten recently has come from selling premium services to recruiters and others. But many analysts think that market is basically tapped out for LinkedIn. So that avenue for growth might be over, or at least slowing.

Like many people on its website, LinkedIn seems to be in need of a transition, but it’s still just making connections.

TIME Earnings

Nintendo’s Hottest Game in Years Is Saving the Company

Splatoon
Nintendo Splatoon

It's a whimsical reinvention of the online shooter genre

Nintendo returned a profit over its April to June quarter in part thanks to a super-popular shoot-em-up online game in which players squirt ink to claim rivals’ territory.

The Japanese game company announced a net income of 8.3 billion yen ($67 million) for the three months leading up to June 30, a turnaround from a loss of 9.9 billion yen year-over-year. Operating income for the quarter landed at around $9.3 million (1.1 billion yen).

A big reason for the more positive quarter is Splatoon, Nintendo’s entry into the world of online shooters. The Wii U game marks a cute reinvention of the genre, replacing bullets and gore with ink and lots of color. The family-friendly nature of the game has helped it take off — the company has sold 1.62 million copies since its May release. Splatoon ranked at number five in U.S. software sales in June, according to research firm NPD Group.

Other factors for the company’s success last quarter include strong sales of its Amiibo interactive figurines — the company has sold 14.7 million units since their introduction in the middle of last year — and the depreciation of the yen, which contributed foreign exchange gains totaling 10.8 billion yen.

The results are encouraging for Nintendo, which has suffered from a lack of third party studio support for its Wii U console. The company recently announced it’s working on smartphone games; it’s also developing a new console codenamed “NX.” All this comes after the recent death of company president Satoru Iwata and speculation on his successor. The company declined to divulge more details on the search for a new president in its earnings report.

TIME Earnings

BP Is Paying Big Time for the Gulf Oil Spill

A BP petrol station in London.
Nick Ansell—PA Wire/AP A BP petrol station in London.

The spill has now cost BP a total of $54.6 billion

BP Plc’s woes show no sign of ending as the company swung to $5.8 billion loss in the second quarter, thanks to falling oil prices and another $9.8 billion in charges to settle the remaining U.S. government claims for the Deepwater Horizon disaster.

The loss had been expected since the company announced the settlement in June, hoping to draw a line under the worst environmental disaster in U.S. history. The spill has now cost BP a total of $54.6 billion, and thousands of private claims against it are still outstanding. The company warned again on Tuesday that the impact of still-outstanding issues on its earnings could be “material”.

The company’s operating business looked little better, after a quarter in which crude prices fell to their lowest level in six years in a heavily oversupplied global market. Underlying cost replacement profits, the measure tracked by most analysts, fell to $2.43 billion from $5.90 billion a year earlier (before the sharp fall in crude prices) and from $2.53 billion in the first quarter of 2015. The bottom line was saved by BP’s downstream division, which includes refining, gasoline distribution and oil trading, and which generated over three-quarters of total underlying profit. By contrast, the contribution from its stake in Russian oil giant Rosneft halved to $510 million and upstream profits fell by nearly 90% to $494 million.

And there’s more gloom ahead: the company expects refining margins to shrink in the third quarter, and the spot crude price has tumbled in recent weeks as world commodity markets have taken fright at the scale of the economic slowdown in China. It expects its output of oil and gas to be broadly flat in the current quarter.

Like every other oil company, BP is scrambling to cut costs. It cut its capital expenditure by 22% in the first half of 2015 to $9.1 billion, and now expects full-year capex to be less than $20 billion, down from $22.9 billion in 2014. Some of those savings are being diverted to pay for other permanent cost reductions: the company now expects restructuring charges of $1.5 billion this year, up from the $1 billion it announced in December.

This article originally appeared on Fortune.com

TIME stocks

U.S. Stock Market Sees Biggest Drop of the Week

Financial Markets Wall Street stock exchange
Seth Wenig—AP Trader Eric Schumacher stands under an electronic display on the floor of the New York Stock Exchange on July 9, 2015, in New York.

Mixed company earnings weighed on stocks as the week wore on

The U.S. stock market capped a four-day losing streak with its biggest drop of the week.

Disappointing quarterly results and outlooks from several companies pulled the major stock indexes sharply lower on Friday. New signs pointing to a slowing of China’s economy also added to investor jitters, bringing down the price of oil and other commodities.

While corporate profits have mostly exceeded Wall Street’s expectations so far this earnings season, investors have grown uneasy as many companies provided cautious outlooks or weak sales.

“The revenue numbers have been very shaky,” said JJ Kinahan, TD Ameritrade’s chief strategist. “After next week, we’ll have a much better picture overall how the earnings season was. But right now, that’s the theme that I’m seeing, and it’s not a healthy one.”

The mixed company earnings increasingly weighed on stocks as the week wore on. The Standard & Poor’s 500 index has now lost ground four out of the last five weeks.

The S&P 500 ended the day down 22.50 points, or 1.1 percent, to 2,079.65, while the Dow Jones industrial average slid 163.39 points, or 0.9 percent, to 17,568.53. The Nasdaq composite lost 57.78 points, or 1.1 percent, to 5,088.63.

Stocks kicked off the week on a strong note, driving the Nasdaq to its latest record high and bringing the S&P 500 close to a milestone of its own. But it’s been downhill since then. The Dow fell into negative territory for the year on Thursday. As of Friday, it was down 1.4 percent for 2015.

The tech-focused Nasdaq remains the best-performing index for the year. It’s up 7.4 percent, compared with 1 percent for the S&P 500.

Trading got off to an uneven start on Friday. The major indexes were all down by midmorning as traders sized up the latest corporate earnings.

Biotechnology company Biogen and pharmaceutical company AbbVie both reported a better-than-expected second-quarter profits, but their revenue fell short of Wall Street forecasts. Biogen plunged $85.02, or 22.1 percent, to $300.03. AbbVie declined $2.44, or 3.5 percent, to $68.08.

Capital One Financial, which announced quarterly results a day earlier that failed to live up to financial analysts’ expectations, sank 13.1 percent. The stock ended down $11.91 at $78.86.

Even a dash of merger news, which often puts investors in a buying mood, failed to impress.

Anthem agreed to buy rival Cigna for $48 billion in a deal that would create the nation’s largest health insurer by enrollment, covering about 53 million U.S patients. Anthem fell $4.35, or 2.8 percent, to $150.86, while Cigna lost $8.64, or 5.6 percent, to $145.72.

Investors did welcome Amazon’s latest quarterly report card. The e-commerce pioneer announced a surprise profit late Thursday. The stock vaulted $47.24, or 9.8 percent, to $529.42.

Nine of the 10 sectors in the S&P 500 ended lower. Health care stocks fell the most, 2.5 percent. Utilities edged higher.

Of the 187 companies in the S&P 500 that have reported earnings so far, about 72 percent of them have delivered results that beat Wall Street estimates, according to S&P Capital IQ. That’s better than the historical average of 66 percent.

“Generally most companies are seeing modest growth, but nothing to write home about,” said Brad Sorensen, managing director of market and sector analysis at Schwab Center for Financial Research.

Another 163 companies, or a third of the S&P 500, are due to report earnings next week, including Facebook, Twitter and Exxon Mobil.

In energy trading, the price of oil continued to slide Friday as the number of rigs drilling for oil in the U.S. rose. Benchmark U.S. crude fell 31 cents to close at $48.14 a barrel in New York. Crude fell 5 percent for the week, and is down 19 percent for the month. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 65 cents Friday to close at $54.62 a barrel in London.

In other futures trading, wholesale gasoline fell 2.4 cents to close at $1.828 a gallon, while heating oil fell 2.5 cents to close at $1.630 a gallon. Natural gas fell 4 cents to close at $2.776 per 1,000 cubic feet.

Precious and industrial metals futures closed broadly lower. Gold lost $8.60 to $1,085.50 an ounce, silver gave up 21 cents to finish at $14.48 an ounce and copper edged down less than a penny to $2.38 a pound.

The price of U.S. government bonds rose slightly. The yield on the 10-year Treasury note fell to 2.26 percent from 2.27 percent late Thursday.

TIME Amazon

Why Amazon’s Stock Is Suddenly Up 20%

Amazon Holds News Conference
David McNew—Getty Images Amazon CEO Jeff Bezos holds up the new Kindle Fire HD reading device in two sizes during a press conference on September 6, 2012 in Santa Monica, California.

Investors are cheering the firm's surprise second-quarter profit

Shares of Amazon were up some 20% Friday morning, adding more than $44 billion to the company’s market value, after strong growth in the company’s cloud business drove a surprise quarterly profit.

The Internet retailer’s stock price rose strongly overnight, after the firm announced a surprise profit of $92 million on Thursday afternoon, when analysts expected it would lose money in the second quarter.

Shares hit $563 per share as of 4:30 p.m. ET Thursday. The surge continued overnight, with the stock touching new highs of $570 per share as of 7:15 a.m. ET Friday morning, and were lately moving higher, according to Bloomberg News.

“They are showing investors that if they want to deliver profits, they can,” Michael Pachter, an analyst at Wedbush Securities, told Bloomberg. “Amazon is a dominant online retailer, well on its way to becoming one of the world’s largest retailers.”

The jump in shares — setting up the stock for its best trading day in five years — takes Amazon’s market capitalization to about $270 billion, overtaking that of retail giant Wal-Mart, Reuters reported.

It also added around $8 billion in paper value to CEO Jeff Bezos’ stake in the company.

Revenue from Amazon’s cloud operations — called Amazon Web Services — nearly doubled in the second quarter, indicating that the business was poised to drive sustainable earnings for the online retailer, Wall Street analysts told Reuters.

TIME Apple

Here’s Why Apple Lost $60 Billion on Record iPhone Sales

It's all about expectations

Over the last three months, Apple grew its revenues by 33%, saw its profits increase by 38% to $10.7 billion, put away more than $202 billion in cash for a rainy day — and yet lost more than $60 billion in market value in just three minutes on Tuesday.

Casual observers might be scratching their heads at news that, at first glance, would suggest the world’s biggest tech company had a bad day despite releasing earnings many companies would be proud to call their own. “Apple iPhone Sales, Up 35%, Disappoint Investors” was the Wall Street Journal‘s initial headline. “Apple Profit Up 38%, but iPhone Sales Disappoint Wall Street” blared The New York Times.

The reason for this initially mind-boggling disparity? Expectations.

Before companies like Apple release their latest earnings reports, analysts try to guess what those numbers might reveal. These analysts, typically employed by brokerage firms, are tasked with providing accurate assessments for investors, who want to know if they should buy more stock, hold their current position, or sell their shares. Analysts’ forecasts are then culled together to produce a consensus earnings estimate for a company. If a company beats these estimates, it usually portends good fortune for their market value as investors flock to buy up stock of the company. If the company fails to meet expectations, however, market sentiment shifts against them — sometimes resulting in a selloff like the one we saw in after-hours Apple trading Tuesday evening.

Apple is perhaps a victim of its own success. It routinely beat earnings estimates over the last four quarters, setting high expectations this time for another rout. In its previous earnings report, Apple recorded its most profitable second quarter ever, with revenues of $58 billion, handily beating a consensus estimate of around $56 billion. The fact that Apple sold almost 61.2 million iPhones in that quarter, a number that also beat predictions of 56.8 million, also delighted investors, as the iPhone is an increasingly important part of Apple’s bottom line. Immediately, Apple’s share price was up 1.25%, reaching an all-time high of $134.

But this time around, Apple missed the mark on its closely-watched iPhone sales. The 47.5 million units it sold, while still a third quarter record, was below the estimate of around 50 million units. And while iPhone sales grew by 35%, that figure was down from the 40% growth in the previous quarter and the 46% growth two quarters earlier. Apple’s own forward-looking revenue projections, too, came in below Wall Street expectations — hence the bad vibes after Tuesday’s earnings report.

“While total company and iPhone revenue growth accelerated in the June quarter, iPhone units missed expectations,” said Morgan Stanley Analyst Katy Huberty.

Read next: What Apple’s Bizarre Stock Tumble Really Means

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This story originally appeared on Fortune.com

TIME Apple

What Apple’s Bizarre Stock Tumble Really Means

Investors are starting to worry about one part of the business in particular

The reigning king of tech stocks took a bad stumble Tuesday. Apple reported financial earnings that, on the face of things, met or exceeded Wall Street’s expectations. Yet there were also signs that sales of its largest product, the iPhone, may be slowing faster than most investors have expected.

And lo, $50 billion in Apple’s market value vanished in a matter of minutes. What happened?

Apple has been branching into other areas like streaming music and the Apple Watch, in addition to its Mac computers and iPad tablets. But these days, the company might as well be called the iPhone company. Smartphones make up to 69% of Apple’s total revenue.

Apple isn’t having trouble selling iPhones. The issue is whether it can keep selling them after the initial surge of demand that follows a new release. Apple says it sold 47.5 million iPhones last quarter. The consensus among analysts had been closer to 49 million, with some of the more bullish analysts arguing that Apple would surprise us with as many as 52 million iPhones sold last quarter.

That didn’t happen. Apple shares fell nearly 8% in a matter of minutes after the numbers were released. This, in spite of the fact that Apple’s revenue rose 33% to $49.6 billion and its net income rose to $1.85 per share, beating Wall Street estimates by four cents a share.

Here’s the thing. The headline numbers on earnings reports often tell only part of the story, especially with a company like Apple that is so obsessively tracked by analysts, investors, fanboys and bloggers. So yes, Apple beat expectations, but it really just kind of squeaked past them, whereas it typically leaps over them with a substantial margin. In other words, beating the numbers isn’t enough. Investors expect Apple to thrash them.

And again, that didn’t happen. But all of this disappointment is centered around the iPhone. The selloff late July 21 wasn’t driven as much by Apple missing a target set by analysts. It came from a much deeper concern about Apple’s ability to keep dazzling–eight years after it introduced the iPhone–with its technology and design.

“We think the iPhone has a lot of legs to it–many, many, many years,” CEO Tim Cook said after an analyst hinted the company was a little too focused on the iPhone. “We’re in the early innings of it, not the late innings.” Fine, except as any baseball fan knows, there can be some ugly things that happen inning by inning, even when you end up winning the game.

This is precisely the concern around the disappointing iPhone sales. It’s not so much that the iPhone will die. It’s that Apple releases a new generation every two years–with a semi-generation (the 4S, 5S, etc) released midway through the cycle. After Apple released the iPhone 5 in 2012, sales surged early before disappointing for quarters, even through the 5S release. Samsung quickly caught up to the speed and features that once set the iPhone 5 apart. And Apple’s stock flagged.

The 8% drop in Apple shares is a hedge against this scenario playing out again. It may end up being a blip in Apple’s steady march toward a trillion-dollar market cap. But for investors focused on the next few quarters, it’s worrisome. Do investors have to wait for the release of an iPhone 7 in the fall of 2016 to ride a wave higher? Or does Apple have something in store to keep it from becoming a cyclical stock?

Of course, it didn’t help that Apple said that revenue this quarter would come in between $49 million and $51 billion, below the consensus estimate of $51.1 billion. Apple pointed out that its iPhone sales rate is three times the industry average. Which is encouraging, but the broader fear among tech investors is that smartphone sales in general are slowing, having reached market penetration in many global markets.

The iPhone has not only been Apple’s biggest product, but also its most consistently reliable. Sales of the iPad declined 18% last quarter, the sixth straight quarter of year-over-year declines. Apple sold an estimated 2 million Apple Watches last quarter, assuming a median sales price of $499, which isn’t bad but also below the projections some saw of 3 million or more.

So Apple may have stumbled but it is still far from falling. Over the long term, it’s proven foolish to bet against the company. Then again Apple’s stock doesn’t rise in a straight line but rather takes detours into valleys. The bullish scenario is this earnings report is Apple has run into a ditch rather than a valley. The bearish scenario is more volatility to the downside before Apple resumes its long-term ascent.

For those focused on the near term, however, there is another concern. The tech earnings season started off on an optimistic note, with Google surprising with strong results. But already this week we’ve seen IBM disappoint (in its ongoing painful transformation into the cloud), and then Microsoft somehow fall short of what investors wanted. And now Apple.

Most of these disappointing earnings have less to do with a fundamental, widespread weakness among tech companies and more with a sense among investors the rally is peaking. It’s getting harder to excite the bulls now that the bull run is entering its seventh year. Apple, like many of its peers, are pushing forward to a brighter future. But their investors are increasingly showing signs of exhaustion.

Read next: Apple’s Hiring More Car Industry Experts For a Secret Project

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TIME Earnings

Microsoft Beats Expectations But Stock Still Slides

Satya Nadella Delivers Opening Keynote At Microsoft Build Conference
Justin Sullivan—Getty Images Microsoft CEO Satya Nadella delivers a keynote address during the 2014 Microsoft Build developer conference on April 2, 2014 in San Francisco, California.

The tech giant was badly hurt by its $7.5M Nokia writedown

Microsoft’s expectations-beating $22.2 billion in fourth quarter revenue wasn’t enough to keep the stock from falling 3.5% in after-hours trading Tuesday, as the company’s $7.5 billion Nokia writedown contributed to Microsoft’s largest-ever quarterly net loss of $3.2 billion.

Investors were likely also dismayed by Microsoft’s commercial revenue, which at $13.5 billion fell short of expectations. Meanwhile, the company’s device sales fell 13% to $8.7 billion, while its equipment manufacturing revenue slid 22% as Windows XP reached its end of life.

Microsoft announced earlier this month it would write down its 2014 acquisition of Nokia’s handset business, a deal spearheaded by former CEO Steve Ballmer but one that failed to result in significant market share for the company’s Windows Phone devices.

Still, there are reasons for optimism in Redmond. Microsoft’s Surface tablets and Xbox gaming unit are showing promise, while its Bing search engine increased its market share and advertising revenue. And the company’s sales increased over the first quarter of the year, when it made $21.7 billion in revenue. That’s in part because the Washington-based computing company’s cloud business continues to grow — revenue from Microsoft’s cloud services, such as Office 365 and Azure, rose 88% this quarter.

TIME Earnings

What To Expect From This Afternoon’s Biggest Earnings Reports

Apple Unveils iPhone 6
Justin Sullivan—Getty Images Apple CEO Tim Cook speaks during an Apple special event at the Flint Center for the Performing Arts on September 9, 2014 in Cupertino, California.

Apple tops the list of major companies reporting quarterly financial results after markets close today.

Corporate earnings season kicked off in earnest this week and disappointing results from a handful of major companies sent the stock market tumbling on Tuesday.

The Dow Jones Industrial Average is down more than 200 points on the day with the stock declines of companies such as IBM and United Technologies — both of which reported sales drop-offs — dragging down the blue-chip index.

The earnings bonanza is just getting started, though, as this afternoon’s crop of corporate results includes quarterly figures from a number of potential market-movers, from Apple to Chipotle.

Here’s what to expect from the earnings reports scheduled for after today’s market close:

1. Apple

This is earnings event the market waits for every quarter and today is no exception as investors hope that Apple will break down the sales numbers for the Apple Watch. The watch launched in April — the first major product launch under CEO Tim Cook — and there have been contradictory reports on the product’s sales performance — some good, some bad. The consensus seems to be that those numbers will not be made public, though Fortune‘s Philip Elmer-DeWitt polled two groups of analysts that predicted the tech giant sold somewhere between 4 million and 4.5 million of the smartwatches last quarter.

Meanwhile, Apple is expected to post strong third-quarter numbers, with analysts surveyed by Thomson REuters predicting 32% revenue growth to $49.3 billion. Analysts polled by Fortune expect Apple to post earnings per share of $1.81 after reporting EPS of $1.28 during the same period last year. Those analysts also predict a 40% increase in the number of iPhones sold in the quarter, to 49.4 million phones. Apple sold 61.2 million iPhones in the second quarter.

For more, read Fortune magazine’s recent profile of Apple CEO Tim Cook.

2. Microsoft

Microsoft’s fourth-quarter revenue is expected to have dropped more than 5%, to just over $22 billion. Sales of the software giant’s Windows operating system stalled as customers await the release of Windows 10 later this month. Revenue from the cloud business, the company’s focal point going forward under CEO Satya Nadella, should continue to clock big gains, but that unit remains a small portion of Microsoft’s overall business.

Meanwhile, the company is likely to post significant losses for the quarter due to a one-time impairment charge of $7.6 billion that stems from Microsoft’s much-maligned purchase of Nokia’s handset business. Microsoft also faces a restructuring charge of at least $750 million related to job cuts. Earlier this month, the company said it would cut another 7,800 positions in the second round of massive job cuts in less than two years since Nadella took over.

During this afternoon’s conference call, investors will be listening closely for any commentary from company leaders on the highly-anticipated Windows launch, the company’s efforts to reverse the decline in Windows sales, and any progress updates on the company’s cloud-first, mobile-first strategy.

3. Yahoo

With its sinking share price and an expected dip in sales, Yahoo’s best bet for exciting the market this afternoon will likely be to share some positive news regarding the company’s planned spin off of its $32 billion stake in Chinese e-commerce giant Alibaba. Last week, Yahoo officially filed plans for the spin off, but the transaction could come with a big tax hit. Investors could also be interested in hearing more about Yahoo’s move into legal online gambling with its updated fantasy-sports app.

Yahoo’s stock is down more than 20% so far this year and the company’s first-quarter sales and profits both declined from the same period last year. Those disappointing results have resulted in investors questioning the turnaround strategy of CEO Marissa Mayer, who is now in her third year on the job. It won’t help that Yahoo is expected to report another decline in both quarterly revenue and earnings.

For more on Yahoo’s attempt at a turnaround, read last year’s Fortune magazine cover story on CEO Marissa Mayer.

4. Chipotle Mexican Grill

Chipotle is not quite expected to match its 20% year-over-year sales increase from the first quarter, but second-quarter revenue is still expected to clock in at a strong $1.2 billion, which would represent nearly a 16% bump. However, the quarter could also see Chipotle’s comparable sales growth drop into single digits after a 10% increase in the first quarter that came in below analysts’ expectations.

Chipotle’s first-quarter numbers suffered a bit from the fast-casual chain’s infamous carnitas shortage, which arose after Chipotle parted ways with a pork supplier that violated the company’s strict standards for the humane treatment of animals. The company’s stock is still down about 1% for the year, but shares have gained nearly 12% since the start of July — just in time for news that an end to the carnitas crisis is in sight. Investors will certainly be keen to hear more about Chipotle’s pork supply outlook on Tuesday afternoon, along with any feedback on the restaurant chain’s decision to remove all genetically modified organism (GMO) ingredients from its products.

5. GoPro

GoPro sells a large chunk of its wearable cameras overseas, which makes the company susceptible to foreign currency headwinds stemming from the strong U.S. dollar. But, GoPro — headed by CEO and founder Nick Woodman — reportedly saw strong demand for its line of Hero4 action cameras, which could result in second-quarter revenue that outpaces Wall Street’s expectations. GoPro is expected to report roughly $395 million in sales for the quarter, which would represent a 62% increase year-over-year, according to Thomson Reuters.

GoPro’s stock is down slightly ahead of the earnings report after jumping on Monday following the announcement of a premium content licensing portal as well as a partnership with Toyota Motor that will result in 2016 Toyota Tacoma trucks featuring a windshield mount specifically designed to house a GoPro camera. This afternoon, investors will be interested to see GoPro’s outlook, and to hear about strategy going forward, as GoPro continues to navigate its shift from being a camera-maker to a full-fledge media company. The market will also be listening for any information on the company’s reported interest in virtual reality and drones.

— Reuters contributed to this report.

TIME Earnings

IBM Posts Thirteenth Straight Revenue Drop

The logo of IBM is seen at their booth p
Odd Anderson—AFP/Getty Images The logo of IBM is seen at their booth prior to the opening of the CeBIT IT fair on March 5, 2012 in Hanover, central Germany.

While executives continue to invest in the cloud

IBM continues to take the saying “you have to spend money to make money” close to heart.

The tech colossus on Monday reported its thirteenth straight decline in quarterly revenue while executives continued to funnel money into IBM’s “strategic imperatives,” which includes its cloud computing and data analytics business.

For the three months ending June 30, IBM logged $20.8 billion in revenue, a 13.5% decline from the $24 billion it brought in the same time period a year earlier.

The company’s software business was responsible for a big part of the drop. Revenue in that division fell to $5.8 billion from $6.5 billion the previous year. IBM’s global technology services group saw quarterly revenue decline 10.5% to $8.1 billion from the $9 billion it raked in the year-ago period.

IBM CFO Martin Schroeter did his best to reassure investors on a call that IBM is on the right track as it invests into areas that the company feels will one day generate high returns. Schroeter didn’t give any concrete details on how IBM’s “strategic imperatives” are currently contributing to the company’s bottom line.

He reiterated the fact that cloud computing, big data, security, and other areas falling into the “strategic imperatives” category brought in $25 billion and represented 27% of IBM’s total revenue in 2014. By 2018, he said IBM is on track for these initiatives to generate $40 billion and account for 40% of sales by 2018, he said.

Revenue from IBM’s cloud business rose 70% in the quarter while revenue from analytics gained 20% for the same time period, Schroeter explained. But because the company doesn’t breakdown the specifics behind those percentage increases, it’s hard to tell whether they offset the declines in the company’s traditional services.

That thought was not lost on some investors, who expressed concern that IBM’s focus on new growth areas isn’t enough. One analyst seemed uneasy with company’s consulting business, which took a hit this quarter. The company’s Global Business Services generated $4.3 billion dollars for the quarter compared to the $4.9 billion it took in the previous year.

Schroeter acknowledged the revenue loss, but explained that IBM’s push into newer areas like cloud computing and data analytics will eventually help lift its consulting business and offset losses. It’s just going to take some more time, he said.

“While we engineered that shift, we will see declines in that business,” Schroeter said.

Another analyst asked about the company’s slumping software sales and whether they reflect the reality that selling software via a cloud computing model produces less revenue than selling software directly to the customer.

Schroeter acknowledged that notion by saying “While they come in at slightly lower margins than traditional on-premise [software], they are highly crucial to IBM.” But that won’t be enough to stop IBM’s journey to the cloud, with Schroeter saying that the company is “building new revenue streams in spaces where we aren’t today.”

And IBM’s continued investment in cloud computing and analytics will not be slowing down any time soon. Schroeter pointed to the $700 million IBM has spent so far this year on acquisitions meant to grow those areas like its June purchase of the cloud company Bluebox and April acquisition of healthcare data company Explorys.

But don’t worry about the cost, Schroeter said. IBM is on the right track, he insisted, saying, “We will get returns on the investments in time.

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