Big Tech Earnings 🤖
Big Tech Earnings 🤖
Review of Microsoft, Amazon, Meta, Apple and Google earnings
It’s becoming a common theme these days for the big tech companies to beat analyst estimates. I’m not sure if that’s because:
The analysts just aren’t very good.
It’s too difficult to predict accurately how much a company making tens or hundreds of billions of dollars around the world will make in a given quarter.
The tech companies are just better businesses than the analysts think.
It’s probably a combination of all three, but regardless, let’s have a look at how they did, starting with Amazon.
Amazon 🛒☁️
Amazon exceeded expectations in its Q4 earnings report with earnings and revenue each outpacing analyst predictions. The company’s stock rose 7% after the announcement.
Revenue: $170 billion vs $166.2 billion forecast.
Earnings per share: $1.00 vs $0.80 forecast.
Amazon Web Services (AWS) revenue matched expectations of $24.2 billion and advertising revenue was $14.7 billion, higher than the predicted $14.2 billion. Amazon’s advertising segment has been one of the company’s fastest growing businesses in the last 5 years.
Amazon projected Q1 sales for this year to be between $138 billion and $143.5 billion, an 8% to 13% growth rate, slightly below the $142.1 billion anticipated by analysts.
The impressive results reflect well on CEO Andy Jassy's cost-reduction strategy. Amazon reduced its workforce by 27,000 positions from late 2022 through mid-2023 and has scaled back or terminated several of its experimental projects.
The company is also seeking cost reductions in other areas, including its fulfillment operations. It’s already announced cutbacks for Prime Video, MGM Studios, Twitch, and other divisions for this year.
Microsoft 💻
Microsoft's stock dipped 2% following the company's announcement of its fiscal second-quarter earnings. The report beat analyst expectations, but Microsoft forecast weaker revenue for the next quarter.
Revenue: $62.02 billion vs $61.12 billion forecast.
Earnings per share: $2.93 vs $2.78 forecast.
Microsoft projected revenues in the range of $60 billion to $61 billion for this quarter and expects to be able to lower its costs of revenue and operating expenses.
Revenue increased 17.6% with net income rising to $21.87 billion, up from $16.43 billion in its second fiscal quarter 2022.
Its cloud segment, reported $25.88 billion in revenue, a 20% year on year increase and revenue from Microsoft Azure specifically was up 30%. CEO Satya Nadella said the company now serves 53,000 Azure AI customers, with a third of them new to Azure in the past year.
The quarter also saw Microsoft complete its acquisition of Activision Blizzard for $75.4 billion and announce new custom cloud chips as well as a $30 monthly Copilot AI add-on for Microsoft 365.
Despite ongoing layoffs, including cuts at LinkedIn and within its gaming unit following the Activision deal, Microsoft's stock has risen about 9% in 2024, beating the S&P 500's 3.4%.
Meta 🥽
Meta announced its first ever dividend payment and excellent revenue and earnings figures. This all lead to a 17% surge in its stock price in after-hours trading.
Revenue: $40.1 billion vs $39.2 billion forecast.
Earnings per share: $5.33 vs $4.96 forecast.
The quarter saw a 25% increase in revenue from the previous year, marking the highest growth rate since mid-2021, as the digital advertising market rebounded. Meta also reduced its expenses by 8% year-over-year to $23.73 billion, enhancing its operating margin to 41%. Its cost-cutting efforts are paying off.
Net income saw a significant jump, tripling to $14 billion from $4.65 billion in the previous year.
The number of daily active users across their platforms was also up, reaching 2.11 billion, slightly above the 2.08 billion expectation. As was average revenue per user, at $13.12, higher than the expected $12.81.
Meta also announced a dividend of $0.50 per share and a $50 billion share buyback program. This follows an increase in cash reserves to $65.4 billion at the end of 2023, up from $40.7 billion a year earlier.
The stock's after-hours rally continues its upward trajectory from 2023, with a nearly tripled value. Prior to the earnings announcement, the stock was already up 12% for the year, pushing Meta’s market capitalization close to $1.2 trillion.
Alphabet (Google) 🔍
Alphabet shares fell after the company announced its Q4 2023 earnings, despite it beating on both revenue, earnings per share and the quarter being the fastest for revenue growth since early 2022.
Revenue: $86.31 billion vs $85.33 billion forecast.
Earnings per share: $1.64 vs $1.59 forecast.
Revenue was up 13% from $75.06 billion a year earlier and net income was up 52% to $20.7 billion.
The main mark against the company was that ad revenue of $65.52 billion trailed analyst estimates of $65.94 billion, but that hardly seems enough to justify a 6% (or roughly $100 billion) drop in its share price.
CEO Sundar Pichai seems committed to prioritizing investments in AI and incorporating the technology into many of Google's products. He’s suggested that to achieve this, the company must reduce expenses in other areas, which will result in additional layoffs beyond the 12,000 job cuts from last year, representing about 6% of the company's full-time employees.
We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come. - Alphabet CEO, Sundar Pichai.
Alphabet shares are up 56% in the past 12 months.
Apple 📱
Apple’s earnings surpassed revenue and earnings expectations but experienced a significant 13% drop in sales in China, a key market. Apple's stock price decreased by over 2% in after-hours trading.
Revenue: $119.6 billion vs $117.9 billion forecast.
iPhone: $69.70 billion.
Mac: $7.78 billion.
iPad: $7.02 billion.
Other Products: $11.95 billion.
Services: $23.12 billion.
Earnings per share: $2.18 vs $2.10 forecast.
Apple saw 2% sales growth in the quarter, marking an end to four consecutive quarters of annual revenue decline and reported net income of $33.92 billion for the quarter, a 13% increase from the previous year.
iPhone sales, contributing to Apple's first full quarter of iPhone 15 revenue, exceeded expectations with nearly a 6% increase to $69.70 billion. And although Apple's profitable services business grew 11% to $23.11 billion in revenue, it slightly missed estimates. Apple reported an increase of 2.2 billion active devices, up from 2 billion the previous year.
Despite overall growth, sales in China fell nearly 13%, raising concerns about Apple's demand in this significant market amid competition from local firms like Huawei.
Apple invested nearly $27 billion in dividends and share repurchases during the quarter.
Excellent run-down of big tech earnings so far. The most comprehensive and sucint one I've read this week. I would add a 4th hypothesis to why analysts in tech are not really good - because of asymmetry of information, big tech can anticipate better what the next quarter will be. And when they guide really, they skew the analysts forecast ... and end up beating expectations. It is half art, half science. But when done right, it creates a lot of value to the shareholders.