Analyzing Big Tech earnings: Facebook and others
The earnings have seen the S&P 500 clinch a new intraday record on Thursday, adding 0.5% while the Dow Jones Industrial Average gained 90 points and tech-heavy Nasdaq Composite added 0.4% as a host of big-tech names rose across the board.
This week has seen earnings from major tech companies, including Apple, Facebook, Shopify, Microsoft, AMD, Apple, and Tesla. Read our quick summary of the reports.
Facebook crushed financial expectations but missed slightly on users. Shares of the company rose around 5% after Facebook reported its recent financial results.
Facebook had a somewhat two-part report. The first piece of its results was a huge financial beat; the second was that it missed ever-so-slightly on active usage. Investors are weighing the former more heavily than the latter.
In numerical terms, analysts expected Facebook to report $23.67 billion in revenue. Instead, it posted $26.17 billion. And its earnings per share beat expectations by $0.93 per share or just under 40%.
Facebook is a controversial company with known issues. But turning in better-than-expected financial results is not one of them.
Shopify smashed analyst expectations, again. Its shares spiked, again. The post-IPO Shopify story of the Canadian e-commerce infra player kicking the heck out of expectations continued this week when the company announced results.
Investors had expected Shopify to post $865.48 million in total Q1 2021 revenue. Instead, it managed $988.6 million. Shopify also beat profit expectations by a multiple.
The results were driven by Shopify’s so-called “Merchant Solutions” business, which grew by 137%, faster than the company’s aggregate 110% growth rate in the quarter. Merchant Solutions encompasses its payments, shipping, and capital services, among other elements of its business.
Apple shares rose after the company reported strong growth across its product categories. Apple, like Facebook, demolished investor expectations for its most recent quarter.
In the three months ending March 27, 2021, Apple produced revenues of $89.6 billion, and earnings per diluted share of $1.40 were miles ahead of an expected $77.35 billion in revenue and $0.99 in diluted EPS.
Apple’s big win was driven by growth in every single product category that the company reported, compared to the year-ago period. iPhone sales totaled $47.94 billion, compared to a year-ago result of $28.96 billion. And the company’s key services business line grew from $13.35 billion to $16.90 billion over the same temporal interval. For the nerds in the room, Apple’s net income as a percentage of gross profit in the quarter was just over 62%.
Spotify shares fell sharply after it reported lower-than-anticipated user growth. In financial terms, Spotify had a good quarter. The company met revenue expectations (around €2.15 billion) and lost less money per share than was anticipated.
But the user base only reached 356 million in the first quarter of the year, the low end of Spotify’s 354 million to 364 million guidance, and under analyst expectations of just over 360 million. Its shares were off around 12% on Thursday.
GrubHub grew its revenues and losses ahead of its acquisition. GrubHub, which is in the final stages of being digested by JustEat Takeaway, brought in more money in the first quarter than in the same period a year ago but also lost more money too.
Revenue grew 52% year-over-year to $550.6 million thanks to all that pandemic-driven demand for delivery. GrubHub also reported a negative Adjusted EBITDA of $9.3 million. GrubHub blamed its adjusted EBITDA results on several factors, including temporary fee caps (which it opposes), increased delivery driver costs caused by short-term driver supply imbalances from surging demand, extreme winter weather in numerous parts of the country, and, to a lesser degree, the issuance of stimulus payments that caused some drivers to temporarily reduce hours in March. Active diners rose 38% year-over-year to 33.0 million, another positive sign for the company. But alas, its net loss grew to $75 million, or a loss of $0.81 per diluted share compared to a net loss of $33.4 million or a loss of $0.36 per diluted share in the same year-ago period.
Alphabet’s earnings were strong across many fronts. YouTube revenue grew nearly 50% to $6 billion, search ads performed well, and even the infamously unprofitable “Other Bets” ground managed to post nearly $200 million in revenue. But the most notable result from the technology conglomerate was its cloud results.
Google Cloud grew from $2.777 billion in revenue and an operating loss of $1.73 billion in the year-ago quarter to revenues of $4.047 billion and an operating loss of just $974 million. Alphabet is building not only a material revenue stream out of a non-ad-based product but one that could generate material operating income in time. If trends hold.
Microsoft’s earnings report was pretty good despite Wall Street’s disinterest. Microsoft grew 17% from its year-ago quarter while pushing its operating income up 31% to $17 billion; faster-growing income compared to revenue is indicative of operating leverage. The company’s net income grew even more rapidly than its operating income, which is sharper than expected. Azure, the company’s Google Cloud, and AWS competitor grew 50% in the quarter, which met expectations according to a CNBC report. Microsoft remains incredibly rich, and its most future-looking products put up some pretty big numbers.