Facebook, Alphabet, Twitter and Amazon all announced Q1 earnings results this week.
Details and Implications:
Facebook: Despite the recent controversy over Cambridge Analytica, Facebook’s revenue soared in Q1 2018. Revenue rose 49% year-on-year to $11.97bn (vs $8.03bn in Q1 2017), beating expectations, with mobile contributing 91% of all advertising revenue. Net income was up 63% year-on-year to $4.99bn (vs $3.06bn in Q1 2017). Global Daily Active Users (DAU) rose 13% year-on-year to 1.45bn and crucially for Facebook in the U.S. and Canada markets, the DAU metric returned to growth with 185m DAU in Q1 2018 compared to 184m in Q4 2017. A strong set of results and return to DAU growth in the US indicates there has been no significant financial impact or loss of users from the Cambridge Analytica scandal or the recent tweaks made to the newsfeed.
Alphabet: Surpassed analyst expectations with strong sales growth and profits. Revenue for the quarter was up 26% year-on-year to $31.15bn (vs $24.7bn in Q1 2017 and vs $30.29bn expected). There was growth on both Alphabet’s advertising business (Google and YouTube) and its ‘Other Bets’, but Google’s ad business still drives everything. Ad revenue was up nearly 20% year-on-year to $26.62bn (vs $21,41bn in Q1 2017) and this helped drive a 73% increase in Alphabet’s profit in the quarter to $9.4bn (vs $5.4bn in Q1 2017). Alphabet’s growth continues, but it’s becoming more expensive for it to maintain that growth as total consumer acquisition costs this quarter continued its upward trend. Alphabet’s shares have fallen about 9% over the past three months as worries about online privacy and regulatory risks have impacted stock, and whilst shares initially jumped 3% on the results they quickly fell back finishing down by 0.33%.
Twitter: More good news for Twitter with strong results that saw analysts upgrade its stock. Following on from posting its first ever net profit in February, Twitter reported a first quarter revenue rise of 21% year-on-year to $665m (vs $548 in Q1 2017). More than half of the $575m advertising revenue reported came from video. It also reported a net income of $61m, down from $91m at the end of last year, but ahead of analyst expectations. It reported 336m monthly active users in Q1 (vs 330m in Q1 2017) and said daily active users grew by 10% in Q1. Despite the second consecutive quarter of profit, shares fell slightly as CEO Jack Dorsey highlighted the potential impact on user numbers of incoming GDPR rules in Europe and the spectre of further regulation for social media companies in the wake of recent scandals – even stating that Twitter ‘is not a social network’.
Amazon: Amazon’s global revenue increased 43% to $51bn in Q1 2018 (vs $35.7bn in Q1 2017). Within this, North America revenue jumped 46% to $30.7bn whilst international sales grew 34% to $14.8bn. Profit more than doubled with net income of $1.6bn (vs $724m in 2017). Results outstripped analyst expectations. The company’s AWS sales grew 49% year-on-year, showing a new spurt of growth having dropped to 42% on the same measure in Q3 last year. AWS generated $1.4bn in operating income, accounting for 73% of Amazon’s total operating income. Amazon’s subscription services revenue, including Prime, grew 60% to $3.1bn. However, Amazon, which disclosed for the first-time last week that Prime had more than 100m members worldwide, also announced it would raise the price of Prime membership in the U.S. to $119 a year, a 20% hike in the price which it said was due to the rising cost of delivering the service and pointing to the fact it is the first rise since March 2014. Amazon also revealed it had re-inked its deal to stream NFL games until 2019. Alongside strong Q1 results Amazon also gave a bullish forecast for Q2 with sales expected to be between $51bn and $54bn (34% to 42% growth over the same quarter last year).
Good results all round, but each player has its own specific issue. Facebook must wait to see any long-term impact of recent troubles. Alphabet will look for ways to keep consumer acquisition costs in check. Twitter will hope to continue profitability and Amazon, well, Amazon seems unstoppable.
Further Reading: Official results – Facebook / Alphabet / Twitter / Amazon