Q1 2019 Earnings

Background:

Snap, Twitter, Facebook and Amazon all reported results this week. Here’s what you need to know.

Details and Implications:   

Snap Inc: Q1 2019 reported revenue of $320m beat analyst predictions of $307m, resulting in stock prices soaring 11% in after-hours trading. Stocks have since fallen. For the first time in two quarters, the company saw a 2% growth in its global Daily Active Users (DAUs) to 190 million from 186 million in the previous quarter. Snap also took the time to reiterate updates announced at its First Partner Summit: a new gaming platform, new original shows and ad network. In addition, the platform’s new Android app is now available on all Android devices hoping to ease issues Android users had using the platform. Forward looking, revenue growth for Q2 is expected to grow from $335m to $360m.

Twitter: Q1 2019 revenue of $787m, outperforming Wall Street expectations of $776.1m, which sent stocks surging more than 15%. Monthly Active Users (MAUs) (excluding SMS users) were up 330 million vs the expected 318 million and up from the reported 326 million last quarter. This will be the last quarter that Twitter will report its MAUs, instead focusing on its new monetised metric: mDAU (monetised Daily Active Users) – users that log in to Twitter either via desktop or through mobile and are able to view ads. Q1 reported 134 million mDAUs compared to 126 million from the previous quarter. The company reiterated that it expects operating expenses to increase 20% in 2019 in efforts to continue investing in “revenue product and sales and platform.”

Facebook: Reported revenue for Q1 2019 of $15.08bn vs forecasted $14.98bn – a decrease from its previous quarter revenue of $16.9bn. DAUs and MAUs both stayed relatively consistent with 1.56 billion and 2.38 billion users respectively and Facebook continues to see 2.7 billion MAUs across its combined portfolio including Instagram, WhatsApp and Messenger as well as the main Facebook platform. After a revamp to its Stories products, the social media giant now sees 3 million advertisers using Stories ads across most of its products including Instagram, Facebook and Messenger. The headlines were all taken by Facebook’s decision to put aside $3bn to cover potential costs from an ongoing FTC investigation into privacy practices, whilst admitting a potential fine could be up to $5bn.

Amazon: Q1 2019 was its most profitable quarter ever. Reported revenue of $59.7bn was in line with expectations and 17% YoY growth, but growth is slowing. Growth in the advertising business, which is under the “other” category, significantly slowed, seeing only 34% revenue growth to $2.7 billion, after growing at least 60% in the past five quarters (that is after taking in consideration an accounting change that made the growth appear to be even faster). According to eMarketer, Amazon now takes over 8.8% of net digital ad revenue share in the U.S., trailing only Facebook (22%) and Google (37%). Amazon warned that its revenue and earnings for the second quarter could fall short of analysts’ estimates. However, Amazon is delivering more profit for its investors. Net income hit a record $3.6 billion and its operating profit of $4.4 billion represented a 7.4% margin, up from 3.8% last year. Amazon’s web services continued to be the biggest contributor to the company’s bottom line with $7.7bn revenue, a 41% increase YoY and $2.2bn in profit.

Summary:

Snap’s recent efforts to broaden reach and increase the time existing users spend on the app seem to be paying off. Twitter is posting consistent growth over the past few quarters, which is a positive sign for advertisers after a period of stagnation. Facebook, despite the well document privacy issues keeps on posting record revenues. Amazon was possibly the most interesting of the set of results. Whether the slow-down in its advertising business growth was structural or short term wasn’t answered in analyst calls, with the company saying instead it was ‘early on’ in its ad business and it was adding tools, making better recommendations, and making it easier to use Amazon demand-side platforms.

Further Reading:

Snap Inc. | Twitter | Business InsiderAmazon | CNBC | Guardian on Snap |