Q2 Earnings 2019

Background:

The latest quarterly earnings reports are in from Snap, Facebook and Alphabet. Here are the headlines.

Details and Implications:  

Snap: Q2 2019 reported global revenue reached $388m, a 48% increase from the same quarter last year, beating analyst predictions of $359.7m. Reported revenue resulted in stock prices soaring 12% in after-hours trading. Snap Inc. also saw a 7% growth in its global Daily Active Users (DAU) to 203 million from 190 million in the previous quarter. Revenue may be growing year-over-year (YoY) but the company lost $255m last quarter as it continues to spend on R&D for products like Snap Games, Snap Originals, new AR filters, functions and Lenses and its Discover platform. The Snap advertising platform (Audience Network) saw 1.9 million visits globally (a 23.9% increase year-over-year) and 200 million users accessed its new next-gen AR filters in the first two weeks of its launch.

Facebook: Reported revenue for Q2 2019 of $16.9bn beat expectations of $16.5bn, a 28% increase year-over-year. DAUs (Daily Active Users) and MAUs (Monthly Active Users) both grew by 8% with 1.59 billion users logging in every day and 2.41 billion users logging every month. Facebook continues to see 2.7 billion MAUs across its suite of apps including Instagram, WhatsApp, Messenger and its main Facebook platform. A focus on Stories and the revamp of Instagram’s Explore page has resulted in more than 500 million DAUs interacting with Stories and about 7 million advertisers using the Stories feature across its family of products – a 133% increase from the previous quarter. However, the main headlines following the reported earnings was the FTC’s investigation and subsequent $5bn fine, the largest fine ever given to a tech company, over Facebook’s data privacy and handling issues – the most high profile of which was the Cambridge Analytica scandal. Though the company put aside $3bn last quarter to cover costs, it had to set aside another $2bn following the FTC’s settlement. The money is also to adhere to the FTC’s mandate for new privacy protection including: undergoing regular privacy audits, appointing a third-party assessor to monitor data security, creating a program with designated compliance officers to review every new/re-launched product/service for data privacy and creating an independently appointed privacy committee on its board whereby members can be removed only by a board supermajority.

Alphabet: Alphabet’s generated Q2 revenue of $38.94bn, slightly surpassing analysts’ expectations of $38.15bn and up 19% from $32.65bn in Q2 2018. Shares rose more than 9% on the results. Google reported advertising revenue of $32.6 billion for the second quarter, compared to $28.09 billion during the same period last year. YouTube was a huge revenue contributor for Alphabet. The video platform was the second-largest growth contributor (Alphabet does not release individual products for its portfolio of businesses). Alphabet’s ‘other revenue’ which includes hardware, subscription services, Google Play and Alphabet’s cloud business, was up 40% YoY to $6.18bn. Over 5 billion Google searches are made daily and it is still the most visited site followed by Facebook. And, for the first time Google Photos has reached a billion users, joining eight other Google products that have reached that milestone (Android, Chrome, Gmail, Google Drive, Google Maps, the Google Play store, YouTube, and its search engine.

Amazon: Q2 reported revenue was $63.4bn, surpassing expectations of $62.5bn and representing a 20% growth YoY. Shares were down 2% in after-hours trading as the company warned of a weak third-quarter profit. Amazon’s “other” business, including its advertising revenue, continues to grow, up 34% to $3bn. International sales were up 12% to $16.4bn, however growth is significantly lower when compared to last year’s growth rate of 64% in the same quarter. Amazon Web Services continues strong growth, with sales reaching $8.4bn, a 37% increase YoY and 13% of Amazon’s overall revenue. Subscription services were up 37% and brought in $4.7bn, which mainly accounts for Amazon Prime. This year alone, Amazon spent $13.2mn on TV ads and digital advertising to promote Prime Day during the first two weeks of July. MediaRadar reported that Amazon’s ad spend has grown 28% YoY. According to eMarketer, Amazon is expected to post $11.33bn this year from ad revenue – compared to $10bn last year. In Amazon’s earnings report, the e-commerce giant also talked about the launch of a new generation of Amazon products – its Echo Show 5 and a handful of new Kindles. There was no mention on revenue brought in via Alexa.

Further Reading:

Snap | Facebook | Alphabet | CNBC |