Alphabet, Apple and Facebook Latest Earnings

Background:

Alphabet, Apple and Facebook announced their latest earnings results this week.

Details and Implications:

Alphabet:
Q3 results fell short of estimates due to higher expenses and continued losses in its “other bets” investments. This was despite a quarter of solid sales growth in the company’s advertising and cloud businesses. The company generated revenues of $40.5bn in Q3 beating the $40.3bn estimated. Alphabet’s Google unit posted advertising sales revenue of $33.9bn a 17% YoY increase and its non-advertising revenues (which includes the hardware and cloud businesses) increased 39% YoY to $6.4bn. Alphabet continues to rely on Google’s advertising which contributed 84% of the company’s total revenues in Q3. The Google parent company stock fell more than 1.6% in after-hours trading on Monday.

Apple:
Q4 earnings saw services revenue reaching an all-time high of $12.5bn. The company’s growth in wearables, home and accessories products and its flourishing services business (which includes the Apple TV app and new entertainment subscription) were the highlights of Apple’s fourth quarter which saw earnings growing to $6.5bn. However, iPhone sales continued to decline. The company posted quarterly revenue of $64bn, an increase of 2% YoY and despite the drop in iPhone sales the share price was up 1%.

Facebook:
Facebook announced better-than-expected revenue and earnings which saw its stock rise in after-hours trading. Q3 revenues of $17.65bn vs. $17.37bn expected showed a 29% increase from the same quarter last year. Key indicators of Facebook’s success saw Monthly Active Users (MAUs) reach 2.45 billion, up 1.65% from Q2 with 1.62 billion Daily Active Users (DAUs) up 2% from 1.587 billion last quarter. Notably, Facebook gained 2 million users in each of its core U.S. & Canada and Europe markets that drive its business. Facebook estimates around 2.2 billion people use at least one of its ‘Family’ of services (Facebook, Instagram, WhatsApp or Messenger) each day, and 2.8bn each month, up slightly from the previous quarter. Mobile ad revenue represented nearly 94% of total ad sales, up from 92% a year earlier. Facebook is undergoing a transition in its business as more ads move from the core News Feed to the newer Stories products. The company says it has more than 500 million daily users for the Stories features across Facebook, Instagram, WhatsApp and Messenger.

Summary:

Alphabet’s costs grew faster than its sales growth in Q3 surprising analysts and resulting in a fall in its stock price. Apple’s latest earnings were further proof that the company’s next phase of growth will be by monetising existing iPhone users rather than just selling more iPhones and despite ongoing public relations issues, Facebook kept growing in Q3 2019 finding more avenues for ad growth through new formats like Stories.

Further Reading:

Alphabet | Apple | Facebook