The Tech Titans Clash During Earnings Season Dear Reader, Lighting flashes. Thunder booms. Tech titans Alphabet Inc. (GOOG), Amazon.com, Inc. (AMZN), Apple, Inc. (AAPL), Meta Platforms, Inc. (META) and Microsoft Corporation (MSFT) are at war this week.
Well, maybe it’s not that dramatic… but these members of the Magnificent Seven group of stocks have certainly been battling it out this earnings season. And investors were keen to watch the battle unfold.
In their struggle for dominance, these companies have been struggling for dominance in everything from the cloud to software to artificial intelligence (AI), and more.
But in an effort to beat one another, some of these tech giants have been making some hasty decisions that have come back to affect their top and bottom lines.
So, in today’s Market 360, we will dig into these tech companies’ quarterly earnings from this week. Then, I’ll share the best stock-picking system to use during this earnings season and how you can access it.
Let’s get into it… Earnings Reviews Alphabet Inc. (GOOG) – Tuesday, January 30
Alphabet bested analysts’ expectations for its fourth-quarter earnings and sales results Tuesday evening. The company reported earnings of $1.64 per share and sales of $86.31 billion, up from earnings of $1.05 per share and revenue of $76.04 billion a year ago. Analysts were calling for earnings of $1.60 per share and $85.28 billion in sales.
Digging a little deeper into the report… YouTube ad revenue came in at $9.2 billion, in line with analysts’ estimates for $9.21 billion. That’s also up by 15.7% from revenue of $7.95 billion in the same quarter a year ago.
Additionally, Google Cloud revenue increased 25.6% year-over-year to $9.19 billion, besting analysts’ estimates for $8.94 billion.
Alphabet’s CEO, Sundar Pichai, stated: We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come. Now, in case you were wondering, Pichai wasn’t referring to a horoscope. Rather, Gemini is the company’s AI language model, which launched last month. But the heart of the tech giant’s business is ad revenue. And in the company’s latest earnings report, ad revenue was up 10.9% year-over-year to $65.5 billion but missed analyst expectations of $65.8 billion.
Despite beating estimates on the top and bottom lines, GOOG shares fell about 2.5% on Wednesday. Unfortunately, Wall Street couldn’t get past the missed ad revenue expectations. Microsoft Corporation (MSFT) – Tuesday, January 30
Microsoft released its earnings report for its second quarter in fiscal year 2024 after the closing bell on Tuesday.
The company reported earnings of $2.93 per share on revenue of $62.02 billion, up from $2.35 per share and $50.12 billion. This translates to 33.2% year-over-year earnings growth and 17.6% year-over-year revenue growth. Analysts anticipated $2.77 per share earnings on revenue of $61.13 billion, so the company posted a 5.8% and a 1.5% revenue surprise.
Now, one of Microsoft’s most closely watched divisions is its Intelligent Cloud platform. Cloud revenue increased 20% year-over-year to $25.9 billion. This also topped analysts’ expectations for $25.3 billion.
During the earnings call, Microsoft CEO Satya Nadella noted: We’ve moved from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector. The company also provided forward-looking guidance for the second quarter. Company management anticipates revenue between $60.4 billion and $61.4 billion. Analysts had estimated second-quarter revenue of $60.9 billion.
Additionally, Microsoft forecast operating expenses of $15.8 to $15.9 billion in the current quarter, up from $15.4 billion in the previous one. This, coupled with the cloudy outlook for the company, weighed on investors as they digested the news.
So, even though Microsoft reported its highest profit growth in more than two years, this “light” guidance disappointed Wall Street, and the stock dropped by 2.3% on Wednesday.
Amazon.com, Inc. (AMZN) – Thursday, February 1
Amazon released its fourth-quarter earnings results Thursday evening. For Amazon’s third quarter, it reported adjusted earnings of $1.00 per share, which came in above analysts’ estimates for $0.80 per share.
Revenue rose 14% year-over-year to $169.96 billion, which was above analysts’ projections for $166.26 billion. This compares to earnings of $0.03 per share and revenue of $149.2 billion in the same quarter of last year.
Additionally, Amazon Web Services (AWS) revenue increased 13% year-over-year to $24.2 billion, just above analysts’ estimates for $24.17 billion.
Amazon’s CEO, Andy Jassy, stated: This Q4 was a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon. While we made meaningful revenue, operating income and free cash flow processes, what we’re most pleased with is the continued invention and customer experience improvements across our business. Following these stellar earnings results, shares of AMZN rose nearly 8% on Friday.
Apple, Inc. (AAPL) – Thursday, February 1
Apple’s earnings came in at $2.18 per share, an all-time record for the company, which beat analysts’ estimates for $2.11 per share. It’s also up 15.9% year-over-year from earnings of $1.88 per share in the same quarter a year ago. Revenue of $119.58 billion also beat expectations of $117.9 billion, and was up 2.1% from the same quarter last year.
The bright spot in Apple’s report was its Services revenue and iPhone sales. Services revenue, which includes Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness and Apple One, rose 11.3% year-over-year to $23.12 billion. Likewise, iPhone revenue came in at $69.70 billion which rose 5.9% year-over-year.
During the earnings call, CEO Tim Cook stated: Today Apple is reporting revenue growth for the December quarter fueled by iPhone sales, and an all-time revenue record in Services. We are pleased to announce that our installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments. Now, all of this seems very positive, but it is important to note that sales out of China were disappointing. This region, the company’s third largest after North America and Europe, reported sales of $20.8 billion while analysts were expecting $23.9 billion.
This nearly 13% miss did not sit well with Wall Street. Following the report, Apple shares opened around 3.4% lower on Friday, but leveled out to end the day relatively flat. Meta Platforms, Inc. (META) – Thursday, February 1
Meta Platforms announced its fourth-quarter results Thursday afternoon. Revenue increased 24.7% year-over-year to $40.11 billion and also beat Wall Street consensus estimates for revenue of $39.17 billion.
Meanwhile, earnings per share surged 202.8% year-over-year to $5.33 per share, up from earnings of $1.76 per share in the same quarter of last year. Analysts were calling for earnings of $4.94 per share.
Facebook daily active users rose 6% year-over-year to 2.11 billion, while Facebook monthly active users rose 3% year-over-year to 3.07 billion.
Now, Meta’s Reality Labs sales passed $1 billion in the fourth quarter, but the virtual reality unit recorded $4.65 billion in losses. The company noted that they expect operating losses to increase meaningfully year-over-year due to ongoing product development efforts in the augmented/virtual reality space.
During its earnings call, Meta CEO, Mark Zuckerberg, stated: We had a good quarter as our community and business continue to grow. We’ve made a lot of progress on our vision for advancing AI and the metaverse. Now, the biggest news from this earnings report is that META initiated a quarterly dividend and boosted its stock buyback authorization by $50 billion. The company pay its first quarterly dividend of $0.50 per share on March 26. All shareholders of record on February 22 will receive the dividend.
Wall Street cheered this news and META shares popped on Friday, rising nearly 22% and adding a historic $200 billion to the company’s market cap. Use AI to Find the Earnings Winners Although Wall Street might be laser-focused on the Tech Titans’ earnings this week, I don’t want you to focus too much on these stocks alone.
The reality is that more than hundred companies reported earnings this week – and we’ll hear from even more until earnings season comes to a close in late February.
Now, there is a lot of data and information being thrown at investors during this time. It's every stock for itself, and it can be overwhelming if you don’t know where to start.
That’s where my Quantum Cash system comes in.
At its core, Quantum Cash uses a series of AI algorithms to constantly scout massive amounts of data looking for patterns. Many of these patterns are nonlinear, meaning you’re not going to be able to see them with the naked eye. But the more data you feed it, the more patterns it can spot.
This is the system I use in Accelerated Profits, and it’s what’s helped pinpoint companies that are primed to post strong earnings results.
Case in point: Nine companies I recommended in Accelerated Profits reported their latest quarterly results this week. Of these nine companies, eight topped analysts’ estimates, and five rallied to new 52-week highs in the wake of their earnings reports.
Clearly, earnings are working, folks. As this earnings season plays out, I expect wave-after-wave of positive earnings to continue to propel my Accelerated Profits stocks higher.
To learn more about my Quantum Cash system and how I incorporate it into Accelerated Profits, click here.
(Already an Accelerated Profits member? Click here to log in to the members-only website now.) Sincerely, |
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