📱📦 Big Tech Makes BANK! Earnings Recap
Happy Sunday! This week we saw:
Earnings Galore!
So this week, we got a TON of earnings reports from Big Tech. A lot of the reports can get pretty complicated and tedious so we’ll be breaking down the earnings of some of the world’s biggest companies. Let’s Go!
Revenue and earnings for Q2 both missed Wall Street estimates. Facebook also lowered its guidance for Q3 due to the macro environment and ongoing pressures in the ad space.
“Right now, about 15% of content in a person's Facebook feed and a little more than that of their Instagram feed is recommended by our AI, from people, groups or accounts that you don't follow. And we expect these numbers to more than double by the end of next year.” - Mark Zuckerberg
“Reels already made up 20% of the time that people spend on Instagram. This quarter, we saw a more than 30% increase in the time that people spent engaging with Reels across Facebook and Instagram” - Mark Zuckerberg
With Facebook management’s focus continuing to be on Reels, AI-recommended feeds and the Metaverse, it seems like this company is struggling to find its footing in a changing environment. Only time will tell if they succeed.
Apple
Revenue was in-line with expectations while earnings missed estimates. Apple didn’t give any guidance about the next quarter due to macro uncertainty.
While the Mac, iPad, and Apple Watch were impacted by supply chains and foreign exchange, the iPhone didn’t experience any slowdown.
“There are some pockets of weakness, primarily in digital advertising that we will need to work through. But at the same time, our Services business a year ago grew a lot and so [the comparison] is a bit challenging. So we don't have a very specific number to give out today.” - Luca Maestri, Apple’s CFO
Apple is experiencing what every other company is facing right now: Supple chain constraints, uncertain consumer spending behavior, inflation, and a strong US dollar affecting internation revenues.
I do hope that Apple looks into some acquisitions that could further parts of their business whether that be health/fitness (Peloton?) or the mysterious Apple Car (so many EV companies to choose from…).
Amazon
Beat revenue expectations but missed earnings expectations.
“On discounting, we're not seeing some of the pressures that other people are seeing right now. Our macroeconomic issues are principally on inflation.” - Brian Olsavsky, Amazon’s CFO
On Amazon Web Services: “When you're trying to launch a new product or service and you have to face with building your own data center and getting capital for a data center and building it yourself or moving to the cloud and essentially buying incremental infrastructure capacity, the cloud computing really shows its value.”
Similar to Apple, Amazon is trying to expand its reach across diferent industries. I recently visited an Amazon Fresh store and an Amazon Style in-person store in my area and they were both incredible! It’s cool to see them expand to in-person stores and I’m excited to see what they do next.
Microsoft
Missed both earnings and revenue expectations.
Projected dougle-digit revenue and operating income growth for fiscal 2023, calming some fears that the macro would greatly affect Microsoft.
According to Satya Nadella, Microsoft’s CEO, they are currently focused on 3 things in the current environment:
“First, no company is better positioned than Microsoft to help organizations deliver on their digital imperative so that they can do more with less. From infrastructure and data to business applications and hybrid work, we provide unique differentiated value to our customers.
Second, we will invest to take share and build new businesses in categories where we have long-term structural advantage.
Lastly, we will manage through this period with an intense focus on prioritization and executional excellence in our own operations to drive operational leverage.”
Commercial bookings grew 25% over the past year against tough comparables and also saw record customer commitments, stemming from increases in the number of >$100M Azure and >$10M M365 contracts.
These top tech companies are really really good at what they do. Duh. While enterprise app spending is usually cyclical and is deferred during economic slowdown, Microsoft seems to still be doing pretty well on this front.
Big deal momentum seems to be strong and mangement is confident in its ability to continue growing… What recession? jk.
Chart of the Week
This week’s chart isn’t tech-related but I just had to share it…
“The U.S. military also owns, leases, or operates an impressive real estate portfolio with buildings valued at $749 billion and a land area of 26.9 million acres, of which around 98% is located within the United States.” - Visual Capitalist