Three of the largest tech companies in the world have all released their earnings report in one week.
As Alphabet and Amazon careen ahead, the race to $1 trillion has never before seen more focus.
Alphabet Inc. Earnings
The race started this week with Alphabet’s earnings announcement. Google’s parent company managed to post second quarter results that skyrocketed beyond Wall Street analyst expectations. This, despite the massive regulatory crackdown that occurred in Europe earlier this month regarding its Android operating system.
Execs, including Chief Executive Officer Sundar Pichai, showed only confidence in Alphabet’s businesses, leaving no doubt in investors’ minds that sales or profits would be curbed. Moreover, Pichai went on to suggest the tech giant intended to step into whole new forms of untapped advertising opportunities.
Pichai underscored the significant growth at its YouTube video service and its cloud branch. Shares promptly soared to a new record high in response to the announcements. Following the announcement, they spiked by as much as 5.3 percent that day, the highest growth experienced in nearly nine months. This brought shares to a peak of $1,275 at New York’s market open on Tuesday. A number of analysts raised their price target for Alphabet’s stock.
Alphabet’s Google managed to rise to astounding levels regardless of the massive European regulatory backlash regarding competition laws and its Android mobile operating system practices. Google’s widespread data collection was also called into question, and advertisers clashed with the company regarding displaying ads on inappropriate YouTube content.
The company’s ability to perform even in an atmosphere of struggle and conflict greatly assuaged investor concerns.
Alphabet provided two different figures regarding its profits, one with and one without the record-breaking $5 billion fine it faces in Europe over Android. The company stated that without taking into account the fine, its profit was $11.75 per share. Google has every intention of contesting the ruling and fighting the fine. That said, even when taking the fine into consideration, it still managed to bring in a net income of $3.2 billion in the second quarter.
Advertising greatly accounted for the company’s astounding performance. Google saw a 24 percent growth in its advertising business, sending Alphabet’s total revenue to $26.24 billion minus partner payouts during the 2018 second quarter. Wall Street had forecasted $25.55 billion, according to a Bloomberg data analysis.
While Alphabet was continuing its celebration of its successes, Facebook released much more disappointing earnings for the same quarter. The colossal social network announced quarterly earnings of $1.74 per share. This just missed the $1.75 per share Zacks Consensus Estimate. That said, it is notably greater than the $1.32 per share earnings it reported during the same quarter in 2017. The figures have been adjusted to take non-recurring items into consideration.
According to the company’s quarterly report, this represents an earnings surprise of -0.57 percent. During the previous quarter, Facebook had posted $1.36 per share earnings after having actually produced $1.69 in earnings, with a 24.26 percent surprise.
Facebook has managed to surpass consensus EPS estimates three times out of the last four quarters. The company posted a $13.23 billion revenue during the second quarter. It fell short of the Zacks Consensus Estimate by 1.45 percent. Comparatively, in 2017, the same quarter brought in $9.32 billion. It exceeded the consensus revenue estimates three times over the last four quarters.
June 2018 daily active users were up by 11 percent year over year, reaching 1.47 billion. The monthly active users were also up by 11 percent, having hit the 2.23 billion mark. Of the quarter’s total ad revenue, mobile comprised 91 percent. This was notable increase over the 87 percent from the second quarter in 2017.
On the whole, Facebook itself grew to 30,275 employees, having added to its numbers by 47 percent in the prior 12 months.
“Our community and business continue to grow quickly,” said Facebook Chief Executive Officer Mark Zuckerberg. “We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect.”
Facebook shares took an 8.4 percent nose-dive to $199.30 in the after-hours trading following the second quarter earnings call. Since the start of the year, the social media company had growing its share prices by 21.7 percent, compared to the 5.5 percent gains seen by the S&P 500. More recently, the company experienced the largest stock market value drop in history.
Amazon’s call included some mixed results for its second quarter. Hopes had been very high, but investors did reign things in slightly following the Facebook earnings. In this case, Amazon certainly managed to excel in its profits, but at the same time it missed on revenue expectations. Following the announcement, the stock rose by about 2 percent in extended trading.
Amazon’s revenue, including Whole Foods sales, rose by 39 percent year over year. Its net income exploded to become six times greater than it was during the same quarter in 2017, reaching 2.5 billion. This figure was greatly achieved through Amazon’s high margin business growth, such as its advertising and cloud business.
Amazon has predicted revenue to fall within the $54 billion to $57.5 billion range during the third quarter. This falls slightly short of Wall Street’s estimates of $55.6 billion to $62.2 billion.
Amazon Chief Executive Officer Jeff Bezos underscored the successes of Alexa, the company’s voice assistant. He stated that the service currently boasts “tens of thousands” of developer users. “We want customers to be able to use Alexa wherever they are,” Bezos explained.
Ahead of the earnings announcement, the company had been receiving some bad press that contributed to investor hesitation around the stock. The American Civil Liberties Union indicated that the facial recognition technology used by the tech giant was heavily flawed to the point that it had matched 28 lawmakers with individuals who had criminal records.
However, once the earnings figures were revealed, many worries were set aside and the stock was able to rise as had been expected earlier in the week.
The Race to $1 Trillion
It appears as though in the race to $1 trillion , the top contenders continue to be Alphabet and Amazon, as well as Apple.