POV: Q1 2021 Earnings

Background:

Alphabet, Amazon, Apple, Facebook, Snap Inc., and Twitter all released their latest quarterly earnings results over the last week. Here are the headlines.

Details and Implications:

Alphabet: The Google parent company smashed expectations, reporting total revenues of $55.3bn in the first quarter of 2021, driven by the increase in consumer activity online. The majority of this was attributed to its advertising business, which saw a 32% YoY boost in revenues to $44.6bn for the quarter, with YouTube ad revenues growing nearly 50% YoY to just over $6bn. Google Cloud revenues were in line with expectations, growing by 46% YoY to just over $4bn.

Amazon: Amazon’s sales surge continued with Q1 results that far exceeded expectations. Revenues were up 44% YoY to $108.5bn and guidance for the year expects this momentum to continue. Aside from its core retail segment, it also saw its cloud services business AWS net sales grow 32% YoY to $13.5bn and its ‘Other’ category that also includes ad sales rose by a massive 77% YoY to $6.9bn. Amazon CEO Jeff Bezos also gave some insight into the company’s Prime Video streaming service, saying that streaming hours were up more than 70% YoY and that the company how has 200 million prime subscribers, up 50 million since the beginning of 2020.

Apple: It was another record-breaking quarter for Apple, with revenues more than doubling YoY to $89.6bn in its second fiscal quarter, far better than the $77.36bn expected. All of its product categories reported double digit growth for the second consecutive quarter, with iPhone sales up 65.5% YoY with Mac and iPad sales even better, up 70% and 79% respectively. Apple’s ‘Services’ revenue also achieved record growth, increasing 26.7% YoY to $16.90bn. Apple is looking to continue diversifying its revenue streams from hardware and recently announced it would launch its own premium subscription service for podcasts.

Facebook: Facebook also had a record quarter. As digital ad spend rose in lockdown, so did Facebook’s revenues, which were up 48% YoY to $26.17bn in the first quarter of 2021. The company said its monthly users across is family of apps was now a staggering 3.45 billion up from 3.3 billion last quarter. On the earnings call, Mark Zuckerberg talked about the company’s focus on building e-commerce features as a key part of delivering a personalised experience to users and that it will continue to invest aggressively to deliver new and meaningful experiences for years to come, including in areas like augmented and virtual reality, commerce, and the creator economy.

Snap Inc.: Last week, Snap reported Q1 earnings with strong revenue and user growth that beat analyst expectations. It reported revenues of $770mn vs the $743.8mn expected and Global Daily Active Users (DAUs) were up 22% YoY to 280 million with the company saying that it expects this number to reach around 290 million in Q2.

Twitter: Twitter reported a 28% YoY increase in revenues to $1.04bn, with advertising revenues up 32% YoY to $899mn and ad engagement up 11% over the same period. Its monetizable daily users also grew by 7 million last quarter to 199 million but this was just short of analyst’s expectations of 200 million and it was also cautious on guidance for the rest of the year, causing its stock to fall.

Summary:

The tech giants have mainly grown stronger following the worldwide lockdowns, work from home trends and ecommerce boom as consumers spend more and more time online. As many parts of the world unlock and economies start to open up, we will have to see if these trends are here to stay and if this pace of growth will be sustained. The biggest beneficiaries are those that have diversified revenues and operate platform ecosystems across apps and services.

Further Reading: Yahoo News (Alphabet) | CNBC (Amazon) | City A.M. (Apple) | City A.M. (Facebook) | Snap | CNBC (Twitter)