30th July 2021
POV: Q2 2021 Earnings
Background:
In the last week Alphabet, Amazon, Apple, Facebook and Twitter all released their latest quarterly earnings. Here are some of the key highlights.
Details and Implications:
Alphabet: The Google parent reported Q2 results that surpassed analyst expectations driven by a boom in advertising growth. Revenues were $61.88bn vs $56.16bn expected. Google’s total ad revenue was $50.44bn up 69% from the same quarter last year which was impacted by the pandemic. YouTube advertising revenues of $7bn were up 84% YoY and the company disclosed that its YouTube Shorts product had surpassed 15 billion global daily views, up from 6.5 billion in March. Google Cloud revenue was up 54% YoY to $4.6bn.
Amazon: It was the company’s third $100bn quarter in a row, however it missed analysts’ expectations and combined with the company’s weak third quarter guidance, its share price fell. Amazon reported revenues of $113.08bn vs $115.2bn expected. Amazon’s ‘Other’ unit which includes advertising, grew 87% YoY to over $7.9bn. But the star of the quarter was Amazon Web Services which surpassed analyst expectations with 37% revenue growth to $14.81bn vs $14.2bn expected, the division’s biggest YoY increase in two years.
Apple: The company reported strong results for the last quarter which also trounced Wall Street expectations. Revenues were $81.41bn vs the $73.3bn estimated, up 36% YoY. Revenues for all of its major product lines grew on an annual basis, with iPhone revenues up nearly 50% YoY to $39.57bn, while its Services revenues was up 33% YoY. However, Apple stock took a slight dip after the company warned that it expected less than 36% growth in the September quarter due to foreign exchange rates and supply constraints for iPhones and iPads.
Facebook: Revenue for the second quarter grew nearly 56% YoY to $29.08bn, exceeding analyst expectations of $27.86bn. Total monthly active users (MAUs) grew to 2.9 billion matching analyst estimates and total users across its family of apps hit 3.51 billion, up from 3.45 billion last quarter. Facebook said the total number of ads delivered rose 6% YoY while revenue from the segment was up 47%, reflecting increased competition in the auction based system. However the company said that revenue growth was expected to slowdown in the second half of the year. During the earnings call Mark Zuckerberg also talked about the company’s goal to help develop the metaverse, which he described as “a virtual environment where you can be present with people in digital spaces.”
Twitter: Reported better than expected revenues of $1.19bn vs $1.07bn expected, this growth was driven by an 87% rise in advertising revenues to $1.05bn. Monetizable daily active users grew 11% to 206 million. The company has recently overhauled its advertising service and introduced its first subscription service.
Summary:
It was another big quarter for the tech giants. Alphabet, Facebook and Twitter benefited from the general return of ad spend to the market and especially the balance of that return, which is more focused on digital channels than pre-pandemic. Amazon reported its first revenue miss in three years, as the online shopping rush begins to slow down as people start reverting to going out more, however its web services continued to be a star player, further validation of Andy Jassy’s appointment as new CEO. Apple’s long running investment in its services strategy is starting to pay off and demand for its hardware is still strong, although pandemic related supply issues may temper that strong growth.