Big Tech Earnings Report Card: The Good, The Bad, And the Grades

By: Spencer Israel

All the “big tech” companies that Wall Street commonly groups together have now reported earnings for the January quarter. Let’s take a look at the results.

Apple ($AAPL)

The Good: Pretty much everything. Earnings Per Share beat estimates. Revenue beat estimates. Sales guidance beat estimates. Services revenue also beat estimates. On top of that, the company added $75 billion to its buyback program and raised the quarterly dividend from $0.73/share to $0.77/share.

The Bad: As expected, iPhone sales were light. Apple made $31.05 billion from iPhone sales last quarter, down 17% year-over-year.

The Grade: A+—Apple blew this one out of the water. Even with growth slowing in their largest segment, Tim Cook said on the conference call “We’re certainly feeling a lot better than we were 90 days ago.” The company briefly topped a $1 trillion valuation after hours.

Amazon ($AMZN)

The Good: Amazon beat expectations on both EPS and sales for the quarter. Its heavy hitter, Amazon Web Services, saw revenue rise 41% year-over-year to $7.7 billion. It continues to be Amazon’s bread and butter. The company also touted that Amazon Fire TV has 30 million active users.

The Bad: There’s not a lot you can point to as being “bad” from this report. It was pretty stellar across the board. If you want to be nitpicky, Raymond James pointed out that unit growth decelerated—but even that was due to the company’s very strong fourth quarter.

The Grade: A—CFO Brian Olsavsky saved his biggest surprise for the conference call, during which he said they are aiming to provide free one-day shipping for all Amazon Prime customers. Your move, Walmart.

Microsoft ($MSFT)

The Good: Microsoft handedly beat expectations for both EPS and sales and reported that increased demand for Azure drove cloud revenue up 41% year-over-year to $9.6 billion.

The Bad: Same story as Amazon—there just simply isn’t a lot to hate in this report. Video gaming revenue only grew 5%, but that’s such a small part of this story right now.

The Grade: A—Canaccord Genuity’s Richard Davis called the report “Boringly excellent.” Shares are up 4% as the stock continues to make new all-time highs.

Facebook ($FB)

The Good: Facebook beat expectations on revenue, generating $15.08 billion vs. a $14.98 billion estimate. Daily active users (DAUs) and Monthly Active Users (MAUs) both came in in-line, rising 8% on a year-over-year basis. Mark Zuckerberg also highlighted Facebook’s Stories feature, which have reached 500 million daily active users (take that, Snapchat).

The Bad: Facebook’s Q1 EPS number was not comparable to estimates. Why? Because of a one-time charge related to the ongoing inquiry by the Federal Trade Commission. The company said it cost them $3 billion in the first quarter, but that it could end up costing as much $5 billion.

The Grade: B+ —Privacy concerns aside, Facebook showed investors that it just keeps on growing. A 6% post-earnings rally has the stock at its highest levels since late-July.

Netflix ($NFLX)

The Good: Netflix beat Wall Street’s expectations across the board, coming in higher on EPS, revenue, domestic subscriber additions, and international subscriber additions. The company now has more than 148 million subscribers worldwide.

The Bad: If there’s anything not to like it’s the company’s Q2 guidance, which was a little light. Netflix sees Q2 EPS of $0.55, which may not compare to the $0.99 estimate, and sales of $4.928 billion vs a $4.95 billion estimate.

The Grade: B—This was a mostly good report, with the company showing continued growth and brushing off concerns about Disney+. Analysts have maintained their current ratings on the stock, showing that the report wasn’t good or bad enough to change anyone’s mind.

Though traders initially hit the stock down to $326, shares have rallied back to where they’ve spent most of the year.

Alphabet ($GOOGL)

The Good: This report was…not great. The best thing you can do is to put things in perspective. This was an objectively bad quarter, but the company is still a behemoth and Google is still one of the two dominant players in the digital advertising space. Plus, as CNBC pointed out, they will stand to profit significantly from their 5% stakes in both Uber and Lyft.

The Bad: Alphabet reported EPS and sales lower than analysts were expecting. Growth slowed across several major metrics, most notably ad sales, which rose 15% compared to 24% in 2018. All of this on top of a $1.7 billion fine the company paid to the European Union.

The Grade: C—This marks the second straight disappointing quarter for Alphabet. The stock closed down 7.5% in the first day after the report.

The author holds no positions in any of the stocks mentioned.

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