Top Articles: Tech Earnings Reports and What They Mean for Your Business
Week 44, 2018
Now that October is ending, quarterly reports are piling in. Overall, the tech industry did not fare well this year, with lows that haven’t been seen since the financial crisis 10 years ago. GAFA in particular had a rough earnings call with investors punishing anything but accelerated growth. Tech stocks have been declining for a while now, so these results are not terribly surprising. Beyond the numerous privacy issues, there is a systemic belief that these tech companies cannot grow any more or, in some cases, will not ever be consistently profitable. The main takeaway from these challenges is that it is important to keep innovating and adjusting in order to survive, even if you’re GAFA.
Zuckerberg’s Bet on Instagram and Video Has Wall Street Support — for Now
By Sarah Frier from Bloomberg
Facebook’s recent issues with privacy and misinformation campaigns have resulted in a pretty steady decline in the stock market. However, after their generally positive earnings report this week, shares went up as much as 6.4%, the biggest gain since April. To be fair, the bar was set pretty low for this gain, but Facebook’s strategy of shifting focus from the classic newsfeed seems to have stakeholders excited. Facebook is now betting heavily on Stories and messaging platforms. This is interesting because Facebook has not yet found sustainable revenue models for these features. They have confirmed that ads are coming to WhatsApp’s “Status” section, but beyond that, we’ll just have to wait and see how Facebook will deliver on these promises.
Amazon Warns of a Weaker-than-expected Holiday Season
By Seth Fiegerman from CNN
Even though Amazon had a 30% year over year revenue gain, their stock fell 9% after their earnings call. Amazon just missed analyst estimates and Wall Street was not pleased. By all accounts, Amazon had a decent quarter. AWS and Amazon’s ad business both grew significantly and made up more than 15% of the total earned revenue (though it should be noted that Amazon is still not profitable). The problem is that market is currently worried about rising interest rates and a trade war with China. These are not unfounded concerns and would certainly hurt Amazon if they came to fruition. Amazon has also been investing heavily in the physical retail space, which is considered risky right now. They will have to show that their risks will have financial reward and that they can be consistently profitable.
Alphabet Stock Falls after Google Beats on Earnings but Sales Come up Short
By Max A. Cherney from Market Watch
Alphabet’s stock fell about 4% after their earnings call. The company reported profits that surpassed expectations, but missed revenue projections. Part of this might have to do with the fact that Amazon is stealing some of Google’s ad revenue, but it could also be that Alphabet loses several hundred million dollars on experimental companies. Analysts say that they see these bets are opportunities to generate cash flow, but it seems like they’re still a bit standoffish when it comes to these “Other Bets.” Regardless, Alphabet will need to look ahead to innovate and adjust if they hope to impress at the next earnings call.
Apple Shares Are Doing Something Unusual Ahead of Earnings
By Rebecca Ungarino from CNBC
Apple has been seen in the past as one of the most reliable big tech stocks to own thanks to their loyal audience who continues to purchase new products every year. This year, everyone was expecting them to have a similar successful quarter. However, even the price hike on their products couldn’t hide the fact that Apple sold fewer phones and computers than anticipated. Their stock went down 7% after reporting quarterly earnings. Analysts still believe Apple is a viable stock, but they are worried about the lack of innovation. The company relies too heavily on iPhone sales and is behind the other GAFA members in areas like voice tech, self-driving cars, and touchscreen laptops. They have been playing catch up too long and need to get back to their disruptive roots.
Twitter Stock Soars after Strong Earnings Beat
By Michelle Castillo from CNBC
Not everyone had a bad day at the stock market: after their earnings call, Twitter shares closed at +15.47%. Twitter beat estimates revenue and profits, but missed the projected number of monthly active users (MAUs). Twitter was very upfront last quarter and warned that their MAU numbers would decline because they purged the platform of fake accounts, GDPR regulations, and product changes. They also claimed that there was ample opportunity to increase the number of daily active users (DAUs), though they do not actually report these numbers. Let’s not forget, however, that at the last earnings call, Twitter share prices dropped 18%, meaning that this gain is not as significant as it might seem.
