POV: Q3 Earnings 2021

Background:

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

Details and Implications:

Alphabet: The Google parent company reported Q3 results of $65.1bn its largest revenue figure in 14 years and up 41% YoY and it posted a profit of more than $21bn. Its advertising revenue rose 43% YoY to $53bn, of which YouTube’s ad revenue accounted for $7.2bn, up from just over $5bn a year ago with CFO Ruth Porat commenting that Apple’s privacy changes had a modest impact on YouTube revenues. Alphabet’s cloud division revenue was up 45% to $4.9bn which was slightly lower than the $5bn expected.

Amazon: As for Amazon, despite missing expectations of $111.6bn it still reported revenues of $110.8bn for Q3, up 15% but a marked slowdown from 37% growth in the same period last year. For the first time, revenue from Amazon services surpassed its retail sales, as revenue from Amazon Web Services (AWS), third-party seller services and Prime subscriptions reached $55.9bn with AWS revenue reaching $16.11bn (vs. $15.48bn expected), a 39% increase. Amazon’s sales growth is decelerating as the company faces supply chain and labor supply challenges and it issued fourth-quarter guidance that was below Wall Street’s estimates.

Apple: Apple reported a record quarter revenue of $83.4bn, up 29% YoY as each of its product categories grew, with iPhone revenue reaching $38.87bn up 47% YoY. However, it fell short of overall revenue expectations ($84.85bn) which Apple CEO Tim Cook said was due to larger-than-expected supply constraints on iPhones, iPads and Macs.

Facebook: Facebook’s earnings per share beat estimates, but revenues of $29bn just missed expectations. Advertising revenue rose 33% YoY to $28.3bn and ‘other’ revenue, which consists mostly of Oculus hardware sales, rose 195% to $734mn. MAUs were up 6% YoY to 2.91 billion just matching estimates. In a statement, Mark Zuckerberg, Facebook CEO, mentioned the company’s future plans: “I’m excited about our road map, especially around creators, commerce and helping to build the metaverse”, a prelude to yesterday’s announcement that the Facebook parent company is changing its name to Meta.

Snap Inc.: The company’s Q3 revenues crossed $1bn, but narrowly missed expectations. Revenues were up 57% YoY to $1.07bn but growth slowed from the previous quarter’s pace. Snap’s CEO Evan Spiegel noted that the company faced issues caused by Apple’s iOS privacy changes which affected advertisers’ ability to measure their ad campaigns. Its DAUs were up 23% YoY to 306 million, beating expectations and exceeding 20% growth for the fourth consecutive quarter. Snapchat has been working hard to attract and retain users with new features and the introduction of gaming options on its platform. 

Twitter: Twitter revenues rose 37% YoY to $1.28bn and its ad revenue rose more than 41% to $1.14bn, with total ad engagements increasing 6% from a year earlier. Its monetizable daily active users (mDAUs) hit 211 million, falling just short of the 211.9 million expected. Twitter said that the impact of Apple’s iOS privacy change was less than expected.

Summary:

It was another big quarter for the industry with record quarters from multiple players, however some missed expectations amid ongoing supply chain issues. There was also some speculation on whether Apple’s privacy changes would impact ad revenues this year and it appears to have impacted some slightly more than others.

Further Reading: Alphabet | Amazon | Apple | Facebook | Snap Inc. | Twitter