POV: Q4 2021 Earnings

Background:

Alphabet, Amazon, Apple, Meta and Snap Inc have all reported quarterly earnings.

Details and Implications:

Alphabet: Alphabet’s Q4 revenue rose 32% YoY to $75.3bn, which was a slower rise than last quarter’s 41% but still beat expectations by more than $3bn. Google’s total advertising revenue was up 33% at $61.2bn, of that YouTube advertising revenue hit $8.63bn vs $8.87bn expected (the only metric that fell short of analyst expectations) and its core search business reported a 36% rise in revenue YoY to $43.3bn despite concerns that iOS changes might eventually affect Google’s advertising business. The company also announced a 20-for-1 stock split that will go into effect in July.

Amazon: The e-commerce giant’s fourth quarter revenues grew 9.4% to a record $137.4bn but were a little weaker than expected and it was Amazon’s first period of only single digit growth since 2017. Advertising services reached $9.2bn for the quarter, up 32% YoY. Amazon Web Services (AWS) revenue grew almost 40% to $17.78bn. The company is still feeling the effects of higher costs as result of supply chain and labour challenges and to offset that it is looking to boost one of its most successful revenue streams, with an increase in the price of an annual Amazon Prime subscription.

Apple: A good Q1 2022, with revenue beating the $118.66bn estimated, reaching $123.9bn, up 11% YoY. Looking at the revenue split, all product lines grew YoY except for iPad sales which was down 14% YoY. The biggest growth was in its services revenue (up to $19.5bn a 24% YoY increase) and its Mac revenue (reaching $10.9bn a 25% YoY increase). Apple CEO Tim Cook reported that the company’s supply issues were improving which has helped this year’s first quarterly earnings reported.

Meta: Meta’s Q4 earnings reached $33.6bn, just beating expectations of $33.4bn. Facebook Reality Labs, Meta’s Metaverse division, reported its first ever numbers with $877mn in revenue. Meta’s core business, Facebook’s Family of Apps (FoA) reported revenues of $32.8bn. However, its daily active users fell for the first time ever, now at 1.93 billion. The company said that its being hit by a combination of factors, including users spending more time on newer rivals like TikTok and the privacy changes to Apple’s iOS. Investors wiped almost $200bn from the market valuation of Meta following the earnings results.

Snap Inc.: Shares soared 62% after it posted its first-ever quarterly net profit and beat analyst expectations on earnings, revenue and user growth. Snap reported revenues of $1.3bn, a 42% YoY growth. The company also reported a 20% YoY increase in daily active users (DAUs) to 319 million. Whilst Apple’s iOS privacy changes had affected its advertising business, Snap CFO Derek Andersen said that had experienced a recovery “quicker than we anticipated”.

Summary:

Growth is slowing for everyone after hyper growth in early pandemic times. Alphabet appears to be dealing with iOS privacy changes better than rivals. Amazon has increased AWS and advertising revenue to offset the weak growth in its retail business. Meta might be losing the battle for attention to other apps such as TikTok, and Snap is faring better than larger rivals who are more exposed to the same pressures. Apple continues to demonstrate that its hardware rules the world, even with supply chain issues.

Further Reading: CNN (Alphabet) / NYT (Amazon) / The Guardian (Apple) / FT (Meta) / WSJ (Snap Inc)