Record earnings for big tech
Thursday afternoon represented the biggest earnings event of the quarter as Apple, Amazon, Facebook, and Google each reported blowout quarters.
On the whole, we were impressed with performance across the board as each company reported record calendar Q3s. Our top takeaways from the earnings-palooza are below:
Amazon
Amazon handily beat expectations on both revenues and earnings, exceeding estimates by 4% and 67%, respectively
The core driver was continued acceleration of broader eCommerce adoption, as Prime members continued to shop more frequently and across a greater number of product categories vs. prior to the pandemic
While $4 billion in COVID-related costs drove down Q4 earnings guidance, we were overall very pleased with bottom line performance
Rapid growth in Amazon's small but high-margin advertising business helped accelerate growth in free cash flow to more than 71% year-over-year
Apple
Apple beat revenue and earnings estimates by 2% and 3%, respectively
While work-from-home dynamics helped power a $1 billion beat on Mac product sales, investors were mostly focused on the roughly equivalent shortfall in iPhone sales
We believe the shortfall on iPhone was primarily a matter of timing, and was attributable to the several week delay in this year's latest-gen iPhone launch. Prior to mid-September, iPhone sales had actually been tracking to double digit growth
With Apple's subscription bundle "Apple One" set to launch on Friday, we expect services to increasingly occupy the center of investors' focus
Facebook
Facebook handily topped expectations on both revenues and earnings, exceeding analyst estimates by 8% and 43%, respectively
These blowout results were tempered by a small sequential decline in US/Canada user counts, which is expected to continue into Q4 as user metrics continue to normalize from the "peak pandemic" surge seen in Q2
We were pleased to hear commentary suggesting growing monetization across the platform as the company increasingly integrates its digital properties (including the perennially undermonetized WhatsApp) and ramps its efforts in eCommerce with Shops
Google
Google surged past expectations on both revenues and earnings, beating estimates by 8% and 45%, respectively
We were most impressed by growth in YouTube, which topped analyst estimates by nearly 15%, reflecting a sharp rebound in brand advertiser spending
Additionally, the company finally announced that it would break out its Cloud business into its own reporting segment, which we view as a strong signal of internal confidence in the business and Google's intent to cement its position within its broader growth story
