Written by Norman Isaac Mwambazi

Earnings Season: Apple, Microsoft, Google all beat Wall Street expectations

Amidst great anticipation, this will be the biggest week in this quarter’s earnings season, as all Big Tech companies are …

Amidst great anticipation, this will be the biggest week in this quarter’s earnings season, as all Big Tech companies are reporting their earnings to shareholders, investors, and analysts alike. Last evening, iPhone maker Apple Inc. (ticker: AAPL), software and hardware designer Microsoft Corporation (ticker: MSFT), and search giant Google’s parent company Alphabet Inc. (tickers: GOOG, GOOGL) all released their respective earnings reports and to everyone’s surprise or not, their stats exceeded both their and Wall Street’s expectations.

Apple

Apple's five most profitable lines of business

Apple Inc., the largest company in the company by market capitalisation, posted its strongest third quarter ever, almost doubling its profits and registering huge revenues for its most profitable iPhone business. However, its shares slightly dropped in after-hours trading after the company announced that it expects to have slower growth in the fourth quarter of the 2021 fiscal year (Q4 FY2021).

Apple’s Q3 FY2021 Earnings report released yesterday, Tuesday, July 27, 2021, shows that the Cupertino, California-based company earned a net income of $21.74 billion, or an Earnings Per Share (EPS) of $1.30. This income is almost double what the company raked in 12 months ago, which was $11.25 billion, or EPS of 65 cents. According to FactSet, Wall Street analysts that were surveyed expected Apple’s EPS for Q3 FY2021 to be $1.01.

The report also shows that Apple’s revenue rose to $81.43 billion in Q3 FY2021, beating what analysts had expected the company to post, which was $73.34 billion. The company’s revenue in Q2 FY2021 stood at $59.69 billion. According to FactSet, Apple’s flagship product, the iPhone, exceeded revenue expectations by more than $5 billion in the third quarter as it delivered $39.57 billion in revenue, beating consensus expectations of $34.19 billion. 12 months ago, Apple’s iPhone business delivered $26.42 billion.

  • Mac revenue: $8.24 billion, up from $7.08 billion a year ago
  • IPad revenue: $7.37 billion, up from $6.59 billion a year ago. All these beat analysts’ expectations of $7.86 billion and $7.17 billion, respectively.
  • Services unit revenue: $17.49 billion (an all-time record), up from $13.16 billion a year ago
  • Wearable, home, and accessories revenue: $8.78 billion in revenue from its wearables, up from $6.45 billion a year ago. These two segments beat FactSet analyst consensus expectations of $16.26 billion and $7.83 billion, respectively.

Apple’s shares slipped 2.2% in after-hours trading, and it is currently trading at $146.77 a share, with a market capitalisation of $2.45 trillion.

Microsoft

Microsoft, another company that joined Apple in the 2 trillion-dollar club, also announced its quarterly earnings report; however, unlike others, this was the fourth quarter of the 2021 fiscal year (Q4 FY2021). The maker of the ever so popular Windows operating system among a plethora of other products finished yet another record-breaking year, posting more than $60 billion in profit and $165 billion in sales.

Microsoft’s dazzling earnings report shows that the company earned $16.46 billion in Q4 FY2021, or an EPS of $2.17, up from $1.46 12 months ago. It also hit a quarterly record when it registered a $46.15 billion revenue, up from $38.03 billion reported in Q4 FY2020.

Microsoft’s results beat analysts’ expectations, who had projected the company to earn $1.92 per share on sales of $44.22 billion. Immediately after releasing the report, Microsoft’s shares slipped 3% in after-hours trading, adding to the 0.9% slip the company had registered in regular trading. It is currently trading at $284.84.

With a total profit of $61.27 billion on sales of $168.09 billion, Microsoft far exceeded consensus analysts’ expectations that which has been attributed to the company’s cloud computing division that has primarily benefited from the coronavirus pandemic as businesses and organisations moved their offices to the cloud due to work-from-home directives by governments around the world in an effort to curb the spread of the deadly virus.

Early this month, software analysts Evercore ISI said Microsoft would continue to benefit from the current trend of entities like businesses, organisations, schools, and government departments shifting work to the cloud due to its intelligent cloud computing enterprise.

Microsoft Azure, the company’s flagship cloud computing product, reported sales of $17.38 billion, beating analysts’ expectations of $6.39 billion from that segment. A year ago, Microsoft earned $13.37 billion from its cloud computing segment, representing a 51% growth, which is also higher than the 44.77% that analysts had projected.

Microsoft’s other business segments like the game console, Xbox, a new version of the Windows operating system, and its traditional PC business all grew beyond analyst expectations. Due to this, Wall Street analysts predict Microsoft will continue growing in the new fiscal year (FY2022) and register more than $63 billion in profit and sales of $186.74 billion.

Google

The third member of the Big Tech to release quarterly results yesterday was Google parent company Alphabet Inc., and just like Apple and Microsoft, Alphabet’s report also exceeded analysts’ estimates. After the release of the report, Alphabet’s stock rose 3% in after-hours trading.

Alphabet’s gleaming Q2 FY2021 earnings were attributed to the meteoric rise of digital advertising, which reported a net income of $18.53 billion, or EPS of $27.26. This net income is more than double what the company reported a year ago, which stood at $6.96 billion, or EPS of $10.13.

After deducting $10.93 billion spent on traffic acquisition, Alphabet’s revenue jumped to $50.95 billion, from $31.6 billion reported in Q2 FY2020. With overall revenue increasing 62% to $61.9 billion, this is the first time the search giant has topped $60 billion in quarterly sales, smashing all analysts’ expectations in both net income and EPS.

During the earnings call yesterday, Alphabet and Google Chief Executive Officer (CEO) Sundar Pichai said that the company is benefitting from a rising tide of consumer and enterprise demand for digital advertising space.

In total, Google earned $50.44 billion from advertising in Q2 FY2021, a 69% increase from the $29.9 billion the company made in the second quarter of 2020.

For a company viewed as a search giant, it makes perfect sense for its earnings to exceed all others, which it accomplished by bringing in $35.85 billion in sales, a feat complemented by YouTube ad sales which soared by 84% year-over-year. Advertisers on Alphabet’s video-sharing platform YouTube paid $7 billion in the last 12 months.

Google’s Cloud business, which is still far behind competitors Amazon (ticker: AMZN) and Microsoft, grew by 54% to $4.63 in Q2 FY2021.

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