How Big Tech Performed in Q2? – Meta, Microsoft, and Google
As we enter the second most important week of the Q2 earnings season, let’s take a step back to have a closer look at how three members of the Big Tech group performed. Meta Platforms (META:US), Microsoft (MSFT:US), and Alphabet (GOOGL:US) all reported last week.
Amazon (AMZN:US) and Apple (AAPL:US) are due to report on August 03, after market close. So far, 51% of S&P 500 companies have reported actual results, according to FactSet’s data, with 80% of them having reported a positive EPS surprise while 64% reported a positive revenue surprise.
The blended earnings decline for the S&P 500 for Q2 2023 so far is 7.3%, just a bit worse than the expected decline of 7%.
Meta Platforms Delivers Big Time
Meta Platforms shares hit a fresh 52-week high on Friday after the social media giant reported a strong set of results just a few days earlier. As always, the focus was on the guidance with Meta offering a revenue forecast that came in ahead of the analyst consensus.
"We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I've seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall," said Mark Zuckerberg, Meta founder and CEO.
The company sees Q3 revenue in the range of $32 billion to $34.5 billion, topping the $31.18 billion expectations. The company also cut its CapEx full-year forecast to $28.5 billion from the prior $31.5 billion as it has pushed back some projects that were planned for this calendar year.
On the other hand, Meta said that its total expenses are expected to rise this year due to “legal-related” costs, which most likely is due to severance packages for more than 20,000 people that the company offloaded in 2023.
As far as the second quarter is concerned, Meta said its revenue rose 11% year-over-year to $32 billion. Hence, the $33.25 billion revenue forecast for this quarter (at the midpoint of the range) would imply a near 4% growth on a sequential basis.
On the bottom line, the adjusted EPS came in at $2.98, higher than the $2.92 expected. The company also reported that Facebook exceeded 2 billion and 3 billion daily and monthly active users, respectively.
Meta’s recent stock outperformance comes just after Congressmen Ro Khanna and Michael McCaul were selling shares in May and June.
Still No AI Boost for Microsoft
Microsoft shares fell following the release of the FQ4 earnings report and subsequent earnings call. The company’s results and guidance showed decelerating demand for cloud-computing services while Microsoft is not projecting a meaningful AI boost in the short term.
The company’s Q2 revenue of $56.19 billion, up 8.3% YoY, topping analyst consensus that was looking for $55.49 billion. At constant currency, revenue increased 10%. Microsoft’s Intelligent Cloud segment – which hosts Azure – saw its sales hit $23.99 in the second calendar quarter, just ahead of the consensus of $23.8 billion.
“Organizations are asking not only how – but how fast – they can apply this next generation of AI to address the biggest opportunities and challenges they face – safely and responsibly,” said Satya Nadella, chairman and chief executive officer of Microsoft.
“We remain focused on leading the new AI platform shift, helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage.”
On the earnings call, the management said it expects Azure to grow between 25% to 26% in constant currency. The consensus was looking for 26% growth.
Earlier this month, Senator Tommy Tuberville disclosed he sold $250,000 - $500,000 worth of Microsoft shares on June 20, when the stock closed at $338.05.
Google Search Still the King
Despite fears that Microsoft’s internet search solution Bing is taking a big share from Google Search, the company’s latest earnings report suggests this is not the case. The company’s stock soared on Wednesday after Alphabet reported second-quarter results that beat expectations.
Moreover, investors were happy to hear that Google’s prominent CFO – Ruth Porat – is transitioning to the newly created role of Chief Investment Officer, effective September 1, 2023.
Google parent said that it generated $74.6 billion in Q2 revenue, beating the expectations for $72.77 billion. The company attracted $58.14 billion in ad sales. The adjusted EPS came in at $1.44, ahead of the estimate of $1.32, while the operating margin stood at 29% – again better than the 27.6% expected.
CFO Porat commented: “Our financial results reflect continued resilience in Search, with an acceleration of revenue growth in both Search and YouTube, as well as momentum in Cloud. We continue investing for growth, while prioritizing our efforts to durably reengineer our cost base company-wide and create capacity to deliver sustainable value for the long term.”
Congress members were also sellers of GOOGL stock in recent months. Most notably, Congressman McCaul was selling shares in May and June, capitalizing on a strong year-to-date rally.
