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- 📈 Meta Jumps 20% on Earnings
📈 Meta Jumps 20% on Earnings
Plus, Microsoft, Apple, Google, and Amazon announce earnings...
🐝 This Week in the Buzz
TOP STORY
📈 Meta Jumps 20% After Most Profitable Quarter Ever
Meta’s stock rocketed over 20% after posting its most profitable quarter ever. The company’s single-day market cap jump of $200B was the highest ever in stock market history 🤯
📊 Earnings by the Numbers
Zuck’s ‘Year of Efficiency’ is clearly paying off, with cost cuts driving record profits of $39B in 2023. Here are some of the key figures:
✅ Revenue: +25%
✅ Earnings: +203%
✅ Costs: -8%
✅ Headcount: -22%
✅ Daily Active Users: +6%
This profit growth, driven by strong ad sales and a rebound in user growth, put Q4 results well above analyst estimates (over 10% to be exact!)
🤖 AI in Full Focus
With over $65B cash in the bank, Meta has a big bag of money to spend, and the Zuck left no mystery about where they’ll be spending it.
Moving forward, a major goal will be building the most popular and and most advanced AI products and services. If we succeed, everyone who uses our services will have a world-class AI assistant to get things done.
To make this happen, Meta plans to spend billions on AI chips from Nvidia, aiming to have 350,000 H100 graphic cards by the end of 2024.
This focus on AI is a big shift from the Metaverse obsession which dominated the discussion in 2021, when Facebook changed its name to Meta.
👓 The Metaverse Is Still An Item
While Zuck made it clear that “AI will be the biggest investment area in 2024”, the Metaverse wasn’t completely left out of the picture with Zuck saying the company made a lot of progress in 2023.
The division lost another $4.65B this year but beat expectations on revenue - topping $1.07B compared to the expected $812B. Meta announced that they “expect operating losses from Reality Labs to increase meaningfully year-over-year.”
Some analysts expect Apple’s Vision Pro headset may re-ignite interest in the technology, giving a boost to Meta in the process.
💸 Meta Announces It’s First Dividend
Maybe one of the most surprising parts of Meta’s earnings call was the announcement of its first-ever dividend - at $0.50 per share every quarter (~0.4% yield).
Meta’s CFO Susan Li said the dividend ‘gives flexibility in how Meta returns capital'. Dividends also signal management confidence about the future.
📈 Analysts Raise Targets
Overall, if it wasn’t obvious from the 20% stock price jump, investors were happy with Meta’s Q4 results.
Analysts were also pleased, increasing 12-month price targets to an average $513.63, and rating Meta a Strong Buy.
"The company is firing on all cylinders and continues to hammer home the notion that this will be a more efficient and leaner organization going forward”
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BIG TECH EARNINGS
📈 Amazon and Microsoft Up, 📉 Google and Apple Down
Meta wasn’t the only company to report earnings this week, Apple, Amazon, Google, and Microsoft also joined the party with varied results:
📉 Apple down 3.2%
📉 Google down 6.6%
📈 Microsoft up 1.28%
📈 Amazon up 7.9%
Let’s dive into the highlights…
🍎 Apple: Weaker iPhone Outlook & Struggles in China
✅ Revenue: $119.58 billion vs. $117.91 billion expected
✅ Earnings per share: $2.18 vs. $2.10 expected
Apple is an interesting one - with the stock falling despite beating both revenue and earnings expectations, but as discussed in last week’s buzz, this is really no surprise, with the following factors at play:
🇨🇳 13% sales decline in China
Once seen as Apple’s biggest growth driver, China has recently been a challenge, with Huawei giving Apple a run for its money.
Huawei lost competitiveness over the last 3 years after US sanctions restricted its access to 5G technology, but this changed last year when Huawei launched the Mate 50 with 5G connectivity.
Economic challenges in the Chinese market, with rock-bottom consumer confidence, are also hurting demand in the market.
📲 iPhone sales dampening
Fears of weakening iPhone sales also put a sour note on earnings, with Apple’s CFO saying they expected iPhone sales in Q1 would be similar to last year’s.
With over 50% of Apple’s revenue coming from the iPhone, any slow-down in sales would be a major blow.
☀️ Optimistic Notes: AI & Vision Pro
While a lot of the coverage on Apple focused on the negatives, there are two shining areas to keep an eye on in 2024: AI & the Vision Pro.
Tim Cook made a point to mention that “AI is an area Apple will be spending a tremendous of time and effort”.
While exactly what Apple is working on has remained mysterious, many analysts anticipate that AI-powered capabilities in the new iPhone may accelerate the upgrade rate.
The other silver lining for Apple this week was the launch of the Vision Pro, which hit the market on Friday and was met with glowing reviews from techies on Twitter, with many agreeing that it lived up to the hype.
I just tried the Apple Vision Pro for the first time. I couldn’t believe my eyes.
This is going to change everything about the world we live in forever.
— Michael Sayman (@michaelsayman)
Feb 2, 2024
🔍 Google: Stock Tumbles After Disappointing Ad Revenue
✅ Revenue: $86.3 billion vs. $85.2 billion expected
✅ Earnings per share: $1.64 vs. $1.61 expected
Like Apple, Google’s stock fell despite beating both revenue and earnings with investors focusing heavily on disappointing ad revenues.
📢 Ad Revenue Falls Short of Estimates
While ad revenue still grew 11% to $65.52 billion, this fell just below estimates of $65.82 billion.
In contrast, Google’s company's cloud revenue grew 25% to $9.19 billion.
♊️ Google’s ‘Gemini’ Era
AI dominated the earnings calls of Big Tech and Google was no exception, with Alphabet’s CEO dubbing it the ‘Gemini Era’ after Google’s large-language model (LLM) that was unveiled in early December.
Google insists that the AI advancements will benefit the company but others remain skeptical about how integrating chatbot AI technology into search queries will impact advertising revenue.
“Search, Youtube, and Cloud are already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come”
☁️ Microsoft: Profits in the Cloud
✅ Revenue: $62 billion vs. $61 billion expected
✅ Earnings per share: $2.93 vs. $2.77 expected
Microsoft blew past expectations with earnings 6% higher than analyst estimates, driven by strong revenue growth in all business lines:
☁️ Azure Cloud: +20%
💻 Personal Computing: +19%
📝 Productivity/Business: +13%
☁️ Growth from the Cloud
Microsoft’s Azure Cloud (which competes with Amazon’s AWS and Google Cloud) was the shining star of earnings.
Microsoft is slated to ‘increase spend materially’ on investments in cloud and AI infrastructure, signaling ‘a line of sight to a significant increase in cloud revenue’ according to Bernstein analyst Moerdler.
📈 Cloud x AI = More Profits?
For the non-techies reading, the ‘cloud’ essentially powers every app/website on the internet (including Blossom which runs on Amazon’s AWS cloud). It provides on-demand data storage, computing power, and more.
In addition to the direct benefit AI has on Microsoft Office Products - it will also benefit the Azure cloud, as Microsoft can apply the learnings from adding AI in its own apps to Azure, building a more compelling offering for companies to choose it over Google Cloud and AWS.
“By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector”
📢 Amazon: Advertising Revenue Leads the Charge
✅ Revenue: $169.9 billion vs. $166.2 billion expected
✅ Earnings per share: $1.00 vs. $0.78 expected
Amazon was the second biggest winner out of Big Tech, jumping nearly 8% this week after crushing revenue and earnings and signaling optimism for the year ahead.
🏆 Advertising is the biggest winner
📢 Ad Revenue: +27%
☁️ AWS Cloud: +13%
While AWS Cloud showed a slowdown in growth (+13% compared to +20% the year prior), advertising made up for it with 27% growth with ads in Prime Video content projected to drive substantial new revenue.
🔪 Amazon Follows Meta in ‘Year of Efficiency’
Like Meta, Amazon’s push to rein in costs is paying off, laying off 27,000 employees between late-2022 and mid-2023.
🤖 Don’t forget about AI
It wouldn’t be a 2024 earnings call without mentioning AI, and Amazon has a few tricks up its sleeve:
🐶 Rufus: Amazon’s new shopping assistant Rufus, a generative AI-powered shopping assistant, is rolling out soon.
☁️ Cloud: Like Microsoft, Amazon sees potential for AI to generate billions for its cloud business since AI tools require huge amounts of data and processing power.
And that wraps Big Tech earnings!!! 😅 I hope you enjoyed this summary as much as I (Max) enjoyed diving into each of the reports 😊
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FROM THE BLOSSOM COMMUNITY
🎙️ Top Discussions This Week
