MSFT Stock – The massive numbers in the Apple, Google, Microsoft, Facebook results
Demand for Apple products has driven revenue growth. Photo / AP
Demand for the iPhone and other Apple products drove profits to more than double in the January-March period as the tech giant continued to capitalize on smartphone addiction.
Profits came to US$23.6 billion, or US$1.40 per share, while revenue climbed 54 per cent to US$89.6 billion in the fiscal second quarter, the company said Wednesday. Analysts polled by FactSet expected 99 cents per share on US$77.1 billion in sales.
The iPhone, Apple’s crown jewel, hadn’t sold quite as well as usual over the past few years as people held on to their current phones for longer. But the release of four iPhone 12 models last fall has unleashed purchases, and iPhone sales rose 66 per cent to US$47.9 billion on top of a holiday-season quarter when iPhone sales jumped 17 per cent.
Some analysts believe the popularity of the iPhone 12 could lead to the device’s biggest sales year since 2014, when the iPhone 6 came out. It was a big hit because Apple enlarged the device’s screen.
The iPhone 12 is the first model that can connect to 5G wireless networks that promise higher speeds but are still being built out. Apple is trying to goose sales even more during the current quarter with a new purple iPhone 12.
Apple’s other products and services — it has music and TV streaming services, just announced a new key- and backpack-tracking device called AirTags, and computers and tablets — are also growing. Mac sales soared 70 per cent to US$9.1 billion, a revenue record for the company, and iPad sales climbed 79 per cent to US$7.8 billion. CEO Tim Cook, on a call with investment analysts, noted the importance of the company’s computers and tablets during the pandemic as students and workers toiled virtually at home.
The company’s steadily expanding services division generated revenue of US$16.9 billion during the quarter, up 27 per cent. That division includes 15 per cent to 30 per cent commissions that Apple collects from most paid transactions completed with iPhone apps. Regulators in different countries are scrutinizing how Apple extracts payments through the App Store.
The issue will be the focal point of a federal court trial scheduled to start May 3. Epic Games, the maker of the popular video game Fortnite, will try to prove its contention that Apple has turned its app store into a weapon for shaking down smaller companies to boost its own already huge profits.
Apple insists its fees are reasonable in light of its massive investment in the iPhone and that its “walled garden” approach helps protect the security of its customers and their devices.
The company also said it would increase spending on stock buybacks by US$90 billion and raised its dividend by 7 per cent.
Apple CFO Luca Maestri said on the call that the company was not providing a revenue forecast given continued uncertainty in the world economy, but said that revenue in the current quarter would grow by “double digits” from the year before. Supply constraints resulting from a shortage of computer chips would lower revenue by US$3 billion to US$4 billion in the June quarter, primarily affecting the Mac and iPad, he said.
Chips that power a wide range of devices are in short supply, contributing to the iPhone 12’s delayed release last year. Apple is “executing extremely well” despite those supply constraints, CFRA analyst Angelo Zino wrote in a research note.
Apple shares rose 1.8 per cent in aftermarket trading Wednesday.
Google’s digital advertising network has shifted back into high gear, with its corporate parent reporting profit that more than doubled after an unprecedented setback during the early stages of the pandemic.
The robust first-quarter advertising growth announced Tuesday provides the latest sign that advertisers are expecting the economy to roar back to life as more people get vaccinated against COVID-19 and burst out of their pandemic cocoons.
That is particularly true in the travel industry, a key part of the ad market that drastically curtailed its spending last year after governments around the world imposed lockdowns to prevent the spread of the novel coronavirus.
Google vast digital ad empire is now benefiting from that recovery, although company executives warned in a conference call that another wrong turn in the pandemic could discourage recent consumer splurging that’s also spurring advertisers to spend more.
“It’s too early to say how durable this consumer behavior will be as economies recover and restrictions on mobility are lifted,” said Ruth Porat, chief financial officer for Google’s parent, Alphabet Inc.
Google’s sales surged 32 per cent from the same time last year to nearly US$45 billion during the January-March period. It’s the third consecutive quarter of accelerating ad growth for Google following an 8 per cent decline during last year’s April-June period. That marked the first time Google’s quarterly ad revenue had fallen from the previous year since the company went public in 2004.
The resurgence enabled Alphabet to easily surpass the analyst estimates that help set investor expectations.
The Mountain View, California, company earned US$17.9 billion, or US$26.29 per share, more than double what it reported the same time last year. The profit was inflated by an accounting change of US$650 million, or 97 cents per share.
Total revenue, which also includes Google’s cloud-hosting service and device sales, climbed 34 per cent from last year.
Analysts had projected earnings of US$15.76 per share on revenue of US$51.5 billion, according to FactSet. The performance pleased investors, who drove up Alphabet’s stock by 4 per cent in extended trading after the numbers came out.
Aside from the one-quarter downturn in ad revenue, Google has mostly thrived throughout the pandemic as people became more dependent on its services — a phenomenon that has strengthened other technology stalwarts such as Apple, Amazon, Microsoft, Facebook and Netflix.
Alphabet’s stock is trading above US$2,300, nearly double its price when the pandemic was declared 13 months ago. Alphabet’s market value is now nearly US$1.6 trillion. And if Alphabet’s shares follow the same trajectory during Wednesday’s regular trading session, the stock will hit a new peak.
Google’s critics contend much of its success has come through anti-competitive practices tied to the dominance of its search engine, which has become the de facto gateway into the digital world. Those complaints culminated in a series of lawsuits filed by U.S. regulators last year in cases aimed at reining in Google’s ability to expand, if not forcing a break of its services.
But the main lawsuit filed by the U.S. Justice Department isn’t scheduled to go to trial until September 2023, leaving Google ample time to extend its tentacles even further while fighting a case that it contends is unfounded.
Google’s YouTube video site remains one of the company’s fastest rising stars, with ad revenue increasing 49 per cent from last year to US$6 billion. The company’s cloud-computing service is also rapidly expanding; its revenue shot up 46 per cent from last year.
Microsoft’s profits soared during the first three months of 2021, thanks to ongoing demand for its software and cloud computing services during the pandemic.
The company on Tuesday reported fiscal third-quarter profit of US$14.8 billion, up 38 per cent from the same period last year.
“Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,” CEO Satya Nadella said in a statement.
Net income of US$1.95 per share beat Wall Street expectations. Analysts were expecting Microsoft to earn US$1.78 per share on revenue of US$41 billion for the fiscal quarter ending in March, according to FactSet.
The software maker based in Redmond, Washington, posted revenue of US$41.7 billion in the January-March period, up 19 per cent from last year.
Revenue from Microsoft’s productivity segment, which includes its Office suite of workplace products such as email, grew by 15 per cent over the same time last year, to US$13.6 billion. Its cloud computing business segment grew 23 per cent to US$15.1 billion.
Microsoft’s personal computing business segment grew by 19 per cent to US$13 billion, buoyed by last year’s release of a new Xbox gaming console and an unusually strong season for PC sales across the industry. Microsoft gets licensing revenue for computers made by other manufacturers running its Windows operating system.
The first quarter of 2021 was a gold mine for the sale of personal computers in part due to unfulfilled demand because of a components backlog, according to separate reports from Gartner and IDC. The sharp rise across the industry was also due to an unusually weak first quarter of 2020, when the coronavirus outbreak began disrupting supply chains in Asia.
Pent-up demand for supply-constrained consoles during the holiday season also contributed to the 34 per cent rise in sales of Xbox content and services in early 2021 from the same time last year.
But it’s the cloud growth that has been Microsoft’s focus as the company tries to tap into a pandemic-caused shift in big businesses, governments and other organizations doing more of their essential work online.
“Microsoft came through the pandemic with relatively little damage,” said Forrester research analyst Andrew Bartels.
Nadella has steered the company through a series of ambitious acquisitions while rivals like Amazon and Google have faced more antitrust uncertainty as regulators scrutinize their market power.
In the latest, Microsoft announced earlier in April it is buying Massachusetts speech-recognition company Nuance in a deal worth about US$16 billion. The acquisition will get Microsoft deeper into hospitals and the health care industry through Nuance’s widely used medical dictation and transcription tools.
Microsoft’s stock, which is up about 18 per cent so far this year, slipped about 3 per cent in after-market trading following the release of the quarterly earnings report.
“There’s been a pattern here of investors expecting the sun, moon and stars from tech vendors, and when they just get the sun and the moon, they get disappointed,” Bartels said. “This is a large company. For that revenue to grow by the magnitude of growth it did, that’s impressive.”
Facebook’s stock jumped Wednesday US time after the social media giant reported stronger-than-expected results for the first quarter thanks to soaring ad revenue.
The company said it earned US$9.5 billion, or US$3.30 per share, in the January-March period. That’s up 94 per cent from US$4.9 billion, or US$1.71 per share, a year earlier.
Revenue grew 48 per cent to US$26.17 billion from US$17.44 billion.
Analysts, on average, were expecting earnings of US$2.35 per share and revenue of US$23.73 billion, according to a poll by FactSet.
The average price of ads on Facebook grew 30 per cent from a year earlier, while the number of ads increased by 12 per cent.
Facebook had 2.85 billion monthly users, on average, in March. That’s up 10 per cent from a year earlier. Its family of apps — Facebook, Instagram and WhatsApp — had monthly users of 3.45 billion in March. That’s the number of people who logged in to at least one of the apps during the month.
In January, the company predicted uncertainty for 2021, saying its revenue in the latter half of the year could face significant pressure. Because revenue grew so quickly in the second half of 2020, Facebook could have trouble keeping up that pace. This uncertainty is now baked into the company’s forecast, so it didn’t come as a surprise to investors.
Shares of the Menlo Park, California-based company rose nearly 6 per cent in after-hours trading.
On Monday, Apple rolled out a new privacy feature, dubbed “App Tracking Transparency,” as part of an update to the operating system powering the iPhone and iPad. It came after a seven-month delay during which the iPhone maker and Facebook attacked each other’s business models and motives for decisions that affect billions of people around the world.
Until the new feature, Facebook and other apps have been able to automatically conduct their surveillance on iPhones unless users took the time and trouble to go into their settings to prevent it — something not many people did.
While Facebook spent months fighting the change, CEO Mark Zuckerberg recently suggested that the new privacy controls could actually help his company in the long run. His rationale: The inability to automatically track iPhone users may prod more companies to sell their products directly on Facebook and Instagram if they can’t collect enough personal information to effectively target ads within their own apps. This would help Facebook’s bottom line, of course.
Facebook said Wednesday it expects its second-quarter 2021 revenue growth to stay stable or “modestly accelerate” compared with the growth rate in the first quarter. The Apple update is already factored into this guidance.
– Associated Press
MSFT Stock – The massive numbers in the Apple, Google, Microsoft, Facebook results
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