Mixed Fortunes for US Big Tech... A Preview of Q4 Earnings

The Q3 earnings announcements of the five major U.S. big tech companies have concluded. Despite the prolonged high interest rates and high inflation putting pressure on economic slowdown, they generally posted solid results, but the Q4 earnings outlook is expected to diverge significantly.

Apple Records 'Contraction' for Four Consecutive Quarters...Longest Slump

On the 2nd (local time), Apple disclosed its Q3 earnings (its fiscal Q4), reporting revenue of $89.5 billion (approximately 119 trillion KRW), down 1% from the same period last year. Net income rose 11% to $22.96 billion. Both revenue and net income exceeded market expectations, but the market focused on the decline in revenue. Apple's quarterly revenue has contracted for four consecutive quarters since Q4 last year. The Wall Street Journal (WSJ) described it as "Apple's longest earnings slump."

In Q3, hardware sales excluding iPhone were generally weak. iPhone sales increased by more than 2% compared to a year ago, but iPad sales fell by 10%. Mac series sales, including laptops and PCs, plunged 34%. However, the services segment, which includes new revenue sources such as the App Store, Apple Music, and Apple TV, showed strong performance with a 16% increase in sales.

[Image source=AFP Yonhap News]

Google, Meta, Amazon, and MS Achieve Double-Digit Growth

Microsoft (MS) posted Q3 revenue of $56.52 billion, a 13% increase year-over-year. Net income surged 27% to $22.29 billion. The Intelligent Cloud segment, including Azure services, generated $24.26 billion in revenue, up 19%. Notably, Azure revenue grew 29%, surpassing market expectations of 26%.

Earlier, on the 24th of last month, Alphabet, Google's parent company, also showed double-digit revenue growth. Alphabet recorded Q3 revenue of $76.69 billion, an 11% increase year-over-year. However, cloud segment revenue was $8.41 billion, up 22%, but fell short of market expectations of $8.64 billion.

Both MS and Google achieved double-digit revenue growth, but their cloud segments, which are the companies' cash cows and focus of investor attention, showed mixed results. Alphabet's cloud revenue slowdown led to a stock price drop of over 8% (based on the closing price that day) after the earnings announcement.

Meta posted Q3 revenue of $34.15 billion, a 23% increase from a year ago, thanks to improved online advertising revenue, exceeding market expectations of $33.56 billion. Amazon also delivered better-than-expected results despite inflation and recession concerns. Amazon's Q3 revenue was $143.1 billion, up 13% year-over-year, surpassing market expectations by about $1.3 billion.

Net income for the same period was $9.9 billion, more than triple the $2.9 billion from the previous year. Earnings per share also significantly exceeded market expectations of $0.58, recording $0.94. Particularly, the growth in the cash cow business, which had shown recent instability, stabilized, leading Amazon's stock price to surge 15% (based on the closing price that day) since the earnings announcement on the 26th.

[Image source=EPA Yonhap News]

Apple, Amazon, and Meta Face a Gloomy Q4... MS Outlook Remains Bright

Apple's Q4 revenue guidance fell short of market expectations. Luca Maestri, Chief Financial Officer (CFO), during the post-earnings conference call, did not specify exact figures but predicted "Q4 revenue will be similar to the same period last year." This is below the market expectation of $122.98 billion, which represents a 5% increase from the same period last year.

Amazon also provided a gloomy outlook for Q4. Typically, Q4, which includes the Christmas and year-end holiday season, is the peak season for e-commerce. Amazon set its Q4 revenue guidance at $160 billion to $167 billion. The midpoint ($163.5 billion) falls short of the market expectation of $166.6 billion. Meta provided Q4 revenue guidance of $36.5 billion to $40 billion. The midpoint of $38.25 billion is below the market expectation of $38.85 billion.

MS set its Q4 revenue guidance at $60.4 billion to $61.4 billion, a 15% increase year-over-year. Particularly, cloud revenue including Azure is expected to grow 26% to 27%. PC demand is beginning to recover, and growth is also expected from the acquisition of Activision Blizzard.

This content was produced with the assistance of AI translation services.