Wall Street’s second quarter earnings season kicks into high gear this week, with investors bracing for the best reporting season in more than a decade amid the fading impact of the COVID-19 health crisis on several industries and businesses.
With the NASDAQ trading near its highest level on record, most of the focus will once again be on the five big-name mega-cap tech companies, which are all due to report their respective results next week.
All five are set to enjoy another quarter of blockbuster earnings and are well worth considering given their growing dominance in the tech space.
1. Google
- Earnings Date: Tuesday, July 27
- EPS Growth Estimate: +88.6% YoY
- Revenue Growth Estimate: +46.1% YoY
- Year-To-Date Performance: +44%
- Market Cap: $1.69 Trillion
Google-parent Alphabet (NASDAQ:GOOGL) has been the best-performing FAAMG stock of 2021 thus far—by a wide margin—as the internet search giant continues to benefit from broad strength in the online advertising market.
GOOGL stock, which has rallied 44% year-to-date, ended at $2,524.20 on Tuesday, within sight of its recent record of $2,585.50 reached on July 14.
The Mountain View, California-based tech behemoth has a market cap of $1.69 trillion, making it the fourth most valuable company trading on the U.S. stock exchange.
Google—which shattered sales records for the first quarter and announced a new $50 billion share buyback plan—next reports financial results after the U.S. market closes on Tuesday, July 27.
Consensus calls for second quarter earnings per share (EPS) of $19.11, improving a whopping 88.6% from EPS of $10.13 in the year-ago period. Revenue is forecast to clock in at $55.9 billion, increasing about 46% from sales of $38.3 billion in the same quarter a year earlier, driven by an ongoing surge in digital ad spending.
Investors will stay laser-focused on growth rates at Google’s core internet search and ad revenue business, which saw a year-over-year gain of almost 32% to $44.6 billion in the previous quarter. YouTube ad revenue growth, which jumped 49% from a year ago to $6.01 billion in the last quarter, will also be eyed.
In addition, one segment that should be primed for another quarter of blockbuster growth is Alphabet's Google Cloud Platform, which saw sales surge 46% to $4.05 billion in Q1. The company has been investing heavily in its cloud business—which is not yet profitable—as it plays catch up with Amazon and Microsoft.
Investors will also be eager to hear fresh details on the U.S. Department of Justice’s ongoing antitrust suit against Google. Part of the suit focuses on allegations the tech giant monopolizes its internet search function to suppress competition.
2. Microsoft
- Earnings Date: Tuesday, July 27
- EPS Growth Estimate: +30.8% YoY
- Revenue Growth Estimate: +15.8% YoY
- Year-To-Date Performance: +25.6%
- Market Cap: $2.10 Trillion
Microsoft (NASDAQ:MSFT) has been flying high, with shares of the tech titan climbing to a new record recently, thanks to robust demand for its cloud-based offerings.
The Redmond, Washington-based company has seen its stock gain roughly 26% since the start of the year, outperforming the S&P 500's 15% increase over the same time frame.
MSFT shares, which hit an all-time high of $284.10 on July 16, closed at $279.32 last night. With a market cap of $2.10 trillion, Microsoft is the second most valuable company listed on the U.S. stock exchange.
Microsoft, which crushed expectations for earnings and revenue in the last quarter, is scheduled to next report financial results on Tuesday, July 27 after the closing bell.
Consensus estimates call for the software giant to post earnings per share of $1.91 for its fiscal fourth quarter, improving nearly 31% from EPS of $1.46 in the year-ago period.
Revenue is expected to reach an all-time high of $44 billion, up roughly 16% from sales of $38 billion in the same period a year earlier, benefitting from soaring demand for its cloud-computing services.
As such, investors will focus on growth in Microsoft’s booming Intelligent Cloud business, which includes Azure, SQL Server, Windows Server, GitHub, and other enterprise services. Microsoft’s commercial cloud revenue rose 23% year-over-year to $15.1 billion in its most recent quarter, while revenue from its Azure services grew 50%.
Another key metric in focus will be how well Microsoft’s Productivity and Business Processes segment performed. The key unit includes Office 365 cloud productivity software, Teams communications app, LinkedIn, as well as Dynamics products and cloud services.
3. Apple
- Earnings Date: Tuesday, July 27
- EPS Growth Estimate: +56.2% YoY
- Revenue Growth Estimate: +22.3% YoY
- Year-To-Date Performance: +10.1%
- Market Cap: $2.44 Trillion
Apple (NASDAQ:AAPL) has been on a tear heading into its earnings report, with shares of the tech and consumer electronics conglomerate hitting a series of record highs in recent sessions.
AAPL stock settled at $146.15 last night, not far from an all-time high of $149.98 scaled on July 15. At current levels, the Cupertino, California-based iPhone giant has a market cap of $2.44 trillion, making it the most valuable company trading on the U.S. stock exchange.
Despite recent gains, Apple has seen its shares lag those of the other four Big Tech stocks mentioned, climbing “just” 10.1% since the start of 2021.
Consensus calls for earnings per share of $1.00 for its fiscal third quarter when Apple reports its latest financial results after the market closes on Tuesday, July 27, climbing nearly 56% from the year-ago period.
Revenue is forecast to increase more than 22% year-over-year to $73.0 billion, reflecting strong demand for its lineup of 5G-enabled iPhone 12 models.
Besides the top- and bottom-line figures, Wall Street will pay close attention to growth in Apple’s iPad and Mac businesses, as both have performed well amid the current work-from-home environment, posting year-over-year revenue growth rates of 79% and 70%, respectively, in the last quarter.
Any updates on growth in its services business—which includes the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, and Apple Fitness+—as well as its wearables segment—which includes AirPods wireless earbuds, and Apple Watch—will also be in focus.
In addition, investors will be keen to hear whether Apple will provide further details regarding the potential impact of regulatory and legal challenges it currently faces in the U.S. and Europe.
4. Facebook
- Earnings Date: Wednesday, July 28
- EPS Growth Estimate: +68.3% YoY
- Revenue Growth Estimate: +48.9% YoY
- Year-To-Date Performance: +25.1%
- Market Cap: $968.7 Billion
Despite several challenges—such as ongoing regulatory investigations at home and abroad, lingering privacy concerns, as well as recent changes in Apple’s iOS 14, which could negatively impact its advertising business—Facebook (NASDAQ:FB) shares have been on the front foot lately.
FB stock, which is up 25.1% year-to-date, closed at $341.66 last night, not far from a record high of $358.67 touched on July 6. At current levels, the Menlo Park, California-based company is valued at $968.7 billion, making it the fifth most valuable company traded on the U.S. stock market.
The social media giant, which has benefitted from an acceleration in ad spending, now counts roughly 3.45 billion monthly users across its family of apps, including Instagram, Messenger and WhatsApp.
Facebook, whose earnings and revenue destroyed expectations in the first quarter, is projected to report second quarter results on Wednesday, July 28 after the U.S. market closes.
The call is for earnings per share of $3.03 for the period, up almost 69% from EPS of $1.80 in the same quarter a year earlier. Revenue meanwhile is forecast to increase 49% year-over-year to $27.8 billion, driven once again by strong advertiser demand and higher ad prices.
As usual, the market will pay attention to Facebook’s update regarding its active user accounts as well as average revenue per user (ARPU—two key metrics for the social network company.
Facebook said daily active users (DAUs) as of the first quarter climbed 8% from a year earlier to 1.88 billion, while monthly active users (MAUs) increased 10% to 2.85 billion. Meanwhile, ARPU clocked in with a double-digit percentage gain, rising 19% from the year-ago period to $9.27.
In addition to the top- and bottom-line numbers, comments from management regarding the negative impact from Apple's recent iOS update—which limits Facebook's ability to track users' activity across third-party sites—will also be in focus.
5. Amazon
- Earnings Date: Thursday, July 29
- EPS Growth Estimate: +18.5% YoY
- Revenue Growth Estimate: +29.7% YoY
- Year-To-Date Performance: +9.7%
- Market Cap: $1.80 Trillion
Amazon (NASDAQ:AMZN) has been the other relative laggard amongst the large-cap tech leaders, gaining less than 10% since the start of the year. Like Apple, Amazon shares have underperformed both the S&P 500 and NASDAQ so far in 2021.
Widely viewed as one of the biggest winners of the COVID-19 health crisis, Amazon shares have struggled this year as pandemic-era lockdown restrictions ended and consumers flocked back to physical retail stores in greater numbers.
AMZN stock, which reached a new record high of $3,773.00 on July 13, ended at $3,573.19 yesterday. With a valuation of $1.80 trillion, the Seattle, Washington-based e-commerce and cloud giant is the third most valuable company listed on the U.S. stock exchange.
Amazon, which reported blowout earnings and revenue in the last quarter, is slated to report second quarter financial results on Thursday, July 29 after the closing bell.
Analyst consensus calls for earnings per share of $12.21, which would indicate a year-over-year growth rate of almost 19% from EPS of $10.30 in Q2 2020. Revenue, meanwhile, is expected to climb roughly 30% from the year-ago period to $115.3 billion, reflecting continued strength in both e-commerce and cloud-computing.
Investors will focus on the company’s thriving cloud business to see if it can maintain its torrid pace of growth. Amazon Web Services’ (AWS) revenue surged 32% to a record $13.5 billion in the first quarter, cementing its spot as the leader in the cloud-computing space, ahead of the aforementioned Microsoft Azure and Google Cloud.
Outside of its core retail and cloud segments, advertising revenue, which has increasingly become another growth driver for Amazon, will also be in focus. While Amazon does not disclose advertising sales figures, they are included in the company’s “Other” category, which saw revenue grow 77% to $6.9 billion in the last quarter.
Growth in its Subscription Services unit, which mainly constitutes Amazon Prime, will also be in focus. The company now has 200 million Prime subscribers, 50 million more than it had at the start of 2020.