Wall Street’s first quarter earnings season kicks into high gear in the coming days, with investors bracing for one of the best reporting seasons in years. This amid the receding impact of the COVID-19 health crisis on several industries.
With the NASDAQ Composite 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 in the week ahead.
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. Microsoft
- Earnings Date: Tuesday, April 27
- EPS Growth Estimate: +27.1% YoY
- Revenue Growth Estimate: +17% YoY
- Year-To-Date Performance: +16.1%
- Market Cap: $1.93 Trillion
Microsoft (NASDAQ:MSFT) has fared better than most software growth stocks lately, with shares of the Redmond, Washington-based tech titan climbing to a new all-time high recently thanks to robust demand for its cloud-based offerings. The company has seen its stock gain roughly 16% since the start of the year, outperforming the S&P 500’s 10% increase over the same time frame.
MSFT shares, which hit a record of $261.47 on Apr. 19, ended at $258.26 on Tuesday. With a market cap of $1.93 trillion, Microsoft is the second most valuable company listed on the U.S. stock exchange.
Microsoft, which smashed expectations for earnings and revenue in the last quarter, is scheduled to next report financial results on Tuesday, Apr. 27 after the closing bell.
Consensus estimates call for the tech giant to post earnings per share (EPS) of $1.78 for its fiscal third quarter, improving 27% from EPS of $1.40 in the year-ago period. Revenue is expected to reach an all-time high of $41 billion, up 17% from sales of $35 billion in the same period a year earlier, amid strong demand for its cloud-computing products.
As such, investors will focus on growth in Microsoft’s booming Intelligent Cloud business, which includes Azure, GitHub, SQL Server, Windows Server, and other enterprise services, such as Office 365. Microsoft’s commercial cloud revenue rose 34% year-over-year to $16.7 billion in its most recent quarter, while revenue from its Azure cloud infrastructure services grew 50% in the period.
Despite lofty valuations—the tech giant's stock is trading for 38 times trailing 12-month earnings—Microsoft still looks like a good bet going forward, given the soaring demand for its cloud-based offerings, which has made it one of the true leaders in its field.
2. Google
- Earnings Date: Tuesday, April 27
- EPS Growth Estimate: +58.1% YoY
- Revenue Growth Estimate: +24.3% YoY
- Year-To-Date Performance: +30.1%
- Market Cap: $1.54 Trillion
Google-parent Alphabet (NASDAQ:GOOGL) has been the best-performing ‘FAAMG’ stock of 2021 thus far—by a wide margin—as its core search and advertising revenue business returned to growth following a brief slowdown amid the coronavirus pandemic.
GOOGL stock, which has rallied nearly 30% year-to-date, closed at $2,279.01 yesterday, within sight of its recent record of $2,304.09 reached on Apr. 19.
The Mountain View, California-based internet giant has a market cap of $1.54 trillion, making it the fourth most valuable company trading on the U.S. stock exchange.
Google, which crushed expectations for its fourth quarter earnings and revenue in early February, next reports financial results after the U.S. market closes on Tuesday, Apr. 27.
Consensus calls for first quarter earnings of $15.60 per share, improving 58% from EPS of $9.87 in the year-ago period. Revenue is forecast to clock in at $51.2 billion, increasing about 24% from sales of $41.2 billion in the same quarter a year earlier.
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 22% to $46.2 billion in the previous quarter. YouTube ad revenue growth, which jumped 46% to $6.88 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 47% to $3.83 billion in Q4. The company has been investing heavily in its cloud business—which is not yet profitable—as it plays catch up with Amazon and Microsoft.
Google currently has less than a 10% market share of the $130 billion cloud industry, compared to Microsoft’s 20% and Amazon’s 33%.
Investors will also be keen 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.
3. Facebook
- Earnings Date: Wednesday, April 28
- EPS Growth Estimate: +36.8% YoY
- Revenue Growth Estimate: +33.1% YoY
- Year-To-Date Performance: +10.8%
- Market Cap: $864.6 Billion
Despite several headwinds—such as ongoing regulatory investigations, lingering privacy concerns, as well as looming changes in Apple’s iOS 14, which could negatively impact its advertising business—Facebook (NASDAQ:FB) shares have been on the front foot lately, climbing nearly 11% this year.
The social media giant, which has benefitted from an acceleration in ad spending, now counts roughly 3.3 billion monthly users across its family of apps, including Instagram, Messenger and WhatsApp.
FB shares settled at $302.65 last night, not far from their record high of $315.88 touched on Apr. 8. At current levels, the Menlo Park, California-based company is valued at $864.6 billion, making it the smallest of the mega-cap tech firms and the only one with a market cap below $1 trillion.
Facebook, whose earnings and revenue easily beat expectations in the fourth quarter, is projected to report first quarter results on Wednesday, Apr. 28 after the U.S. market closes.
Consensus calls for earnings per share of $2.34 for the period, up almost 37% from EPS of $1.71 in the same quarter a year earlier. Revenue, meanwhile, is forecast to increase 33% year-over-year to $23.6 billion, driven once again by strong advertiser demand.
As such, Facebook’s ad revenue—which grew 31% year-over-year in Q4 despite an ongoing global boycott from more than 1,000 advertisers—will be closely watched by investors.
In addition, 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 fourth quarter climbed 11% from a year earlier to 1.84 billion, while monthly active users (MAUs) increased 12% to 2.8 billion.
Meanwhile, ARPU clocked in with a double-digit percentage gain, rising 19% from the year-ago period to reach a record high of $10.14. Even more impressive, ARPU for Facebook’s lucrative U.S. and Canada region jumped to $54 in Q4, up 32% from ARPU of $41 in the same period last year.
4. Apple
- Earnings Date: Wednesday, April 28
- EPS Growth Estimate: +53.8% YoY
- Revenue Growth Estimate: +31.6% YoY
- Year-To-Date Performance: +0.3%
- Market Cap: $2.24 Trillion
Apple (NASDAQ:AAPL) has been the major laggard among the ‘Big Five’ mega-cap firms, with shares rising less than 1% since the start of 2021 and trailing the S&P 500 by about nine percentage points.
The tech and consumer electronics conglomerate has also significantly underperformed the NASDAQ Composite, which is up nearly 7% year-to-date.
Following last year’s wildly successful launch of its 5G-enabled iPhone 12, some market experts have cited the absence of looming new products as the main reason for Apple’s relatively mild performance this year.
AAPL stock closed at $133.11 on Tuesday, approximately 8% below its all-time high of $145.09 touched on Jan. 25. The Cupertino, California-based iPhone giant has a market cap of $2.24 trillion, making it the most valuable company trading on the U.S. stock exchange.
Apple—which posted the best earnings report in its history in the previous quarter—next reports financial results after the market closes on Wednesday, Apr. 28.
Consensus calls for earnings per share of $0.98 for its fiscal second quarter, climbing nearly 54% from the year-ago period, but down sharply from EPS of $1.68 in fiscal Q1. Revenue is forecast to increase more than 31% from the same period a year earlier to $76.7 billion. However, that would mark a steep decline from sales of $111.4 billion in the last quarter.
Besides earnings and revenue, Wall Street will pay close attention to growth in Apple’s subscription services business, which includes iTunes Music, Apple TV+, Apple Arcade, Apple Fitness+, as well as its News+ platform.
Any updates on growth in its iPad and iMac business, as well as its wearables segment—which includes AirPods and the Apple Watch—will also be in focus.
In addition, investors are hoping Apple will provide further details regarding the potential impact of proposed tax rate changes and possible new legislation from the Biden administration seeking to curb the influence of Big Tech companies.
5. Amazon
- Earnings Date: Thursday, April 29
- EPS Growth Estimate: +89.4% YoY
- Revenue Growth Estimate: +38.4% YoY
- Year-To-Date Performance: +2.4%
- Market Cap: $1.66 Trillion
Amazon (NASDAQ:AMZN) has been the other relative laggard amongst the large-cap tech leaders, gaining just about 2% since the start of the year. Like Apple, Amazon shares have drastically underperformed both the S&P 500 and NASDAQ so far in 2021.
Widely viewed as one of the biggest beneficiaries of the COVID-19 health crisis, Amazon shares have struggled this year as pandemic-era lockdown restrictions ease and consumers head back to physical retail stores in greater numbers.
AMZN shares, which are 6% below their record high of $3,552.25 reached back in September, ended at $3,334.69 yesterday. With a valuation of $1.66 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 a massive beat on earnings and revenue in the last quarter, is slated to report first quarter financial results on Thursday, Apr. 29 after the closing bell.
Consensus calls for earnings per share of $9.49, which would indicate a year-over-year growth rate of almost 90% from EPS of $5.01 in Q1 2020. Revenue, meanwhile, is expected to climb roughly 38% from the year-ago period to $104.4 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 jumped 28% to a record $12.7 billion in the fourth quarter.
Outside of its core retail and cloud units, advertising revenue, which has increasingly become another growth driver for Amazon, will also be in focus. Numbers from this segment increased by 64% in the last quarter.
Despite worries over looming antitrust reform amid allegations the tech giant monopolizes its services to suppress competition, Amazon remains one of the best names to own in the months ahead due to its clear position as the leading name in both e-commerce and cloud.