Meta, Microsoft, and Alphabet: April 2024 Earnings Previews

Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOGL) will report results this week. Here are the key numbers that we’re watching.

Figure 1: Meta Platforms – consensus expectations for Q1 2024, past earnings surprises, revisions, and CAGR

Source: Visible Alpha consensus (April 19, 2024). “Previous Surprises” indicate the direction that specific line items beat or missed. “Consensus Revisions” show the trajectory of line items from a given date.

Figure 2: Meta Platforms consensus estimates

Source: Visible Alpha consensus (April 19, 2024). Stock price data courtesy of FactSet. META’s current stock price is as of the market close on April 18, 2024.

Meta Platforms Q1 2024 Earnings Preview

According to Visible Alpha consensus, total revenues expected for Q1 have moved up to $36.3 billion, driven by better performance in the Family of Apps segment, especially in the U.S. and Europe. However, expectations for operating profit have remained at $17.7 billion since Q4 2023. There is some debate among the analysts into Q1 for the Family of Apps’ income from operations, with estimates ranging from $16.0 billion to $19.4 billion.

For 2024, expectations for operating income from the Family of Apps have remained at $81.3 billion since last quarter, driven by continued efficiency in the business. In addition to the continued expected efficiencies in the Family of Apps segment, projected losses from Reality Labs for 2024 have decreased further since last quarter, suggesting efficiency is expected to continue to have an impact here too. Will Meta be able to continue managing costs in 2025?

The stock has been an outperformer since last quarter, up more than 27%. What new information will come out of the Q1 release that could potentially maintain the positive momentum?

Figure 3: Microsoft – consensus expectations for Q3 2024, past earnings surprises, revisions, and CAGR

Source: Visible Alpha consensus (April 19, 2024). “Previous Surprises” indicate the direction that specific line items beat or missed. “Consensus Revisions” show the trajectory of line items from a given date.

Figure 4: Microsoft consensus estimates

Source: Visible Alpha consensus (April 19, 2024). Stock price data courtesy of FactSet. MSFT’s current stock price is as of the market close on April 18, 2024.

Microsoft Q3 2024 Earnings Preview

According to Visible Alpha consensus, total revenues expected for Q3 have remained around $61 billion since October, driven by resilience in its core business segments. In particular, the Intelligent Cloud segment, which makes up over 40% of total revenues, is projected to remain solid, with consensus estimates around $105 billion for FY 2024, driven by Azure.

The profitability of the Intelligent Cloud segment is a source of debate among analysts. Currently, the Q3 2024 consensus of 14 analysts for the Intelligent Cloud business’s operating profit margin is 45%, but margin estimates range from 41% to 50%, suggesting this segment may deliver a surprise in the Q3 release. We are closely watching what the company will say about the outlook for AI and Copilot. Are the generative AI investments going to start to drive upside to fundamentals from this quarter?

CapEx numbers have continued to increase steadily since last year. According to consensus projections, CapEx estimates have climbed $15 billion from $28 billion in January 2023 to currently $43 billion for FY 2024, up 3x from FY 2019 and outpacing peers. We are also watching the Gaming segment, as the company fully integrates Activision. Analysts are expecting $5.1 billion in revenues this coming quarter and $21.3 billion for FY 2024. Will Microsoft start to invest more CapEx in the Gaming business?

Microsoft stock has traded down 1% since the last earnings release, but is up 8% year-to-date, outperforming the S&P 500. Could the Q3 release help drive further growth and momentum in the stock?

Figure 5: Alphabet – consensus expectations for Q1 2024, past earnings surprises, revisions, and CAGR

Source: Visible Alpha consensus (April 19, 2024). “Previous Surprises” indicate the direction that specific line items beat or missed. “Consensus Revisions” show the trajectory of line items from a given date.

Figure 6: Alphabet consensus estimates

Source: Visible Alpha consensus (April 19, 2024). Stock price data courtesy of FactSet. GOOGL’s current stock price is as of the market close on April 18, 2024.

Alphabet Q1 2024 Earnings Preview

According to Visible Alpha consensus, total revenues expected for Q1 2024 have remained around $79 billion since January 2023, driven by resilience in its ad business. The sentiment around profitability appears to be improving, as the Q1 consensus expectations for operating income and EPS have ticked up to $22 billion and $1.51/share since January 2024.

We are closely monitoring the trend of the Cloud business, given the volatility in this business. The operating profit margin, which turned positive in Q1 2023 and showed further improvement in Q2, missed expectations in Q3 by 200 bps, but ultimately delivered a 5% margin for the year. Looking ahead to Q1 2024, analysts expect the Cloud business to generate a 7.3% operating profit margin, down 140 basis points since January 2024. However, analysts expect the Cloud business operating profit margin to jump to 8.5% in FY 2024, driven by increased profitability in H2 2024. Longer term, the Cloud business is projected to generate a 13.7% margin by FY 2026. Is this expectation still too high?

Alphabet stock has traded up 3% since last quarter’s release and up 12% since the beginning of the year, outperforming the S&P 500. The stock has remained resilient, driven by solid ad growth in its core business. However, questions remain about the profitability of the Cloud business and its Unallocated and Other Bets. Could the Q1 release provide more visibility into the trajectory of 2024 profitability?