Big Tech Earnings Reviews: Alphabet, Meta, Amazon & Apple

Big Tech companies — Alphabet (NASDAQ: GOOGL), Meta (NASDAQ: META), Amazon (NASDAQ: AMZN), and Apple (NASDAQ: AAPL) — reported their latest earnings. Here’s a recap of those earnings, some key takeaways, and the resulting shifts in analysts’ estimates, according to Visible Alpha consensus.

Summary of Earnings

For the mega-cap tech companies, this earnings season has once again been dominated by mixed results around the core businesses and investing in the technology infrastructure to support generative AI (GAI). The dynamics of juggling talent and investment in multiple layers of the stack have added complexity to the business fundamentals. The mega-cap firms are all, in their own way, enhancing aspects of infrastructure, building off the existing large language models (LLMs) and supporting an environment for creating new GAI apps. However, given the strong pace of both CapEx and OpEx spending, there has been some concern that revenues are not growing in tandem, and expectations have become too high.

When will revenue growth begin to expand as rapidly as expenses?

CapEx and OpEx Snapshot

Source: Visible Alpha consensus (November 4, 2024)

Earnings Overview: GOOGL, META, AMZN, AAPL

Alphabet’s (GOOGL) Q3 2023 Earnings

According to Visible Alpha consensus, total revenues of $88.3 billion exceeded consensus expectations for Q3 2024, driven by resilience in its search business and strength in the Cloud segment. In addition, the Q3 consensus also exceeded expectations for operating income and EPS, coming in at $28.5 billion and $2.12/share, on the back of a stronger-than-expected cloud margin.

We have been closely monitoring the trend of the Cloud business. The operating profit margin has been trending better. Analysts expected the Cloud business to generate a 10.4% operating profit margin in Q3 2024, but the company reported a 17% margin, delivering a positive surprise and exceeding the top end of consensus estimates.

For the FY 2024 Cloud business, Visible Alpha consensus expects the operating profit margin to hit 13.9%, up from an 11% margin expectation prior to the earnings release. Longer-term, the consensus Cloud margin is estimated to generate a 20% margin by the end of FY 2026, with operating profit ranging from $7.8 billion to $17.9 billion. What will be the right margin level for Alphabet’s Cloud business?

Alphabet stock has traded up since last quarter’s release and up 22.5% in 2024, slightly outperforming the S&P 500’s return. The consensus P/E for FY 2025 is 19x and 16x for FY 2026. Questions remain about the profitability of the Cloud business and its Unallocated and Other Bets. Will the cloud margin continue its expansion in FY 2025?

CapEx has continued to increase reflecting investment in servers, data centers, and networking equipment. For 2024, the consensus now expects capex to be $51.5 billion, up from 50.7 billion, an increase of almost $15 billion since the beginning of the year. CapEx is projected to increase in 2025 to $58.7 billion, up significantly from $32.2 billion in 2023.

Alphabet – Consensus Estimate Revisions

Source: Visible Alpha consensus (November 5, 2024). Stock price data courtesy of S&P. GOOGL’s current stock price is as of the market close on November 2, 2024.

Alphabet – Consensus Estimates

Source: Visible Alpha consensus (November 5, 2024). Stock price data courtesy of S&P. GOOGL’s current stock price is as of the market close on November 2, 2024.

Meta Platforms’ (META) Q3 2024 Earnings

According to Visible Alpha consensus, total revenues for Q3 were slightly ahead of expectations at $40.6 billion, driven by solid performance in the Family of Apps segment, especially in the U.S. and Europe. However, operating profit exceeded expectations by around $1.4 billion at $17.4 billion, driven by resilience in the Family of Apps and losses that were lower than consensus in Reality Labs.

The company’s revenue outlook for Q4 was in line with expectations, but with the top-end of guidance exceeding consensus by $1.7 billion. Consensus now expects the Q4 operating profit to be $20 billion, $630 million higher than pre-Q levels, driven by higher profitability at the Family of Apps. For 2024, post-earnings expectations for operating income from the Family of Apps have increased over $3.5 billion to $84.1 billion since the July quarter, driven by higher ad revenue per DAU in the US and EU. In addition, the projected losses from Reality Labs for 2024 have increased only $500 million since July.

In addition, CEO Mark Zuckerberg highlighted that the company will continue to invest in servers and data centers to support AI, because it is expected to drive marketing and customer engagement across the Family of Apps. CapEx came in a bit above consensus for the quarter and is projected to climb in Q4 to $15.4 billion from $12.5 billion. On the earnings call, Meta explained that CapEx will further increase in 2025. Consensus now expects FY 2025 capex of $50.7 billion, up $3 billion from last quarter.

META stock has been an outperformer year to date, up over 60%. Will Meta remain disciplined in Q4 2024 and FY 2025 and continue to be an outperformer?

Meta Platforms – Consensus Estimate Revisions

Source: Visible Alpha consensus (November 4, 2024). Stock price data courtesy of S&P. META’s current stock price is as of the market close on November 1, 2024.

Meta Platforms – Consensus Estimates

Source: Visible Alpha consensus (November 4, 2024). Stock price data courtesy of S&P. META’s current stock price is as of the market close on November 1, 2024.

Amazon’s (AMZN) Q3 2024 Earnings

Total revenues of $158.9 billion for Q3 were over $1.5 billion above consensus, driven by higher revenues in North America and International retail. The International segment generated $35.9 billion in revenue, ahead of consensus by $1.5 billion, making up most of the top-line surprise. Revenues from Advertising and AWS were in line with consensus.

The North American retail operating margin increased to 5.9%, exceeding the 5.6% expected by consensus. After the Q3, the consensus margin for Q4 has edged up to 6.6%. Continued strength in Q4 is expected to drive a full-year margin of 6%, a significant improvement from last year’s 4.2%. This margin expansion was driven by improvement to their fulfillment network cost structure and inventory placement, leading to higher units per box. Similarly in the international segment, the operating margin hit 3.6%, almost 300 bps better than expectations ahead of the release. The international margin was also helped by strength in the UK and Germany and enhancements to the transportation network and their fulfillment centers. Looking further out, consensus expects the International margin to hit 5% by the end of FY 2026.

AWS margin came in very strong at 38% in Q3, well ahead of the consensus estimate of 33.2%, driven by a combination of a strong top line, managing costs, and a change in the estimated useful life of their servers. For 2024, analysts are now expecting a 36.6% margin, up from 34.6% last quarter. The company expects AWS growth to continue, driven by high demand for GAI.

The company guided to Q4 revenue of $181.5-188 billion, in line with the consensus of $186.4 billion, and to an operating profit of $16-20 billion, which was also in line with $17.5 billion coming into the Q3. Since the release, Q4 and FY 2025 consensus have increased further. The stock traded up 5% after the Q3 release. Could the retail business surprise the upside in Q4 or have retail margins peaked?

To support Amazon’s growing need for technology infrastructure, CapEx continued to increase further and for 2024, the consensus is expected to be $75 billion, up from 70 billion, an increase of over $10 billion since Q1. CapEx is projected to increase in 2025 to $85 billion, up significantly from $52 billion in 2023.

Amazon – Consensus Estimate Revisions

Source: Visible Alpha consensus (November 6, 2024). Stock price data courtesy of S&P. AMZN’s current stock price is as of the market close on November 5, 2024.

Amazon – Consensus Estimates

Source: Visible Alpha consensus (November 6, 2024). Stock price data courtesy of S&P. AMZN’s current stock price is as of the market close on November 5, 2024.

Apple’s (APPL) Q4 2024 Earnings

Total revenues of $94.9 billion for Q4 were in line with Visible Alpha consensus of $94.6 billion. Revenues of $46.2 billion from iPhone in Q4 were up 6% year-over-year. Based on consensus, Q3 iPhone units of 53 million were a bit better than expectations of 51 million. China continues to underperform and was flat this quarter, below the 5% growth expected by consensus.

Overall full-year iPhone revenue expectations of $209 billion have been moving around since the beginning of the year, suggesting debate in the market about the potential upgrade cycle. Currently, Q1 is expected to deliver $71.1 billion in iPhone sales, a small decrease since the earnings release.

While iPhone sentiment has ebbed and flowed since the beginning of the year, expectations for the high-margin Services segment and for total operating profit have remained relatively consistent. In Q4, the Services segment delivered $25.0 billion, up 13% year over year and close to consensus of $25.3 billion coming into the release. Gross margin for the Services segment was 74%, slightly below the 74.4% expected, but still solid. The 36.3% gross margin for Products, which was up 100 bps sequentially and 80 bps better than expectations. The company said that it continues to see increased customer engagement, with the Apple ecosystem supporting the future growth of the Services business. Based on consensus, Services is expected to hit $118.8 billion at the end of FY 2026, up over $22 billion from this year’s $96.2 billion.

Vision Pro delivered another set of results this quarter, a bit below expectations. For the FY 2025, consensus revenue estimates for the Vision Pro have remained at the current $1.2 billion.

The stock has traded down around the Q4 release, and up 16.9% since the beginning of the year, underperforming the S&P 500. Will users start to get excited about Apple Intelligence and drive iPhone upgrades that exceed expectations in FY 2025?

Apple – Consensus Estimate Revisions

Source: Visible Alpha consensus (November 5, 2024). Stock price data courtesy of S&P. AAPL’s current stock price is as of the market close on November 2, 2024.

Apple – Consensus Estimates

Source: Visible Alpha consensus (November 5, 2024). Stock price data courtesy of S&P. AAPL’s current stock price is as of the market close on November 2, 2024.