Big tech companies recently released their quarterly results for Q3 2023. Here are some key insights for industry enthusiasts.
Alphabet, the parent company of Google, released third-quarter earnings that were above analyst projections. The business was satisfied with the quarterly results. The tech giant credited Cloud, YouTube, and Search for the overall boost. Out of all three, Search continued to be the key driver of their revenue expansion. However, Google’s Cloud business division failed to meet its revenue projections. Since Q1 of 2021, this has been the slowest documented growth in the Cloud business.
Because of this, Alphabet keeps investing in the cloud industry, which is growing in significance as generative AI emerges. YouTube’s advertising income exceeded experts’ forecasts thanks to increases in direct response and brand awareness. This is attributed to Shorts, the TikTok competitor of YouTube with 70 billion views every day.
By the numbers
- Revenue reported was $79.69B, up 11%.
- Google Search and other advertising revenues were $44B, a rise of 11% Y-O-Y.
- Google Cloud computing revenue rose 22% to $8.41B against estimates of $8.64B.
- Advertising revenue was up 9% to $59.6B as against an estimated $59.1B.
- YouTube advertising revenue reported $8B, up 12% Y-O-Y.
- Network advertising revenue was down 3% to $7.7B.
- Traffic acquisition costs were up $12.64B vs estimates of $12.63B.
- Search ad revenue was up 18%.
Google disclosed its quarterly results in the middle of its antitrust lawsuit. Government authorities claim Alphabet uses unlawful monopolistic methods to maintain control over its search engine. Additionally, it’s predicted that more advertisers will spend money on Google advertisements, which could lead to increased rivalry among them. In addition, Google keeps funding its attempts to develop Generative AI in an attempt to overtake its rivals.
Sundar Pichai, CEO of Alphabet, said in the earnings call,
I’m pleased with our financial results and our product momentum this quarter, with AI-driven innovations across Search, YouTube, Cloud, our Pixel devices, and more. We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come.
Ruth Porat, President and Chief Investment Officer; CFO said,
The fundamental strength of our business was apparent again in Q3, with $77 billion in revenue, up 11% year over year, driven by meaningful growth in Search and YouTube, and momentum in Cloud. We continue to focus on judicious capital allocation to deliver sustainable financial value.
In terms of earnings and revenue, Meta exceeded the third-quarterly results. This was attributed to the increase in digital advertising spending. Exceeding expectations, the results showed the fastest growth rate, with revenues rising by 23%. Additionally, the company’s user base has grown in the face of fierce competition from rivals such as TikTok.
As its clients recover from a challenging 2022, Meta is witnessing faster growth in its core digital ads businesses. Right now, Meta’s business is doing better than its rivals. Its recovery can be largely traced to increasing the impact of its online ads. Additionally, Meta has cited its significant investments in AI as a crucial technological advancement that has enabled it to attract businesses seeking to serve clients with tailored incentives.
By the numbers
- Revenue rose 23% to $34.15B.
- Facebook DAUs were 2.09 billion on average, a 5% increase Y-O-Y.
- Facebook MAUs were 3.05 billion, an increase of 3% Y-O-Y.
- Family Daily Active People (DAP) was 3.14 billion on average, up 7% Y-O-Y.
- Family Monthly Active People (MAP) was 3.96 billion, higher by 7% Y-O-Y.
- Ad impressions across all Meta apps increased 31% Yo-Y and the average price per ad was down 6%.
Meta anticipates its spending in 2024 will exceed that as it continues to invest in AI infrastructure. Meta expressed a distaste for falling behind in the race towards generative artificial intelligence. To boost engagement, the internet giant intends to roll out AI-powered avatars on Facebook and Instagram. Users may be able to engage with the platform in new ways, receive recommendations, and do more with these identities.
Susan Li, Meta’s Chief Financial Officer stated that for Reality Labs, Meta’s augmented reality and virtual reality division, the company expects operating losses to increase meaningfully Yo-Y due to its ongoing product development efforts and investments to further scale the ecosystem.
Mark Zuckerberg, Meta founder and CEO said in the announcement,
We had a good quarter for our community and business. I’m proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta smart glasses, and our AI studio.
Microsoft released the first quarterly results of its 2024 financial reports, and the company was off to a great start to the fiscal year. The favorable outcomes were ascribed to Microsoft Cloud’s strength, which outperformed analyst predictions. Microsoft completed its $68.7 billion acquisition of Activision Blizzard, a publisher of video games, earlier this month.
Microsoft claims to have the greatest AI infrastructure and the widest cloud footprint. Furthermore, compared to other cloud providers, it has more regions where AI services are installed. Furthermore, while search income growth was still influenced by third-party agreements, the rise in search and news advertising revenue was linked to higher interaction on Bing and Edge.
By the numbers
- Revenue recorded $56.5, higher by 13%.
- Microsoft’s Intelligent Cloud Unit revenues were $24.3, up 19% beating estimates of $23.4B.
- Azure revenues rose 29% against an estimated 26.2%.
- LinkedIn’s revenue increased by 8%.
- Microsoft Cloud Revenue was $31.8B, up 24%.
Microsoft is still dedicated to making investments in the cloud and AI potential. In order to increase consumer productivity, it is concentrating on quickly integrating AI into all facets of its technological and business processes. In addition, it will maintain strong growth in the upcoming year thanks to its leadership in the commercial cloud and AI platform wave.
Satya Nadella, CEO of Microsoft said,
With copilots, we are making the age of AI real for people and businesses everywhere, we are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.
Amy Hood, Chief Financial Officer, Microsoft, commented,
We saw healthy renewals, particularly in Microsoft 365 E5, and the growth of new business continued to be moderate for standalone products sold outside the Microsoft 365 suite. In Azure, as expected, the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure.
Amazon outperformed analysts’ expectations and exceeded its own projections for the third quarter. Growing online sales in its retail section and significant cost reductions drove growth. Additionally, a notable increase in advertising revenue and growth in its cloud business, which kept stabilizing, were its main drivers. According to Amazon, the increase in AWS revenues of over $900M was offset by customers’ shifting focus towards fostering innovation and delivering new workloads to the cloud.
Amazon is still concentrating on buyer behavior and customer happiness. Thanks to the Prime Day event, when over 375 million goods were purchased globally by Prime members, Q3 revenues increased 11% YoY. The company’s introduction of generative AI capabilities into its products and services compensated for the decline in advertising revenue. Demand for daily necessities in areas like health, beauty, and personal care has remained high on Amazon.
By the number
- Revenue posted $143.1B, up 11% Yo-Y vs analysts’ expectations of $141.41B.
- AWS revenue was $23.1B, higher by 12% Yo-Y.
- Advertising sales jumped to $12B, rising 26%.
In addition to warehouse robots, which were already a prominent business for the corporation, Amazon continues to make large investments in generative AI. Further, AWS and Anthropic, Amazon’s generative AI, will work together on future advancements in AWS Trainium and AWS Inferentia chip technology, according to CEO Andy Jassy of Amazon. He thinks that the partnership will support the ongoing acceleration of the benefits to customers in terms of pricing and performance.
Amazon chief executive Andy Jassy said,
We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward.
Brian Olsavsky, Amazon’s Chief Financial Officer added,
We’re ready to make this a great holiday season for customers. Overall, consumers have shown resilience in their spending despite rising interest rates and stubbornly high inflation that has steadily eased since last year. Amazon said Thursday its retail business grew by 6% during the third quarter. It was boosted by the company’s popular Prime Day sales event held in July. It’s also seeing strong customer demand across categories like beauty, health, and personal care items. But we still see customers being cautious about price, trading down where they can and seeking out deals.
He further added that as Amazon enters the holiday season, its operations network and inventory are in the optimal position like never before.
Snap INC. reported the third-quarterly results of 2023 and numbers that were better than anticipated by Wall Street. Its ad platform enhancements were the cause of the improvement in outcomes. For quite some time, Snap’s company has been in turmoil. This is because of TikTok’s rivalry, Apple’s modifications to iOS’s ad tracking, and a number of other issues. It was encouraging to see sales rise again. Moreover, Snap improved the ML ranking and optimization for the web, app, and Dynamic Product Ad (DPA) platform by implementing over 17 significant changes.
By the numbers
- Revenue posted $1,19B, up 5% from estimates of $1.11 B.
- DAUs 406 million, high 12% (43 million) Yo-Y.
- Snapchat+ reached more than 5 million subscribers.
By concentrating on investing in ML models to enhance content ranking and personalization across all content offerings, Snapchat is aiming to increase the depth of engagement with its content. Additionally, it will keep utilizing AI technology to provide the community with new services and goods. In addition, the business declared that over 200 million users have sent over 20 billion messages on My AI since its debut.
Evan Spiegel, CEO of Snap INC. said in the earnings call,
Our revenue returned to positive growth in Q3, increasing 5% year-over-year and flowing through to positive adjusted EBITDA as our reprioritized cost structure demonstrated the leverage in our business model. We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success.
OMNICOM MEDIA GROUP
Beyond estimates, Omnicom revealed remarkable revenue growth in the 2023 third quarterly results. With consistent growth in media, advertising, and precision marketing, the business is still on track for the entire year. The outcomes follow significant recent victories, like the $600 million Uber media contract, which was transferred from competitor WPP to Omnicom Media Group in September.
With the release of Omni Assist, Omnicom’s customized version of ChatGPT that improves every task with Omni, it continues to develop its Generative AI capabilities. In addition, it keeps evaluating how Generative AI will impact Omnicom’s operations throughout the entire company and plans ahead.
By the numbers
- Global revenue reported $3.58B, a high of 3.3% or $113.1M organically.
- Advertising and media posted a 6.1% growth to $1.9B.
- Public Relations was down 5.5% against 12.6% delivered in Q3 2022.
- Third-party service costs increased $90.6M or 15.4% to $678.6M organic growth.
Omnicom is confident that its clients will receive the greatest creative skills and capabilities from the newly established Omnicom Advertising Services.
John Wren, Chairman and Chief Executive Officer of Omnicom stated,
We are pleased with our strong organic revenue growth of 3.3%, with notable performances in our Advertising and media, Precision Marketing, and Healthcare disciplines. Our year-to-date organic growth of 4.0% remains in line with our full-year expectations, which reflects the resiliency of our business even in periods of economic uncertainty. Omnicom continued to post strong profitability and earnings growth in the quarter, and our recent business wins validate the benefits of our client strategy in this rapidly evolving marketplace. We are very well positioned for a recovery in business conditions, with a strong balance sheet and leading creativity in all of our service disciplines.
Its earnings season and Facebook has some relatively good news on that for the investors. It has impressively beaten Wall Street expectations on revenue and earning per share (EPS). Facebook ad revenue grew by 17% Y-o-Y despite the instability in the digital ad market due to COVID-19.
Why does it matter?
Interestingly, Facebook was able to beat top and bottom-line revenue expectations amid the coronavirus crisis showing how its business is strong and growing. However, the company didn’t provide specific revenue guidance for Q2 due to the ongoing uncertainty but offered a snapshot on the revenues of upcoming quarters.
- Meanwhile, Facebook said that the current rise in engagement will continue but the usage will come down once the stay-at-home orders are lifted.
- The digital advertising industry has taken a hard hit due to shelter-at-home orders globally. Facebook said in a statement, “We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020.”
Let’s talk numbers
- Earning per share (EPS): $1.71 vs. $1.75 per share forecast by Refinitiv
- Revenue: $17.74 billion vs. $17.41 billion forecast by Refinitiv
- Daily active users (DAUs): 1.73 billion
Image Credit: Facebook
- Monthly active users (MAUs): 2.6 billion
- Family Monthly Active people (MAP): 2.99 billion monthly users across its family of apps. This metric helps to measure Facebook’s total user base across its main app, Instagram, Messenger, and WhatsApp.
- The average revenue per user (ARPU): $6.95
- Other revenue: $297 million which is driven by sales of VR headset ‘Oculus.’
- Cash and cash equivalents: $60.29 billion
What lies ahead?
- Facebook is the third internet company that posted strong Q1 results after Snapchat and Google despite the hindrances in the digital ad market. This shows big internet companies will keep dominating the advertising ecosystem due to the pandemic.
- CCS Insight chief operating officer Martin Garner believes the impact of the virus will lead companies to use digital services from advertising to collaboration.
“………..Although Google and Facebook will take a hit from Covid-19, we expect them to be leading indicators of recovery, as digital advertising and other services show early growth in economies getting back to normal.”