摘要： The reports are in, and another Big Tech earnings season is done, as Facebook, Apple, Amazon, Alphabet and Microsoft all announced their quarterly results this week. And while we’ll be the first to admit that AFAMA AMAFA, FAMAA or MAFAA don't have quite the same ring as FAANG does, it’s probably the stock family to watch to get a good idea of what’s next in Big Tech, and where the biggest players are placing their bets.
On the whole, the earnings season so far has rolled out well for Big Tech, as all five of the big players saw their revenue numbers come out ahead of, or at least in line, with analysts' forecasts. As for where they are placing their bets, the answer can be stated in a word: commerce.
For Amazon, at base an eCommerce outfit, that is probably not so surprising. Once again, the eCommerce giant delivered a blockbuster quarterly result, with half of all revenue coming care of product sales, which rose 38 percent to $57.5 billion. Its services portfolio, which includes Prime Video and ad sales, rose 52 percent to $51 billion, amounting to roughly 47 percent of total revenues. As far as profits are concerned, Amazon Web Services (AWS) contributed $4.2 billion of operating income in Q1 — not quite half the total, but down from the more than 75 percent profit burden it bore just a year ago.
Next, the firm will need to figure out how to convert all of that momentum into post-pandemic success, as Amazon prepares for the departure of Founder and CEO Jeff Bezos in two months. AWS CEO Andy Jassy will take over that top spot, and Bezos will remain on board as executive chairman.
Beyond that burgeoning leadership change, looking ahead, Amazon is anticipating its Q2 revenue growth rate will slow by between 24 percent and 30 percent, with operating profits between $4.5 billion and $8 billion — a wide range that implies either a decline of as much as $1.3 billion up to a gain of $2.2 billion versus a year ago.
“I don’t have a downside case yet [on projected eCommerce demand declines], but I’m surprised a bit by the [Q1] growth,” Amazon Chief Financial Officer Brian Olsavsky told investors during the company’s earnings call, noting that the company expects to spend about $500 million less on pandemic-related costs in Q2 versus the $2 billion it spent in Q1. “But on Q2 guidance, I would say we are projecting continued strength across all of our segments, and we will remind you that Prime Day is scheduled for later in Q2 [this year], and we’ll have more [as] that quarter unfolds.”
But Amazon wasn’t the only player talking expanded commerce ambitions this week. Facebook’s commerce ambitions were a recurring theme during its earnings presentation, as it boasted one billion users on its marketplace, along with plans to expand into unexplored territory like augmented reality (AR) and virtual reality (VR) as commerce enablement tools. The social media giant is also keen to talk up its efforts at boosting commerce opportunities across its platform, especially Instagram.
The hope, CEO Mark Zuckerberg noted, is that by giving Instagram content creators more avenues to generate revenue, Facebook will draw an ever-increasing number of influencers to the Instagram platform. “If we become the best place for creators to make a living, that’s going to mean there’s better content across the services and better opportunities for community-building and engaging people,” he said. “And that’s what we care about.”
And it's what Alphabet increasingly cares about as well, as it dedicated a fair share of its earring presentation walking up its growing retail commissions (though none were broken out specifically in the earnings report). But Alphabet CEO Sundar Pichai did put the category among the company’s successes, underlining recent steps to drop product listing fees and commission fees. He also pointed to Google’s open platform approach with Shopify and PayPal.
“People's shopping preferences have shifted constantly in response to changing conditions,” Pichai said. “It's not just online; it's not just offline. It's a mix, and that's our sweet spot: Search, Maps and YouTube. Last quarter, we talked about an increase in searches for ‘available near me’ and ‘curbside pickup.’ That trend has not changed. Searches for local and businesses are up 80 percent versus last year.”
Pichai also called out Google's contribution to retail efforts at places like Dick’s Sporting Goods and Michaels in accelerating their omnichannel expansions into the digital market. For Dick's, he noted, digitization has contributed to a 100 percent year-over-year increase in eCommerce sales in 2020, while Michaels has ignited a 350 percent spike in online sales.
“We also had a set of new partnerships with Shopify and PayPal that are giving resellers a lot more choice, and we will continue to simplify the end-to-end user and merchant experience,” Pichai added. “We're trying to streamline the back-end experience for merchants, especially for hybrid retailers. Overall, we want to make it much easier for retailers to get started on Google, and have their information appear across different screens.”
Also focused on delivering a product across a myriad of screens, Microsoft was talking up its MS Cloud solution, expanding the firm’s reach and pushing its market cap ever closer to $2 trillion. And Microsoft's expanding ambitions have become clearer in 2021, as the firm captured headlines with its recent move to purchase the online communications platform Discord for an estimated $10 billion, as well as its purchase earlier this month of Nuance Communications, expanding its reach into the world of healthcare.
Coming out of earnings, it's clear that Big Tech is thinking really big when it comes to what it will take on next in the ongoing digitization of everything.
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