In the most recent earnings season, FANGMA companies not only showcased robust financial performance but also highlighted artificial intelligence as a recurring theme. Despite the current economic uncertainty, Meta, Apple, Netflix, Alphabet, Microsoft, and Amazon all reported earnings that met or surpassed analyst expectations. Key segments of interest included their digital advertising, cloud services, and streaming divisions. Despite strong overall earnings, individual stock performance has varied post announcements, emphasizing the advantage of investing in a diversified ETF like TECH to mitigate individual stock volatility.

Meta

Earnings per share: $4.39 vs. $3.63 expected

Revenue: $34.15 billion vs. $33.56 billion expected

Meta’s recent earnings report paints a robust picture of the company’s performance, surpassing expectations in various key metrics. With earnings per share at $4.39 compared to an expected $3.63, and revenue at $34.15 billion versus an anticipated $33.56 billion, the company has demonstrated strong financial growth. Notably, the user numbers also show positive trends, with daily and monthly active users meeting or exceeding expectations, along with a higher average revenue per user. This success can be attributed to Meta’s adept handling of online ads, especially in the face of challenges brought by Apple’s iOS privacy changes in 2021. Meta’s investments in artificial intelligence have helped to attract retailers looking to deliver targeted promotions, and CEO Mark Zuckerberg highlighted the positive impact on user engagement, with a 7% increase in time spent on Facebook and a 6% boost on Instagram due to recommendation improvements. In comparison to competitors like Google’s Alphabet and Snap, Meta’s business is outperforming the field, further solidifying its position in the digital advertising landscape.¹

Apple

• Earnings per share: $1.46 vs. $1.39 expected
• Revenue: $89.5 billion vs. $89.28 billion expected

Apple’s recent earnings report shows mixed performance, with some positive surprises. The company exceeded expectations in earnings per share, reporting $1.46 per share compared to the expected $1.39 per share. Revenue was also slightly higher than anticipated, reaching $89.5 billion versus an expected $89.28 billion. Notably, iPhone revenue was in line with expectations, showing over 2% growth from the previous year, even with only about a week of iPhone 15 sales included in the period. Importantly iPhone 15 demand in mainland China was strong despite fears of share losses (Huawei) and geopolitical tensions in this key region as Apple set a record for the September quarter. While overall China revenues missed the Street in the September quarter, this was due to softer Mac/iPad sales. The Mac and iPad businesses both declined during the quarter, with Mac sales falling nearly 34%, which Apple attributes to a challenging comparison to a record fourth quarter in 2022. The company’s services business, on the other hand, stood out, with services revenue surpassing expectations and growing more than 16% from the previous year, indicating a strong performance in this segment. Despite these strong results, Apple’s shares fell on weaker than expected guidance for the December quarter that suggested revenue stability,  rather than growth. ²

Netflix

• Earnings per share: $3.73 vs $3.49 expected
• Revenue: $8.54 billion vs $8.54 billion expected

Netflix once again demonstrated its dominance in the streaming industry with its latest earnings report. The company exceeded expectations with earnings per share at $3.73, compared to the expected $3.49 per share, and revenue matching expectations at $8.54 billion. What’s particularly impressive is Netflix’s continued subscriber growth driven by password-sharing crackdown efforts and its new ad-supported tier, with total memberships reaching 247.15 million, surpassing the expected 243.88 million. The ad-supported membership tier saw remarkable growth, increasing nearly 70% quarter over quarter. Netflix’s pricing power is evident as it maintains its ad tier pricing at $6.99 a month in the U.S. while raising prices for its basic and premium services, a move aimed at improving profitability and offsetting rising production costs. Netflix’s shares popped over 10% after the earnings release.

Netflix’s success is especially noteworthy in a competitive streaming landscape, where it stands out not only in terms of subscriber numbers but also in its ability to navigate challenges like labor negotiations with Hollywood’s writers and actors. The company’s commitment to reaching agreements with various industry stakeholders reflects its determination to maintain its leadership position in the streaming world.³

Alphabet

• Earnings per share: $1.55 vs. $1.45 expected
• Revenue: $76.69 billion vs. $75.97 billion expected

Alphabet, the parent company of Google, delivered strong financial results in its latest earnings report, however the stock dropped on disappointing cloud revenue.  Alphabet reported earnings per share of $1.55, compared to the expected $1.45 per share, and revenue of $76.69 billion, surpassing the expected $75.97 billion. The company’s key segments performed well, with YouTube advertising revenue reaching $7.95 billion, beating analyst expectations, and advertising revenue for the third quarter rising to $59.65 billion, marking a significant increase from the previous year. Google Cloud, while slightly missing revenue estimates at $8.41 billion, still exhibited robust growth, increasing by 22% from the prior year, and turning an operating profit of $266 million after a loss the year before. Alphabet’s cloud miss was a stark contrast to Microsoft’s earnings, which showed accelerating growth in the company’s Intelligent Cloud business, sending the shares tumbling 9.5%, the most since March 2020.

Alphabet’s cloud unit remains a key investment focus as it competes with major cloud providers like Amazon Web Services and Microsoft Azure. While the unit’s growth rate reflects the impact of customer spending optimization, the company is actively working on enhancing its cloud profitability. Additionally, the performance of Other Bets, including the Waymo self-driving car business and the Verily life sciences unit, saw increased revenue but reported a narrower loss.⁴

Microsoft

• Earnings per share: $2.99 vs. $2.65 expected
• Revenue: $56.52 billion vs. $54.50 billion expected

Microsoft reported impressive financial results in its latest earnings report, with earnings per share at $2.99, exceeding the expected $2.65 per share, and revenue of $56.52 billion, beating the expected $54.50 billion. The company’s growth is particularly notable in its Intelligent Cloud segment, where revenue reached $24.26 billion, showing a 19% increase, driven by strong performance in Azure, which saw a 29% revenue growth during the quarter. Microsoft continues to demonstrate its strength in the cloud market, and the Azure OpenAI Service has gained significant traction with 18,000 customers, benefiting from higher GPU capacity in Azure. Additionally, the Productivity and Business Processes unit saw a 13% revenue increase, with the Teams communication app now having over 320 million monthly active users. Despite challenges like cost-saving efforts by clients and competition, Microsoft remains confident in its performance and execution. Shares of Microsoft rose over 5% the morning after the strong earnings report as analysts praised Microsoft for its product pipeline, including Microsoft 365 Copilot.⁵

Amazon

• Earnings per share: $0.94 vs. $0.58 expected
• Revenue: $143.1 billion vs. $141.4 billion expected

 

Amazon delivered strong financial results in its latest earnings report, surpassing expectations with earnings per share of 94 cents, compared to the expected 58 cents per share. The company’s revenue also exceeded estimates, reaching $143.1 billion, outperforming the expected $141.4 billion. Notable segments such as Amazon Web Services (AWS) and advertising performed well, with AWS showing growth of 12% and advertising revenue soaring by 26% year-over-year, outpacing competitors like Google andMeta. Amazon’s core e-commerce business rebounded, expanding 7% year-over-year, following a 4% growth in the previous quarter, driven in part by the success of this year’s Prime Day promotion.

The company’s focus on cost-cutting measures over the past year is paying off, with CEO Andy Jassy highlighting improved cost-efficiency and speed of delivery. Net income more than tripled, reaching $9.9 billion, aided by a pre-tax valuation gain of $1.2 billion from Amazon’s investment in electric car company Rivian. While Amazon’s cloud segment, AWS, showed slower growth compared to Microsoft and Google, the company’s cost optimization efforts continue to have a positive impact on its financial performance. Amazon’s stock over jumped 5% after reporting.⁶

Investing in FANGMA: TECH ETF

In the current stock market, it’s hard to ignore the prominence of the FANGMA tech giants. These six influential companies have such a significant impact on advanced technologies and popular consumer services that it’s highly likely you, along with billions of others, use their offerings on a daily basis. However, the soaring share prices of these companies might discourage investors from individually incorporating all of them into their portfolios.

With the Evolve FANGMA Index ETF (TECH ETF), investors gain exposure to all six companies – Facebook, Amazon, Netflix, Google, Microsoft, and Apple – for a reasonable unit price.

For more information about the Evolve FANGMA Index ETF (TECH ETF) or any of Evolve ETF’s lineup of exchange-traded funds, please visit our website or contact us.

Sources:

1. Vanian, J. (2023, October 26). Meta beats on top and bottom lines as digital ad recovery pushes revenue up 23%. CNBC. https://www.cnbc.com/2023/10/25/meta-earnings-q3-2023.html
2. Leswing, K. (2023, November 2). Apple stock dips after weak outlook for December Quarter revenue. CNBC. https://www.cnbc.com/2023/11/02/apple-aapl-earnings-report-q4-2023.html
3. Whitten, S. (2023, October 19). Netflix profit beats expectations, AD-tier subscriptions rise. CNBC. https://www.cnbc.com/2023/10/18/netflix-nflx-earnings-q3-2023.html
4. Elias, J. (2023, October 25). Alphabet shares drop as cloud miss overshadows better-than-expected overall results. CNBC. https://www.cnbc.com/2023/10/24/alphabet-googl-earnings-q3-2023.html
5. Novet, J. (2023, October 24). Microsoft ticks up on faster cloud growth and hopeful revenue forecast. CNBC. https://www.cnbc.com/2023/10/24/microsoft-msft-q1-earnings-report-2024.html
6. Palmer, A. (2023, October 26). Amazon reports better-than-expected results, as revenue jumps 13%. CNBC. https://www.cnbc.com/2023/10/26/amazon-amzn-q3-earnings-report-2023.html

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