Big Tech's Big Earnings

Amazon.com and Apple were the last of the Big Tech companies to report third-quarter results this evening, following Google-parent Alphabet, Facebook, and Microsoft earlier in the week. The five Silicon Valley giants had nearly $72 billion in net income in the July-August-September period, on $332 billion in combined revenue.

They're no longer the top-five most valuable companies on U.S. stock markets—Tesla just bumped Facebook for the No. 5 spot—but they can rake it in like almost no other businesses, and still maintain enviably fast growth rates and wide profit margins.

Alphabet is the top-performing stock among the group in 2021, rising 66% year to date. Amazon stock is the laggard—coming off a 76% surge in 2020—up 6% this year.

Here are the key points from each company's third-quarter release this past week:

Alphabet
What was reported: $18.9 billion in net income, or $27.99 in earnings per share (up 71%), on $65.1 billion in revenue (up 41%)
What was expected: $23.73 in earnings per share and $63.5 billion in revenue
The good: Profits and sales topped expectations by a wide margin. Online advertising was less affected by Apple privacy changes than feared.
The bad: Not much. Google Cloud revenue grew 47%, but still trails rivals Amazon and Microsoft by miles.
The stock reaction: Alphabet stock jumped 5% on Wednesday.

Amazon
What was reported: $4.7 billion in net income, or $6.12 in earnings per share (down 51%), on $110.8 billion in revenue (up 15%)
What was expected: $8.90 in earnings per share and $111.6 billion in revenue
The good: Amazon is spending in the short-term to deliver for customers despite a challenging environment. But the company missed on earnings, revenue, and fourth-quarter guidance.
The bad: "The company’s results were weighed down by a series of factors, including tough comparisons with the surge in online shopping during the pandemic, ongoing product shortages, higher wage costs, increased shipping expenses, and further investment in the company’s fulfillment operations," wrote Eric Savitz.
The stock reaction: Amazon stock fell more than 4% in after-hours trading Thursday.

Apple
What was reported: $20.6 billion in net income, or $1.24 in earnings per share (up 70%), on $83.4 billion in revenue (up 29%)
What was expected: $1.24 in earnings per share on $85.1 billion in revenue
The good: Services revenue was up 26%, to $18.3 billion, and ahead of consensus. Apple returned $24 billion to shareholders in the quarter in the form of dividends and stock buybacks.
The bad: Apple's iPhones sales totaled $38.9 billion, up 47%, but shy of the Wall Street consensus at $41.2 billion. iPad and wearables revenues also missed.
The stock reaction: Apple stock fell more than 3.5% in after-hours trading Thursday.

Facebook
What was reported: $9.2 billion in net income, or $3.22 in earnings per share (up 19%), on $29.0 billion in revenue (up 35%)
What was expected: $3.19 in earnings per share on $29.5 billion in revenue
The good: Facebook ended the quarter with 2.91 billion monthly active users. It announced a $50 billion stock-repurchase authorization.
The bad: Facebook's fourth-quarter revenue guidance was below Wall Street's numbers. Management cited "significant uncertainty" due to "continued headwinds from Apple’s iOS 14 changes, and macroeconomic and Covid-related factors."
The stock reaction: Facebook stock fell 3.9% on Tuesday.

Microsoft
What was reported: $17.2 billion in net income, or $2.27 in earnings per share (up 25%), on $45.3 billion in revenue (up 22%)
What was expected: $2.08 in earnings per share on $44.0 billion in revenue
The good: All three of Microsoft's business segments beat expectations. Cloud-computing revenues grew 30%, including 50% for Azure. Fourth-quarter guidance was solid.
The bad: Management sees a decline in Surface hardware sales due to component shortages. Microsoft shares are trading at their priciest valuation since the tech bubble.
The stock reaction: Microsoft stock added 4.2% on Wednesday.