Neil Cybart 7/26/24 Neil Cybart 7/26/24

Alphabet 2Q24 Earnings

Happy Thursday.

A few follow-ups to yesterday’s Apple TV+ discussion.

We talked about a scenario involving an Apple user subscribing to Apple TV+ but then not following through in terms of knowing how and where to watch Apple TV+ content. Apple TV+ signups come through various channels including cable bundle deals as well as promotions.

While we can assume Apple has granular information on Apple TV+ consumption, the key piece of information wouldn’t be plain vanilla watchtime data. Instead, broader usage patterns involving Apple TV, the TV app, and finally Apple TV+ would prove more valuable. Interesting observations can be had from seeing how the average Apple user interacts with the three.

A marketing angle that we did not talk about was Apple using different brand marketing tactics to draw more attention to specific Apple TV+ shows and movies. On social media, there always seems to be people claiming to be unaware of certain Apple TV+ shows existing. Netflix has had success leveraging marketing to turn specific shows into something much more than just video content. These are lessons that Apple can learn from (Apple is the true new kid on the block here).

One last point: We shouldn’t understatement how the lack of a back catalog can negatively impact Apple TV+ watchtime. If Apple TV+ is all about great series with shows released weekly, consumption will trend differently versus a steaming service pushing binge watching.

Alphabet 2Q24 Earnings

This past Tuesday, Alphabet reporting earnings. Results for the quarter (April to June) were positive enough to earn an "OK/fine” label relative to recent Alphabet earnings releases. While growth and margin improvement impressed, the rise in capex spending took a bite out of free cash flow.

Revenue growth was 14% (to $85B) with good growth in Search and Cloud. Growth at YouTube slowed as the company began lapping the Temu / Shein etc. ad bonanza from last year. Operating margins moved higher (32% vs. 29% last year) thanks to cost management initiatives. Turning to free cash flow, the $13B total was dinged by a rise in capex and a one-time tax impact.

On Wall Street, reaction to Alphabet (Google) will likely be guided by the battle between two schools of thoughts:

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Neil Cybart 4/30/24 Neil Cybart 4/30/24

Alphabet 1Q24 Earnings, Pichai (Sort Of) Hints at Apple / Gemini Rumors, Google Announces HW Reorganization

Hello everyone.

Apple reports earnings on Thursday. We will begin my earnings preview on Tuesday. With Apple being in the bottom 12% of performing stocks in the S&P 500 year to date, we have quite a bit to talk about. In today's update, we will look at Alphabet's earnings.

Alphabet 1Q24 Earnings

Last Thursday, Alphabet reported 1Q24 earnings. It was a good quarter for the company. Revenue was 15% to $81B while operating margin jumped to 32% (from 25% last year). Free cash flow was a solid $17B (unchanged from last year). Google TAC was up 11% which bodes well for Apple's Services revenue line item.

Alphabet has a few major trends on its side.

Like how Apple has long been criticized by some for being too dependent on the iPhone for revenue, Alphabet has been looked down by many as being too dependent on search for revenue. In the early months of AI mania, there was skepticism that Google would be able to continue printing money from search. A clear explanation as to how generative AI would disrupt Google search was rarely given. Instead, much of the analysis was superficial in that users were basically said to no longer need questions answered via a search portal. Given some of the crazy prognostications, my stance that Google Search’s sustainability was

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Neil Cybart 2/16/24 Neil Cybart 2/16/24

Alphabet Earnings, Amazon Earnings

Monday’s update concluded with the following:

“Meta has reported more than $38B of operating losses on its AR/VR efforts. The company needs products like Quest 3 and Ray-Ban Meta to do well and generate revenue to reduce pressure on what are mounting losses.”

There is more to say about the mounting losses in Meta’s Reality Labs and why I think generating some revenue is important. We will focus on that topic today. Our Big Tech earnings reviews will continue tomorrow.

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Neil Cybart 10/27/23 Neil Cybart 10/27/23

Alphabet FY3Q23 Earnings, Microsoft FY1Q24 Earnings

Hello everyone. We conclude this week’s updates with Alphabet’s and Microsoft’s earnings.

Next week is shaping up to be a busy one with an Apple event on Monday evening followed by earnings a few days later. The current plan is to prepare for Apple’s earnings on Monday with the discussion possibly being continued on Wednesday. Let’s jump into today’s update.

Alphabet FY3Q23 Earnings

Alphabet’s earnings were fine with revenue up 11%. While that growth rate is up from the 6% reported last year, the difference is due to FX no longer being a headwind. Gross margins were up 300 basis points year over year. Operating income was up 25%. Free cash flow was $23B (which benefited from tax payment deferrals).

Diving deeper into the results, Google Search led the way with $4.5B revenue growth contribution (59% of total revenue growth). Revenue for Google – other, which includes everything from YouTube Premium and YouTube TV subscription revenue to Pixel, was up $1.4B (18% of the total), roughly the same as Google Cloud. YouTube proper (advertising) was up $0.9B.

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Neil Cybart 5/24/23 Neil Cybart 5/24/23

Alphabet Earnings, Pichai Comments on Google's Mobile Search Deals, Microsoft Earnings

Hello everyone. We wrap up Big Tech earnings reviews with Alphabet and Microsoft. There are a handful of earnings from smaller companies worth going over – we will do that at some point next week. We kick off today’s update with Neil’s thoughts on Alphabet’s 1Q23 earnings. The update goes over Sundar Pichai’s comments on Google’s various services partnerships with Android OEMs as well as Apple for mobile search. We conclude with a look at the main takeaways from Microsoft’s FY3Q23 earnings.

Let’s jump right in.

Alphabet Earnings

Alphabet reported 1Q23 earnings back on April 25th. From a financial perspective, results were good. In a quarter that won’t be remembered for any particular financial line item, Alphabet reported $17B of free cash flow. That is testament to Google’s ad machine kicking off an incredible amount of cash quarter in and quarter out. The company possesses some of, if not the most, valuable pieces of digital real estate. As seen with a growing list of much smaller companies, most other ad-funded digital paths are nowhere near as attractive as Google’s.

Here are Alphabet’s major financial line items compared to those of Apple, Meta, and Amazon:

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Neil Cybart 2/16/23 Neil Cybart 2/16/23

Alphabet FY4Q22 Earnings, The Subscription War, Peloton FY2Q23 Earnings (Daily Update)

Hello everyone. We kick off today’s update with Neil’s thoughts on Alphabet’s earnings. The discussion also goes over an observation regarding the changing competitive landscaping involving Google, Amazon, and Apple. We then examine Peloton’s earnings. Let’s jump right in.

An anecdote regarding Apple TV+ and Hollywood star branding.

Looking over my Apple TV+ usage over the past few months, actors/actresses have played a key role in my watch habits. Apple’s heavy marketing around the new Jennifer Lawrence movie "Causeway" included making her Hunger Games films available to TV+ subscribers for free for a limited time. Those movies represented a decent amount of my TV+ watch time in the back half of 2022.

It is fair to question if this star power emphasis appeals to certain age demographics (i.e. older) over others. However, considering that all Apple TV+ subs are essentially family subs, Apple only needs to appeal to one family member to do well in the subscription engagement/dollars battle.

Alphabet FY4Q22 Earnings

Continuing our earnings reviews, we turn to Alphabet. The company reported 4Q22 earnings back on February 2nd.

Here are the major financial line items compared to those of peers:

(click / tap here to view table)

In what has become a theme with these releases, a main takeaway from Alphabet’s earnings call was a focus on cost controls. There was talk of economic anxiety, softness in various businesses, and a resulting push for optimization and improved profitability.

A big difference between Google and Amazon is that Google Search remains highly profitable.

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Neil Cybart 10/26/22 Neil Cybart 10/26/22

Alphabet 3Q22 Earnings, Three Google Yellow Flags, What Apple May Say About FY1Q23 (Daily Update)

We begin today’s update with Neil’s thoughts on Alphabet’s 3Q22 earnings. The discussion then turns to three yellow flags found in Google’s numbers. We conclude with a few of Neil’s closing remarks heading into Apple’s earnings release. The update includes access to Neil’s updated Apple earnings model.

Hello everyone.

As a reminder, there won’t be a daily update published tomorrow due to Apple earnings. Instead, the update will be pushed to Friday. In today's update, we will conclude our Apple earnings preview discussion.

CY3Q22 earnings season is in full swing. Tesla reported results a few days ago. Alphabet, Microsoft, and Spotify reported earnings yesterday. Meta reported results today.

The game plan is to go through these earnings reports with an eye out for trends and developments that will either have a direct impact on Apple or cause Apple competitors to change / modify strategies. We will kick things off with Alphabet earnings.

Alphabet 3Q22 Earnings

Heading into Alphabet’s earnings release, consensus was already aware of various headwinds impacting digital advertising trends. Macro issues were clearly hitting advertising revenue growth. In addition, temporary behavioral change caused by the pandemic was still producing an overhang on year-over-year revenue growth metrics. The unknown was found with how competition, namely TikTok and Apple, were impacting business trends.

In a nutshell, Alphabet’s 3Q22 numbers were alarming. Revenue growth has imploded.

The following exhibit contains the primary financial metrics for Alphabet’s 3Q22.

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