Apple, Amazon and Big Tech Showcase Their Earning Power Again – Nasdaq | Hot Mobile Press

Amazon’s quarterly release made up for the disappointment of the previous period. The report not only ticks all the right boxes for Q2, but also sends a clear all-is-good signal for Q3.

This became doubly important to the market after we heard about Walmart WMT a few days ago. Reading the Amazon publication almost feels like they’re operating in a parallel universe where there are no logistical challenges and customers aren’t pressured by inflation.

Among the Big 5 tech players — Apple AAPL, Microsoft MSFT, Alphabet GOOGL, Meta META, and Amazon AMZN — Amazon, Apple, and Microsoft really stood out for the resilience and stability of their businesses. No company is completely immune to cyclical forces, and we’ve seen some of them in the adspend trends in Alphabet and Meta’s earnings reports. But even after acknowledging that point, it’s hard not to be impressed by the strength of numbers from Apple, Amazon, and Microsoft.

Apple posted a profit of $19.44 billion on sales of $83 billion in the second quarter. Earnings declined -10.6% year-on-year due to overall higher spending, issues in China, cyclical weakness in product categories like Mac and iPad, and currency translation issues. But Apple was still able to give a reassuring forecast for the September period, even if all this headwind will still be with us very strongly.

Contrasting with Apple and what it was struggling with, we also saw Exxon exit XOM with a profit of $17.55 billion on sales of $115.7 billion. Exxon is the quintessential old economy company currently enjoying a very benign commodity price environment.

Apple brought in $19.44 billion in a seasonally weak quarter; it had earned $25 billion in the first quarter of 2022 and $34.6 billion in the fourth quarter of 2021. Even “cyclically exposed” Alphabet brought in $16 billion of profit in the second quarter.

Regardless, we generally think of the likes of Exxon as “better money than god,” when in fact the limitless fortunes lie with these tech titans.

Total revenue for the Big 5 Tech players in the second quarter fell -20% from the same period last year, driven by +6.8% higher revenue and a 585 basis points (bps) reduction in net margins. Q2 net margins declined for each of the five technology leaders, with the largest declines at Meta and Alphabet at -1255 and -851 basis points, respectively.

The chart below presents the group’s quarterly earnings and revenue growth picture, with the group’s performance in the second quarter highlighted.


Image source: Zacks Investment Research

The chart below shows the Group’s year-on-year revenue and revenue growth.

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Image source: Zacks Investment Research

The table below shows the annual change in net margins for the Group on a year-to-year basis. As you can see, Microsoft is the only company in the group whose margins are expected to expand in 2022 while Alphabet keeps them intact.

Zacks Investment Research
Image source: Zacks Investment Research

Excluding the Big 5 tech players, the total revenue of the tech sector is expected to decline by -8.4% yoy in the second quarter on +2.4% higher revenue.

The dramatic looking chart below shows the sector’s second quarter earnings and revenue growth expectations in relation to growth over the past few quarters and expectations for the next four periods.

Zacks Investment Research
Image source: Zacks Investment Research

This overall view of the “Big 5” players and the industry as a whole shows a slowing growth trend. In contrast to this “quarterly view”, however, the annual picture shows much more stability, as the following chart shows.

Zacks Investment Research
Image source: Zacks Investment Research

For those of you out there on “recession watch”, please note that the sector’s earnings growth rate in 2022 is down +2.7% from three months ago. Growth estimates for 2023 have fallen by +13.1% over the same period.

Season scorecard for Q2 results

Until Friday, July 29ththwe saw Q2 results from 279 S&P 500 members, or 55.8% of the index’s total members. Total earnings for these companies are up +4.7% on +14.1% higher earnings with 75.6% beating EPS estimates and 65.6% beating sales estimates.

The following comparison charts place the second quarter earnings and revenue growth rates for these index members in historical context.

Zacks Investment Research
Image source: Zacks Investment Research

The financial sector has been a major drag on the year-over-year growth rate of the companies that have previously reported. Q2 earnings growth for financial sector companies that have previously reported is -23.5% lower than the same period last year.

Excluding this drag on the financial sector, Q2 earnings growth improves to +13.8% for the rest of the index.

The following comparison charts put the second quarter EPS and revenue percentages in historical context.

Zacks Investment Research
Image source: Zacks Investment Research

As you can see above, the EPS and Sales Beats percentages are still on the low side compared to historical periods.

This week’s list

We’ll have another very busy reporting calendar this week, with almost 1,300 companies on deck to report quarterly results, including 151 S&P 500 members. We have a variety of reporters this week from the Energy, Technology, Consumer Staples and Discretionary sectors.

I’ll be keeping an eye on the evolving mission statement, with a particular focus on the broader Travel space, with results from Uber UBER, Airbnb ABNB, Expedia EXPE, Booking BKNG, and others to be released this week.

By this time next week, we will have seen Q2 results from 86% of S&P 500 members.

The current income situation

The chart below shows current expectations (and actuals) on a quarterly basis.

Zacks Investment Research
Image source: Zacks Investment Research

Please note that the expected earnings growth of +5.7% in the second quarter of 2022 is solely due to strong earnings in the energy sector. Ex-Energy earnings growth falls to -4.2% in Q2.

The following graphic shows the earnings pattern on an annual basis.

Zacks Investment Research
Image source: Zacks Investment Research

For a detailed overview of the overall earnings picture, including expectations for the coming periods, see our weekly earnings trends report >>>>Stable earnings despite many headwinds

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Amazon.com, Inc. (AMZN): Free Stock Research Report

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Walmart Inc. (WMT): Free Stock Research Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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