Post-Brexit, it might feel like British business is heading south, but across the Atlantic there are still reasons to be cheerful.
Despite low expectations, most of the world’s tech giants reported strong results (with the notable exception of Twitter), leaving investors in an upbeat mood.
Here’s The Memo’s analysis of the latest results from Apple, Microsoft, Facebook, Google and… Twitter.
After finally hitting “peak iPhone” most were downbeat about Apple’s short term future.
With people across the world upgrading their devices less often, there were concerns that the iPhone, Apple’s cash cow, would hurt Apple’s overall profits.
As expected iPhone sales have continued to fall (-15%) and most alarmingly in China, a crucial market, the company saw a 33% drop in sales.
But as Toni Sacconaghi at Bernstein Research coined it, on the whole Apple’s results were “a sigh of relief”.
Why? Because iPhone sales did fall, but not by as much as expected. And Apple made up for this with two strong positives:
1) Strong sales of its new larger iPad Pro, which sells for an eye-watering £800.
2) Consumers are still spending on the App Store (Apple takes 30% from every purchase) and signing up for storage services like iCloud.
Earlier this year we announced why “We’re Done with Apple”, due to our long-standing frustrations with the company’s iPhone, Watch and TV products. Our criticisms still stand, but with Apple being one of the most cash-rich businesses on the planet, they have the resources to turn things around.
In the two years since Satya Nadella took over as CEO at Microsoft, he has transformed the company into a mobile and cloud focussed force to be reckoned with, and the company’s $22.6 billion revenues beat expectations.
Microsoft has long-shed the days of clippy, Windows vista, and shoddy phones – and we couldn’t be more bullish about the future.
The figures speak for themselves: Microsoft’s Cloud business is on track to bring in $10bn this year.
Microsoft’s foray into smartphones had unquestionably been a disaster with sales down 71%. But the company’s apps for iPhone and Android tell a different story: who would have thought that in 2016 Microsoft’s would be behind Outlook, the best email app on the market for iPhone?
With HoloLens, Microsoft’s new augmented reality headset around the corner, and growing sales for Surface (the company’s own brand tablet computer line), things really are looking up.
Facebook is the star of the show.
The social media giant’s revenues surged up by 59% ($6.44bn), blowing past Wall Street estimates.
Can they keep this up? Zuckerberg delighted investors when he responded:
“We have a saying here at Facebook: Our journey is only 1% done.”
The good news centred around mobile and video. Facebook’s making more money from mobile than any of its competitors and advertising agencies are queuing up to switch their budgets from TV to social.
Next quarter we’re keeping an eye on the long-awaited launch of the company’s virtual reality headset. the Oculus Rift, and Facebook’s new live video platform. If they perform as well as results this quarter, Zuckerberg’s words might just live up to the hype.
When it comes to advertising online Google continue to dominate the market.
Google’s websites reported a 24% increase in revenues ($15.4bn) again beating Wall Street expectations. Like Facebook, Google has picked up the secret to advertising on mobile and is reaping the rewards.
“The strength of the quarter is about mobile,” said Google’s Chief Executive Sundar Pichai.
Under its new-formed Alphabet, the lion’s share of profits continue to come from Google’s advertising, which is being reinvested in experimental projects including driverless cars and Nest home devices.
These so called “moonshot” projects continue to lose money for now, but could turn into cash cows in the future. There’s a lot to be excited about.
Compared to its peers, Twitter’s results were not a pretty picture. Shares are now down 50% since CEO Jack Dorsey returned to run the ill-fated social network.
The number of monthly active users, the measure which investors desperately wanted to see improve, grew by a measly 1% in the last three months. Without growing user numbers – and therefore ad sales – it’s hard to see a bright future for the company.
We’ve been downbeat on Twitter for some time as the social network fails to deal with its cultural problems around trolling.
In 2016 its unacceptable for a publicly listed media company to allow the shocking level of abuse on the platform to continue. Until the company fixes it, we don’t blame users for not coming back.
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