What to think of Amazon, Meta, Google Earnings?
Here's the data...
Today's Data
Meta record top and bottom line.
YouTube revenue accelerates = resilient consumer.
Amazon margins show how one can turn disciplined.
Overall
This week GDP hit 4.9% and inflation continues to show signs of moderation with Core PCE Q3 hitting 2.4%. The economic landscape is sound despite lingering fears of a looming recession, which has not occurred (and yes one will happen eventually if you wait long enough). Earnings reports from industry giants like Meta, Amazon, and Google paint an encouraging picture. They reveal a noteworthy trend in advertising spending, with Meta experiencing a 23% increase in top-of-funnel advertising and Amazon Ads boasting a remarkable 26% growth in bottom-of-funnel advertising. This uptick suggests healthy purchase intent from customers, and it aligns well with an economy that's heavily driven by consumer spending, accounting for a substantial 75%.
Meta Recorded All-Time Highs in Both Top and Bottom-line Metrics
Meta had an impressive quarter with a record both in terms of revenue and profitability. Their operating margins pushed past 40%, a milestone not reached in two years. What's even more exciting is that these margins outpaced the 2019 figures, even with their increased investments in Facebook Reality Labs. This suggests that Meta's core businesses, including Facebook, WhatsApp, and Instagram, are strengthening. This success gives them more financial runway to invest in future ventures, particularly in the world of AR/VR. We firmly believe that these technologies will play a pivotal role in the computing landscape over the next decade. So, it looks like Meta is on a promising path forward.
Amazon Margins Shoot Higher
Amazon had quite the quarter, with wins in both its cloud business, AWS (Amazon Web Services), and its e-commerce business. They saw an overall growth of 13%, reaching $143.1 billion in the third quarter. AWS, in particular, seems to be healthy, with 12% growth for the second consecutive quarter. They mentioned some big bookings near the end of the quarter, suggesting an acceleration in AWS growth in the upcoming quarter.
But the real focus for us was margins. AWS margins have moved above 30%, contributing to an overall business margin of 8%. Overall very healthy report and its implications on technology and commerce.
YouTube Strength = Consumer Resilience
Let's take a look at one of our favorite metrics – YouTube revenue growth. It's no secret that YouTube is a powerhouse in terms of user engagement worldwide. Therefore, when we see an uptick in advertising demand on this platform, it often serves as a strong indicator of consumer purchase intent. This week, Google's report caught our attention. While we anticipated a more positive market reaction, given the solid performance in core search and YouTube, we understand that there's considerable interest among investors in Google Cloud, even though it's a relatively smaller part of the business compared to other segments. Looking at the bright side, YouTube experienced an impressive 12.5% growth, its highest in nearly two years. That's certainly a net positive for the company and the market broadly.
Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.
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Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.