Big Tech Earnings: A Quick Overview

Quarterly Earnings Reports: Alphabet, Microsoft, and Pinterest

This afternoon, financial reports for the first quarter of 2021 were released by Alphabet, Microsoft, and Pinterest. Following the publication of their results, Microsoft and Pinterest experienced a rapid decline in valuation. Conversely, Alphabet’s stock price increased after its earnings were announced.

To avoid excessive detail, here’s a concise summary of key takeaways from each report, as analyzed by TechCrunch:

• Alphabet demonstrated robust earnings performance across multiple areas, eliciting a positive response from investors. YouTube revenue saw a substantial increase of nearly 50%, reaching $6 billion. Search advertising also performed strongly. Even the historically unprofitable “Other Bets” division generated approximately $200 million in revenue.
• However, the most significant outcome from the tech giant was its cloud computing results. Google Cloud’s revenue increased from $2.777 billion, with an operating loss of $1.73 billion in the same quarter last year, to $4.047 billion and an operating loss of only $974 million.
• The company, headquartered in Mountain View, is successfully developing a significant revenue stream from a product that isn’t reliant on advertising. Furthermore, this segment has the potential to generate substantial operating income over time, assuming current trends continue.
• Despite a solid earnings report, Microsoft faced disinterest from Wall Street. The company’s revenue grew by 17% compared to the previous year, while operating income increased by 31% to $17 billion.
• This faster growth in income relative to revenue indicates positive operating leverage. Net income experienced even more rapid growth than operating income, exceeding expectations.
• Azure, Microsoft’s competitor to Google Cloud and AWS, achieved a growth rate of 50% during the quarter, aligning with CNBC’s projections. Microsoft maintains a strong financial position, and its forward-looking products are delivering impressive results.
• Pinterest reported a remarkably strong quarter, yet the market reacted negatively. Pinterest’s Q1 2021 revenue reached $485.230 million, representing a 78% increase year-over-year.
• Simultaneously, the company reduced its net loss from $141.196 million to $21.674 million, and its non-GAAP net income rose from -$59.916 million to $78.527 million during the first three months of the year.
• Despite these impressive results, the company’s shares fell by over 8%. A potential reason for this decline is that Pinterest fell short of expectations for monthly active users (reporting 478 million against an anticipated 480.5 million).
• The company also cautioned that operating expenses would increase at an accelerated rate in Q2. However, with anticipated revenue growth of 105% and mid-teens MAU growth in the current quarter, the market reaction appears somewhat harsh.
• It seems investors may be penalizing Pinterest for not exceeding already high expectations.

This provides a quick overview of the recent earnings reports. While I am generally discouraged from covering earnings extensively, it’s difficult to resist commenting on these results!