After a Strong Start, the Latest FAANGs Earnings Were Disappointing

Netflix & Meta Optimism

The streaming giant and the social media behemoth had a very bad 2022, with their stocks collapsing 51% and 64% respectively, but things have improved since then and their recent earnings reports provided reasons for optimism.

Netflix is typically the first of the FAANG group to release its earnings, having done so back in 19 January. This revealed the addition of 7.66 million users in the fourth quarter, extending the recuperation from the shocking loss of more than 1,000,000 subscribers in the first-half of 2022. ^[1] The firm also commented on the recently introduced ad-supported subscription plan, saying that it is pleased with the progress so far, having seen "very little switching from other plans".

Earlier this week, Meta Platforms (former Facebook) took up the baton, with poor financial results. The company announced a decline in Q4 Revenues to $32.165 billion and a big hit in the bottom line, with a Net Income of around $4.5 billion from well over $10 billion a year ago ^[2]. However, investors liked the $40 billion share buyback announcement and the messaging around the current year. CEO Mark Zuckerberg named 2023 the "Year of Efficiency", saying that the firm will focus on becoming "stronger and more nimble".

Markets reacted positively to the results of those two companies, sending NFLX.us up 8.5% right after the report and META.us to a whopping 23% surge. The FAANG.us stock basket also benefited from those results, along with sustained optimism for a Fed pivot, which moderated further its pace of tightening this week.

After markets closed yesterday, it was the rest of the FAANGs turn to report, with markets being disappointed by the results, as the stocks of Apple, Amazon and Alphabet (former Google) drop in today's pre-market.

Apple Revenue Drop

The smartphone giant posted quarterly Revenue of $117.2 billion, which marked a decline of 5% year-over-year, while iPhone sales also dropped markedly and Net Income was also squeezed - disappointing investors. ^[3]

CEO Tim Cook cited the strong US Dollar, the broader challenging environment and Covid-related production disruptions in China, as the main reasons behind those poor results. Back in early November, Apple had announced an impact on the Phone 14 Pro and iPhone 14 Pro Max production line, which Mr Cook now said lasted "through most of December". ^[4]

On the bright side, Revenues of the Services sector hit record highs in excess of 20 billion, while CFO Luca Maestri said that iPhone sales are expected to accelerate year-over-year in the March-quarter, compared to the one just reported. ^[4]

Markets did not like the results and the stock was down around 3% in today's pre-market at the time of writing. AAPL.us ended the past year in bear territory with losses of over 20%, but has started 2023 in the offensive.

Amazon Timid Guidance

Amazon.com posted Revenues of nearly $150 billion in Q4, 9% higher form the year ago quarter. The important cloud segment (AWS) continued to rise with a 20% y/y revenue growth and the advertising business also expanded with sales of $11.55 billion. ^[5]

The firm's bottom line though, left much to be desired. It returned to profitability in Q3 after two losing quarters and stayed there in Q4, but barely so, since Net Income was just $278 million. Moreover, markets did not seem to like the firm's timid forward guidance.

Amazon expects Revenues of $121.0 -$126.0 billion in Q1 2023, which would mark a 4-8% year-over-year increase and decline from Q4 2022. It also sees operating income of $0 to 4$.

Amazon's stock was losing around 5% in pre-market today. AMZN.us saw its value halved in 2022 and erased its pandemic era rise, but the new year is profitable so far.

Alphabet YouTube Disappointment

Alphabet (GOOG.us) saw only a marginal Revenue increase in Q4 2022 over the previous year, coming in at around $76 billion, while markets were disappointed by the year-over-year drop in advertising sales of YouTube and Google. ^[6]

Revenues of Google Cloud increased on both yearly and sequential basis in the fourth quarter, but the segments continued to operate at a loss. In fact, Operating Losses widened to $1.45 billion.

The company had announced a workforce reduction of 12,000 employees last month and now said that this will incur an around $2billion hit, because of these lay-offs.

The stock was losing close to 5% in pre-market today, at te time of writing, after those disappointing results. GOOG.us shed nearly $40 last year, but is off to good stat in 2023.