Topic: Earnings
Microsoft FY17 Q2 (December 2016 quarter) Earnings – Microsoft (Jan 26, 2017)
Cloud was the big theme on Microsoft’s earnings call once again, with a $14 billion annual run rate and nearly 50% gross margins across its cloud businesses, and a 95% growth rate in the Azure business alone. Surface revenue was down a bit, predictably because the product line wasn’t refreshed as fully as in previous years, but not by much, and it seems commercial sales actually grew (probably a reflection of the long sales cycles in enterprise). The phone business continues to dwindle to nothing (just over $200m in revenue this quarter by my estimate, down 81% year on year), but that’s so small now it barely impacts results. Windows did well overall, with some revenue growth from slightly stronger shipments in the PC market, though the PC market overall was still down overall last quarter. Monetizing its consumer business continues to be one of Microsoft’s biggest challenges – its Office consumer subscribers appear to be plateauing at around 25 million, most of its other consumer apps are offered free, and gaming is performing decently, though overall gaming revenue was down year on year. Overall, the results feed the narrative that Microsoft is undergoing a comeback, though it’s a slow and subtle one from a financial perspective.
You might also be interested in the Microsoft Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service.
via Microsoft (more on Techmeme)
Alphabet Announces Fourth Quarter and Fiscal Year 2016 Results – Alphabet (Jan 26, 2017)
One of the things I was most interested in as part of Alphabet’s results was what happened to the Google Other category of revenues, because that’s where sales of the new hardware devices will be reported. That category grew 62% year on year, but also includes Play store revenues as well as Google’s enterprise cloud service revenues, and has been growing at a decent clip already. I’d estimate around $600-700m in revenue from the new hardware products, which probably translates into 600-700k Pixel sales and sales of Home, WiFi, and Daydream hardware. That’s not a bad start, but of course supply was constrained and distribution limited, so there’s clearly potential for more here. Back in the core business, it’s striking how the number of paid “clicks” on Google’s own properties remains the one big driver of ad revenue growth, while total paid clicks on third party sites and the cost per click on all sites continues to fall. YouTube is the major driver here (those clicks include views of video ads where no-one actually clicks), offsetting the erosion of revenues from the shift from desktop to mobile, and was an obsession among analysts on the call. Sundar Pichai focused his remarks on machine learning rather than AI, although the two topics are closely related – it was interesting to hear Satya Nadella kick off the Microsoft earnings call an hour later with talk of AI.
You might also be interested in the Alphabet Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service.
via Alphabet (more on Techmeme)
Comcast Reports 4th Quarter and Year End 2016 Results – Comcast (Jan 26, 2017)
Comcast is an enormous and complex company, with its US cable and broadband business but also a movie studio, theme parks, the NBC TV business, and more, and as such it’s hard to its results justice in a brief space, so I’ll focus on a couple of key areas. Firstly, it saw video subscriber growth for 2016 as a whole, the first time that’s happened in a decade. This wasn’t a surprise – Comcast’s video net adds have been trending upwards for several years, mostly because the major telcos (AT&T and Verizon) have taken their foot off the gas in selling their TV services (AT&T has instead ramped up its satellite based offerings through DirecTV). All the cable companies have benefited from this, but Comcast perhaps more than most. It’s worth noting, though, that cord cutting is accelerating overall, and Comcast is gaining share in a shrinking market, and its programming costs are also rising as a percentage of its TV revenues. We didn’t get much more clarity on Comcast’s wireless ambitions on the call, other than that the focus will predictably be on bundling. But that service should launch in H1. I’m asked a lot about the prospects for that service, but so much depends on the details of what Comcast launches – on balance, I’m fairly bearish.
via Comcast
AT&T Reports Fourth-Quarter Results – AT&T (Jan 25, 2017)
AT&T is the second of the big US carriers to announce its Q4 results, after Verizon earlier this week. On balance, AT&T’s results look a little better, with the lowest postpaid phone losses in a long time, and decent overall TV growth, mostly thanks to DirecTV Now. AT&T is executing on what I’ve called its ampersand strategy, with 7.9m subs now taking a DirecTV-AT&T mobile bundle with unlimited data. This strategy is also the underpinning of the Time Warner merger, which AT&T apparently still expects to close later this year. AT&T continues to report stronger growth in connected devices – everything that isn’t traditional phones and tablets sold to businesses or end users – than any of the other carriers, and that growth has really helped offset some of the weakness in the phone business in recent years, as has its prepaid growth, mostly under the Cricket brand. Overall, AT&T is still pretty well positioned when it comes to US wireless competition.
via AT&T
LG posts $224 million loss as ‘weak’ selling G5 smartphone drags it down once again – TechCrunch (Jan 25, 2017)
LG’s smartphone business has been struggling for at least 18 months now – it briefly went into the black in late 2014 and early 2015, but with that exception has been struggling for even longer, posting losses for the last six straight quarters and eleven of the last twenty. Shipments are falling on an annualized basis – they were 55 million in 2016, compared with 59.7 million in 2015 – but the company is also spending more on marketing and its flagship phone isn’t making the waves past versions did. The modular G5 wasn’t well received and LG will abandon that approach in favor of the smaller-bezeled strategy others are pursuing too ahead of an anticipated launch of a similar phone from Apple in the fall. LG’s troubles just reinforce both the overall challenges of doing business in a maturing smartphone market and trying to compete using Android against many others using the same operating system.
via TechCrunch (slide deck with full results available from this page on LG’s website)
Verizon grows its strong customer base profitably in 4Q – Verizon (Jan 24, 2017)
Verizon puts a brave spin on its results in its headline, but there’s a lot of detail beneath the headline which isn’t quite so positive. Having started the transition to device installment plans in wireless later than its peers, it’s still seeing declining service revenues and now expects to see that trend continue into 2018 rather than 2017 as previously forecast. Its postpaid phone net adds continue to be well down over last year’s Q4 results, and adds over 2016 as a whole were pretty anemic. Tablets are another drag on the company’s overall results as it continues to see customers who bought cheap tablets two years ago turn off their service as they exit their contractual lockups. On the wireline side, penetration of Fios TV continues to fall each quarter, while Fios broadband penetration holds up a little better. Verizon continues to be the largest carrier in the US, and a very profitable one, but as smaller competitors become more aggressive on price, there are questions about whether Verizon can maintain its margins and grow at the same time – recent evidence suggests that’ll be tough.
via Verizon
Samsung Electronics Announces Fourth Quarter and FY 2016 Results – Samsung (Jan 23, 2017)
Samsung released preliminary numbers a few days ago, and rather shocked everyone by previewing some of its best results in a long time (and its best operating margin ever). Until today, though, we didn’t know the precise breakdown by segment behind those numbers – now we do: the mobile business rebounded decently from last quarter, but is still a shadow of its former self in terms of both revenues and profits, while the semiconductor business is going gangbusters. The latter provided a quarter of revenues but a little over half of operation profits for Samsung Electronics last quarter, and was the major driver of that fantastic overall operating margin. An increasing focus on premium products and rising prices driven by tight supply versus demand both helped that division, while on the mobile side Samsung seems to have done a good job selling Galaxy S7 phones to those who might otherwise have bought a Note7. It looks like Q1 might be a little tough on the mobile side – we won’t get a Galaxy S8 at Mobile World Congress in February, meaning Q1 will be the lull quarter before a likely launch in Q2. But overall this is a pretty decent set of results for a company dealing with the fallout of the Note7 recall.
via Samsung Electronics Announces Fourth Quarter and FY 2016 Results – Samsung (Samsung’s earnings deck with lots more detail here and there’s more coverage on Techmeme. You might also be interested in the Samsung Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service)
Yahoo Reports Fourth Quarter and Full Year 2016 Results – Yahoo (Jan 23, 2017)
Yahoo’s results seem to have been well received, though it also announced that the Verizon acquisition now likely won’t close until Q2. The results themselves are a mixed bag, really – there’s been an interesting switch between search and display advertising performance over the past year, with erstwhile strength search taking something of a dive, while display advertising actually performs better. Overall revenue after traffic acquisition costs is still down year on year, but Q4 was stronger by far than the rest of 2016. Yahoo has changed the presentation of so many of its metrics that many of them are impossible to compare on a like for like basis year on year, but positive change overall is still hard to find in the results. Mostly, they’re probably better described as less bad rather than actually good. There’s plenty here for Verizon to sink its teeth into when the deal eventually does close.
via Yahoo Reports Fourth Quarter and Full Year 2016 Results – Yahoo (further coverage on Techmeme)
Netflix reports $2.35B in Q4 revenue, up from $1.67B in Q4 2015 – Techmeme (Jan 18, 2017)
Normally I’d link to a company’s own report on its earnings, but since Netflix’s earnings material is all in non-web file formats like PDFs and Excel spreadsheets, I’m linking instead to the Techmeme cluster of articles on the earnings report. Broadly speaking, this is a great set of results for Netflix – subscriber growth both domestically and internationally was higher than it forecast, with domestic growth bouncing back nicely now after a couple of tough quarters in which price increases were a drag on net adds. The international business is nearing profitability, though Netflix will invest to keep it just in the red in 2017, and margins expanded nicely domestically thanks to those price increases. With short-term growth concerns somewhat alleviated, the main focus returns to Netflix’s content spending and whether it’s sustainable. It had a non-GAAP free cash flow loss of $639m in Q4 and $1.7bn in 2016 as a whole, both massively up from the year before as it invests in original content, which has to be paid for upfront. Over time, that much higher investment will flow through into the P&L too, and continued strong growth is critical for staying ahead of those costs.
via Techmeme
You may also be interested in the Netflix Q4 2016 deck in the Jackdaw Research Quarterly Decks Service.
Samsung Cuts Q3 Guidance Over Note7 (Oct 12, 2016)
The financial impact of the Note7 debacle began to become clear, as Samsung formally reduced its revenue and profit guidance by several billion dollars (its final results for Q3 would be broadly in line with this guidance).