An earnings season to remember for mega-tech

Heading into reporting season, all the focus was on the market’s biggest names. How did they square up?

Amid a stunning rally over the last year, expectations could not have been greater heading into the latest earnings season.

With mega-tech names comprising more than 20% of the entire S&P 500, there is little denying the burden on the tech industry has been particularly heavy, even if there has been some rotation towards ‘value’ in recent months.

Nonetheless, with all the prevailing tech trends throughout the pandemic still flourishing, opportunities for the likes of Amazon, Facebook, Apple, Alphabet and Microsoft to justify their valuations have been supported by an earnings season to remember.

Amazon entrenches its necessity in society

Global ecommerce behemoth Amazon (AMZN) delivered earnings of US$15.79 per share versus forecasts of US$9.54 per share, and revenue of US$108.52 billion versus US$104.47 billion.

With sales up 44% year-on-year, it is evident that Amazon has been one of the biggest beneficiaries amid the pandemic. In our view, the thesis here is particularly clear. Online shopping has become the go-to method for consumers across the world, even in countries that have largely recovered from the effects of the pandemic.

With guidance for next quarter pointing to revenue of between US$110 billion and US$116 billion, another period of strong growth looms on the horizon. Underpinning this will be the company’s Prime Day event, which is scheduled to take place in the June quarter.

The timing couldn’t be any better either. Consumers in the US are awash with cash at the moment on the back of several stimulus packages.

Elsewhere, the company’s cloud division is booming, with sales up more than 30%, while Prime Video has acted as a key component in promoting the uptake of its Prime subscription service, which now boasts over 200 million subscribers.

All in all, the evidence points to broad-based success for Amazon, and with international sales growth now outpacing that in North America, there is plenty left to play out in this story.

Facebook is becoming a personal ad medium

When the pandemic first broke out just over a year ago, there were some effects that initially flowed through to the advertising market, with Facebook (FB) one of those hit hardest. Fast forward and the stark contrast couldn’t be any more apparent.

Facebook trounced consensus estimates when it reported revenue and earnings late last month. However, the driving factor wasn’t necessarily the increase in active users, it was the engagement among these users, and the pricing of said ads.