Apple, Amazon, and Alphabet report earnings after market close today and they all missed their EPS targets and quarterly profits declined sharply YoY for all 3 companies.
Apple’s Q4 2022 revenue was $117.15 billion vs. $121.10 billion expected, down 5.49% YoY. EPS was $1.88 vs. $194 expected, down 10.9% YoY. Service revenue was $20.77 billion vs. $20.67 billion expected, up 6.4% YoY.
Amazon’s Q4 2022 revenue was $149.2 billion vs $145.42 billion expected, up 8% YoY. EPS was 3 cents vs. 17 cents expected, down 98% YoY. AWS revenue was $21.4 billion vs $21.87 billion expected, up 20% YoY. Advertising revenue was 11.56 billion vs $11.38 billion expected, up 19% YoY.
Alphabet’s Q4 2022 revenue was $76.05 billion vs. $76.53 billion expected, up 1% YoY. EPS was $1.05 vs. $1.18 expected, down 31% YoY. YouTube advertising revenue was $7.96 billion vs. $8.25 billion expected, down 7.7% YoY. Google Cloud revenue was $7.32 billion vs. $7.43 billion expected, up 32% YoY.
It appears the macroeconomic headwinds hit all 3 companies pretty hard and their profitability suffered. Interestingly, Amazon ad revenue grew 19% YoY in Q4 2022 while Alphabet and Meta’s advertising revenue was flat and down respectively. Despite the drop, Apple and Alphabet are immensely profitable with $36 billion and $18.16 billion of quarterly profits respectively. (Amazon is just being Amazon by reinvesting all their profits back to their business. They will never be profitable in the accounting sense by design.) Their earnings are pretty similar to Meta with lackluster revenue and a sharp decline in quarterly profits. But this appears to be systemic and very strong tailwinds in 2021 are inevitably followed by headwinds in 2022. No great things last forever. I am curious what kind of wind we will experience in 2023.
I have been very curious about Alphabet’s take on ChatGPT and we finally got the following statement from Google CEO Sundar Pichai :
Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices. We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.
Google search results have been pretty underwhelming these days due to heavy SEO influence. I wonder what new format Google will offer us without sabotaging their link-based sponsored search business. Anyway, I am so looking forward to the new experience Google is coming up with. After all, Google is the inventor of the transformer models which helped leap forward the generative AI revolution.