Thoughts on Twitter earnings for Q1 2014

This is the latest in a series on major tech companies’ earnings for Q1 2014. As with the others, I won’t aim to be comprehensive, but rather to pull out some key figures and draw some conclusions from them.

As with Facebook, I borrow Twitter’s own three-part approach to growth to gauge these companies’ potential, in a sort of scorecard. In each case, I try to use the metrics the companies themselves provide in these three categories: user growth, engagement and monetization. Below is my growth scorecard for Twitter:

Twitter growth scorecard

The biggest difference between Facebook and Twitter in this regard is engagement. Whereas Facebook’s measure of engagement (DAUs as a % of MAUs) is rising globally and in all regions, the main metric Twitter offers – timeline views per user – is falling. Now, there’s apparently a good reason for this – Twitter changed the way certain features work in its mobile app, and that led to fewer timeline views recorded for similar levels of engagement. But as long as this is the (only) metric Twitter consistently provides to measure engagement, it’s going to get beaten up over it. Continue reading

Thoughts on Amazon earnings for Q1 2014

Amazon’s earnings are sort of the opposite of Microsoft’s: whereas Microsoft’s earnings and especially its 10-Q are packed full of little nuggets and details that you can tease out, Amazon’s earnings are about as sparse as Google’s in terms of finding interesting details. But there’s still some interesting stuff, and I’ve done my best to tease out some of the more meaningful bits below. As a reminder, this is one of a series of posts about major tech companies’ Q1 earnings – you can see them all here.

Profits and growth

The first thing that strikes you when you look at Amazon’s results is how amazingly small its operating margins are compared to all the other leading tech companies. When you plot revenue and operating profit on the same chart, you almost can’t even see the operating profit bars because they’re so small. It wasn’t always quite this bad, though: Amazon long-term marginsThere was a time when Amazon regularly generated 4-6% operating margins (still low by the standards of its peers) but over the last couple of years it’s settled into a very consistent 1% operating margin over 4 quarters. On the other hand, look at that growth line – there’s no other company that grows so consistently and sharply at this scale in the tech industry. This chart perfectly captures Amazon’s current strategy: very high growth at 1% operating margins, with the low margins caused by massive investment in the infrastructure necessary to drive growth. It very much feels as though Amazon recognizes that there’s a limited window of opportunity for it to build the sort of scale and infrastructure necessary to dominate e-commerce before anyone else does, and it’s scraping by with minimal margins in order to capture as much as possible of that opportunity before it closes. Continue reading

Thoughts on Microsoft’s earnings for Q1 2014

The next company in my series of “thoughts on earnings” pieces (see Google here, Apple here and Facebook here) is Microsoft. I’ll be doing something on Amazon next, most likely. Microsoft is a complicated business, with many parts to it, so I’ll focus mostly on the things I think most people overlook, because they’re rather buried in the earnings release or even the 10-Q. This involves making some estimates, calculations and assumptions, as well as interpolation, so please understand that many of the numbers are my best guesses rather than those reported by Microsoft (I try to be clear on which is which in each case).

Long story short: for all Microsoft’s talk about Mobile and Cloud, those two categories likely generate under 10% of Microsoft’s revenue today – something I’ll return to in the conclusion at the end of this post.

Windows Phone

First, Windows Phone. I’ve written at length before about the methodology used here, but we got another couple of quarters’ worth of solid data so I’m providing some quick numbers off the back of that.

Microsoft Windows Phone revenueThe key thing to note here is that, other than in the fourth quarter, this number stays a little under $400 million a quarter. And it’s worth reminding everyone that this number is not just Windows Phone licensing itself but also the rest of Microsoft’s mobile licensing activity (think patents licensed to Android OEMs). As such, as Microsoft executes on its new policy of not charging OEMs for Windows for devices under 9 inches, there’s only a very small amount of revenue at risk – likely $100-200 million per quarter. And of course Nokia was paying about 90% of that anyway, so it would have become an internal transfer starting today. Continue reading

Thoughts on Facebook Q1 2014 earnings

Along with Apple’s earnings yesterday, which I commented on here, Facebook also announced its results for the first quarter of 2014. Here are a few charts and thoughts on Facebook’s results and its overall trajectory.

Firstly, my Growth Scorecard for Facebook. This builds on the analysis I shared in this blog post on Techpinions a while back. I that piece, I argued that essentially all ad-based online businesses need to pull three levers to grow revenues:

  • Growing the overall user base
  • Growing user engagement – frequency of use or time spent
  • Growing revenue per user.

The first lever is the one most companies start with – driving user growth is often the primary focus of a startup long before it even thinks about monetization, but the theory goes that if you have enough eyeballs you’ll find a way to monetize them. At the same time, simply getting someone to create a username and password is no good unless you get them to engage regularly and meaningfully with your site. That’s key to monetization as well – a user that never uses your site or app will never encounter any ads and as such won’t make you money. And then there’s the revenue model as well, which will be driven by ads of one kind or another. So here’s the growth scorecard for Facebook in Q1, showing a key metric for each of these three areas:

Facebook growth scorecard


Now, let’s drill down into those three elements: Continue reading

Thoughts on Apple’s Q2 FY 2014 earnings

Apple’s earnings were out today, and so I thought I’d do a quick run-down of some of the most interesting numbers, as I did for Google last week. Time permitting, I’ll do this for some of the other major tech companies as they report too. Some of what’s below is based on stuff Apple explicitly reports, while the rest is based on calculations and assumptions. I’ll try to be very clear about which is which.


First, Apple’s hardware lines. Because Apple’s numbers are so cyclical in nature, I try to use both year on year growth and 4-quarter trailing numbers to make comparisons more meaningful and to better tease out long-term trends. Here, then, is year on year 4-quarter trailing revenue growth for the four major hardware product lines:

Growth rates for 4 major Apple product lines

The obvious trend is down and to the right, though it’s a bit more nuanced than that. But iPod is clearly very much in decline at this point, and it’s reasonable to speculate how much longer it will stick around. But iPhone growth has clearly slowed enormously too, as the law of large numbers kicks in, and as key markets approach saturation. However, iPhone growth actually ticked up this quarter after consistent declines for several quarters before that, suggesting that growth in China, Japan and other both emerging and developed markets helped to turn things around a bit. It’ll be very interesting to watch this number going forward. The Mac line has also recovered a bit in the last couple of quarters. Continue reading

Thoughts on Google earnings Q1 2014

Google just reported its earnings for the first quarter of 2014. Here are a few charts and observations on what they reported.

Motorola’s best quarter in over a year, ironically

First, ironically, it looks like Motorola had its best quarter in quite a while, with revenues of around $1.45 billion in the quarter, compared with $1.0 billion a year ago. It seems as though the boost was caused by strong sales of the Motorola G. But perhaps that just reinforces Google’s rationale for getting out of the business – the low end, emerging markets segment is not where the money is, and that’s the only area where Motorola was likely to be competitive under Google. (note one quarter’s results are missing because Google closed its acquisition in that quarter and as a result only reported a partial quarter in Q2 2012).

Motorola division revenuesThe rest of the analysis below focuses on Google’s core business (i.e. excluding Motorola Mobility). Continue reading