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Alphabet and Facebook Beat Expectations

GuruFocus.com
·2 min read

- By Nicholas Kitonyi

Technology giant Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) shares are up while Facebook Inc.'s (NASDAQ:FB) stock is down following the release of their most recent quarterly results. The two companies reported third-quarter earnings after the market closed on Thursday that beat analysts' revenue and earnings expectations.

Alphabet earnings highlights


Alphabet and Facebook Beat Expectations
Alphabet and Facebook Beat Expectations

Alphabet's most recent quarterly results easily beat expectations amid an increase in ad spending. The company posted a bottom line of $16.40 per share, which beat the consensus estimate of $11.31. This was also a significant improvement from earnings of $10.12 per share posted in the same period a year ago.

The company's top line grew 14% from the prior-year quarter to $46.17 billion, which surpassed the consensus analyst estimate by $3.33 billion. Alphabet's traffic acquisition cost of $8.16 billion was also higher than the expected TAC of $7.66 billion, while the operating margin of 24% outshone the consensus estimate of 19.8%.

CEO Sundar Pichai attributed the impressive performance partly to the investments the company has made in artificial intelligence and other technologies.

He said that it was a "testament to the deep investments we've made in AI and other technologies, to deliver services that people turn to for help, in moments big and small."

The company's stock surged nearly 5% in after-hours trading following the announcement.

Facebook earnings highlights

Alphabet and Facebook Beat Expectations
Alphabet and Facebook Beat Expectations

The social media giant posted adjusted earnings of $2.71 per share, which outperformed the consensus estimate of $1.91. This reflected a bottom-line growth of 28% from $2.12 posted a year ago.

Facebook's top line grew 22% from last year to $21.47 billion. This was mainly due to the 22% growth in advertising revenue. The company's other revenue segment posted a decline of 7%. The company's bottom line also benefited from a significantly lower effective tax rate of 4% compared to 17% in the same period a year ago.

Facebook's average daily active users rose 12% to 1.82 billion year over year while the number of monthly active users soared to 2.74 billion.

CEO Mark Zuckerberg attributed the strong quarterly results to an increase in demand for the company's services, with individuals and businesses using the social networking platform's array of services to stay connected.

"In Q4 of 2020, we expect this trend to continue and that the number of DAUs and MAUs in the US & Canada will be flat or slightly down compared to Q3 of 2020," Zuckerberg said.

The company's stock slid 1.5% in after-hours trading despite the earnings beat.

Disclosure: No positions in the stocks mentioned.

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This article first appeared on GuruFocus.