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Twitter sees revenue growth despite Apple changes, AMD posts earnings beat

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Watch as Brian Sozzi, Julie Hyman, and Brian Cheung discuss how the market is reacting to the latest earnings from Twitter and AMD.

Video Transcript

JULIE HYMAN: Let us dig a little bit more deeply into these. And I want to start with Alphabet here. And what's remarkable to me, Brian Cheung, is that a company of this size can grow by the amount that it is growing, and yet in a couple of those areas we're still seeing it not up to snuff versus what analysts have been predicting.

BRIAN CHEUNG: Yeah, certainly. I mean, for what it's worth, it depends on what analysts you're looking at, right? When you take a look at MoffettNathanson, they actually said their overall ad revenues at around $47.6 billion were actually knock on to what they had expected.

But yeah, I mean, again, I wouldn't read too much into the pre-market action. First of all, that's not a very significant move at all, being down by 1/10 of a percent. But year-over-year figures are very nice for Google across the board. Ad revenue's up 44%, YouTube revenue's up 43%. And, of course, Cloud revenue's up 45%.

But, of course, remember that Google pays for traffic, right, in order to get all that Search SEO on their site. So that actually required them to fork up more expenses in this quarter. That was also up by 41%. But obviously, 41 is a smaller number than 43 and 44%. So those margins are looking still pretty nice.

But again, MoffettNathanson saying that they're keeping their $3,300 price target on Google. And they actually, by the way, like the fact that this is a stock that's trading about 10 times the multiples of expected 2025 EBITDA. That's a lot cheaper than Snap and Netflix. So I feel like especially with the expectations for Google, even if they didn't miss by a little bit, it might already be priced in.

BRIAN SOZZI: Yeah, let me hit some points here. I can really spend about 12 hours on this quarter from Alphabet, but I have about 30 seconds. So really, why you're seeing the stock, I think, having been one of the top-performing tech stocks or stocks in the entire market this year, this company continues to execute on operating profit margins. Geeky, but it's important when you're modeling the future stock price potential of a Google. Operating margins up five quarters in a row despite the company hiring significantly. Margins are now significantly higher than pre-pandemic levels back in fiscal year 2019-- hat tip to friend of the show Brent Thill for that fun fact.

Next up, another big tech company. We saw it with Facebook. We saw it with Microsoft last night, repurchasing large amounts of their stock. Year-to-date, Alphabet has repurchased $37 billion of their stock. That is absolutely massive.

And last but not least, guys, look what they said on the earnings call about YouTube, passed the 50 million premium subscriber mark. That is recurring revenue coming into the YouTube business. That is a big, big number and another win for Google.

JULIE HYMAN: Yeah, and also something that stuck out to me, just to wrap up Google here, Ruth Port, the CFO, said that they hired 6,000 people in the third quarter. And she said on the call we expect the pace of hiring to remain strong. So still adding people over there at Google. By the way, Microsoft we're going to dig a little bit more into coming up later in the hour with Brent Bracelin, an analyst who covers the stocks. I just wanted to note that.

Moving on, though, to another company that reported, and another company sort of caught up in the Apple app changes, is Twitter. Now, like we heard from Alphabet, the effect on Twitter seemed to be modest. In fact, they used the same word, "modest impact on sales" when it came to those Apple iOS changes.

Third-quarter sales and user growth pretty much in line with estimates here, as you see there. Looks like there was a loss versus a gain, but that's not really how people trade those Twitter numbers, right? And if you look at the daily users for Twitter, 211 million. That's up 5 million quarter-over-quarter, or about 13%.

Twitter projecting revenue in the current quarter going to be as much as $1.6 billion. That, too, is about in line with what analysts had been predicting. And looking at some of the analysts' commentary here, the analysts seemed by and large to be impressed here, especially after the rough quarter from Snap and the effect of the Apple iOS changes there.

Also interesting commentary on another issue that plagued Snap. That is ad issues, because, as we know, a lot of people experiencing supply chain issues, they're not going to advertise the products as much. JPMorgan's Doug Anmuth saying 50% of its ad revenue, though, comes from services and digital goods. So Twitter is not as exposed to some of the hard good advertisers that some of its competitors are, Brian Cheung.

BRIAN CHEUNG: Yeah, and this kind of fits along with the model that we've already seen them unveil of wanting to turn away just from ad revenues themselves. Obviously, they're trying to create some more monetization just for the creators on the app through the tip jar and through ticketed spaces, if you will, again, those kind of audio, Clubhouse-like features on the app. We know that what Twitter does is they try to throw products at the wall, right? We know that was the case with the Fleets, which were just as fleeting as the actual product itself, right? It really only existed for a few months during the pandemic when people were bored and wanted to use it like Instagram Stories.

But if you just take a look at the financials themselves, again, ad revenue was up 41% year-over-year compared to a weird 2020, albeit it's still pretty OK and comparable even to what we saw with Google. Now, of course, their actual revenue size is far smaller when you consider it was about $1.1 billion. Consider that that's about seven times smaller than just YouTube's revenue stream at Google.

So we do like to talk a lot about Twitter and Google in the same breath. But they're very different scale. And I do want to note that in terms of the ad issue with Apple iOS, yes, they did say that it's going to be a modest impact into their Q4 guidance. But keep in mind, the real selling point for Twitter is the fact that their active users are just so much larger than, say, other comparable social media platforms, even though the monetization per user isn't necessarily as desirable as maybe those on Facebook or TikTok or Snapchat. Now, for what it's worth, the stock hasn't necessarily been a darling of the year. It's up about 13%, underperforming the market, but severely underperforming the likes of Google.

BRIAN SOZZI: Glad you mentioned users there, Brian. If you do want to poke a hole in this quarter, US monthly active users were flat on a sequential basis or compared to the second quarter. But overall, two positive things here. One, Twitter had the most optimistic fourth quarter revenue growth outlook compared to Snap and Facebook. Twitter looking for about 23% revenue growth for the current quarter, Facebook at about 13%, Snap at 12%.

So for some reason, Twitter is out here navigating these Apple challenges better than its two rivals. And secondarily, on the earnings call, we've talked to Twitter CFO Ned Segal about this before, they are out reiterating their 2023 sales guidance of $7 and 1/2 billion. I think the market liked to hear that.

JULIE HYMAN: And finally, let's talk AMD as well. That coming out after the close of trading also, and the company's third quarter net income coming in ahead of estimates. Revenue there up 54% to that $4.31 billion, and coming out with a fourth quarter revenue forecast as well that looks to be ahead of what analysts have been predicting. Brian Sozzi, data center sales in the third quarter more than doubled for AMD.

BRIAN SOZZI: This quarter, Julie, was old hat for AMD. If you've been following AMD under CEO Lisa Su for the past two, three, four years, this is nothing new. I mean, this is another very strong quarter for AMD. And as we mentioned earlier in the week, that weak quarter in guidance from Intel when they reported last Friday, and ultimately the stock got hammered, that was the tell that AMD was going to come out here this morning and come and report-- or last night, I should say, and report a very strong quarter and an upbeat outlook. All parts of the business were very strong.

I would, if I have to toss a red flag into this one, analysts are starting to poke around on what 2022 growth rates might look like for an AMD after a very strong year. I think there might be a little concern on how their gaming business, how that continues to grow after record setting run this year. But overall, I mean, this is a good quarter from AMD, maybe a little profit taking here in the pre-market. But all in all, I mean, much more of the same from this company.

JULIE HYMAN: Guys, we're just getting started. I hope you guys--

BRIAN SOZZI: Just getting started. Let's go.

JULIE HYMAN: --go a lot more gas in the tank--

BRIAN SOZZI: Come on, let's go.

JULIE HYMAN: --because we have--

BRIAN SOZZI: Let's go.

JULIE HYMAN: --a lot more earnings to cover coming up later. Aw, look at that. That's so adorable. It's tea, ladies and gentlemen.