Thematic Spotlight: Earnings Turbulence Hits US Mega Caps

As of market close last week, more than 90% of the S&P 500 have reported their Q2 earnings, and despite recent volatility, markets have more reason to be happy than upset.¹ Average earnings per share across the US are roughly 4% ahead of expectations at the time of writing, with 78% of companies surprising to the upside. Revenue growth across the S&P 500 index, while not as strong as the previous quarter, is also up 0.76%.² Apple and Amazon were two big names that reported last week, meaning six of the magnificent seven have now announced earnings. Nvidia will be the last of the pack to hand in its report card, scheduled for the 23rd of August.³ As we approach the end of Q2 2024 earning season, let’s take some time to recap earnings highlights across some of the US’s biggest companies.

Tesla reported good revenues but missed on profit margins – causing some investors to worry as broader electric vehicle adoption had also slowed. Overall, the EV maker generated US$25.5bn in revenue, much higher than the US$24.5bn expected, but EPS came in at just US$0.52, quite a bit lower than the US$0.61 analysts were hoping for.⁴

Alphabet (Google) earnings were a mix bag of beats and misses as search engine and cloud division revenues beat market expectations, but YouTube failed to meet lofty investor demands. Overall revenue for the internet giant came in at US$84.7bn with an EPS of US$1.89, beating analyst estimates.⁵

Microsoft reported June quarter EPS of US$2.95 on US$64.7bn revenue, beating analyst expectations on both fronts.⁶ The company’s cloud division (which contains its artificial intelligence unit) reported revenues in-line with market forecasts at US$36.8bn, and Azure, a primary growth engine, grew 29% YoY.⁷

Meta had one of the strongest reports of the big tech cohort this earnings season. Revenue for the social media giant came in at US$39.1bn, handily beating estimates of US$38.3bn.⁸ EPS also outperformed at US$5.16 versus analyst expectations of US$4.72.⁹ Meta’s strong beat came on clear fundamental improvement in ad impressions and ad pricing. Investors were also happy to hear from management that even more ad inventory was available for monetisation.

Apple reported strongly on all fronts but one. Revenue and EPS both beat expectations at US$85.8bn and US$1.40 respectively, but investors were more concerned about the company’s revenue in China, which had fallen 7% YoY.¹⁰ Nonetheless, strong iPhone 15 demand and positive services revenue saw the stock trade flat after earnings.¹¹

Amazon was the most recent big tech firm to report. The e-commerce titan reported US$147.9bn in revenue, thanks in large part to a re-acceleration in AWS growth which grew 19% YoY.¹² Advertising revenue, however, was weaker than expected and the company raised capex guidance for investments in AI infrastructure – which rang alarm bells for some investors.

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