EARNINGS PK: Microsoft Amazon beats expectations Google's ad business to perform badly

Tencent Technology News, April 24, the U.S. tech giants reported better-than-expected results, Google's advertising business was not as expected.

Microsoft's third-quarter revenue was $21.729 billion, up 6% from a year earlier.

Microsoft's third-quarter revenue was $21.729 billion, up 6 percent from a year earlier, and net profit was $4.985 billion, down 11.9 percent from $5.66 billion a year earlier, the company said.

Microsoft's third-quarter revenue for the third quarter ended March 31 was $21.729 billion, up 6 percent from $20.403 billion a year earlier, and net income was $4.985 billion, or 61 cents per share, less than net income of $5.66 0 billion, or 68 cents per share, a year earlier. Microsoft's third-quarter results were better than expected. Market analysts had expected Microsoft's third-quarter earnings of 51 cents per share to be $21.06 billion, according to Thomson Reuters data.

Microsoft's third-quarter revenue was $7.161 billion, up from $5.978 billion a year earlier. Among them, Microsoft spent $2,984 million on research and development in the third quarter, up from $2.743 billion a year earlier, sales and marketing expenses were $3.709 billion, up from $3.542 billion a year earlier, and general services and administration expenses were $1,091 million, down from $1,166 million a year earlier.

Microsoft included $190 million in consolidation and restructuring expenses in its third-quarter results, negatively impacting earnings per share of $0.01, reflecting microsoft's restructuring plan announced in July 2014 and the ongoing consolidation of Nokia's equipment and services businesses.

Microsoft's third-quarter gross profit was $14.568 billion, up from $14.425 billion a year earlier. Microsoft's third-quarter operating profit was $6.974 billion, up 5 percent from $6.594 billion a year earlier.

By division, Microsoft's equipment and consumer licensing division generated revenue of $3.476 billion in the third quarter of fiscal 2015, compared with $4.597 billion in the same period last year, while gross profit was $3.210 billion, compared with $4,017 million in the same period last year. Revenue in Microsoft's computing and gaming hardware division was $1.80 billion, compared with $1.872 billion a year earlier, and gross profit was $414 million, compared with $258 million a year earlier.

Revenue in Microsoft's mobile hardware division was $1.394 billion, compared with zero in the same period last year, and gross loss was $4 million, compared with $4 million in the same period last year. Revenue from Microsoft equipment and other consumer sectors was $2.28 billion, compared with $1.824 billion a year earlier, while gross profit was $566 million, compared with $391 million a year earlier.

Microsoft's business licensing division reported revenue of $10.036 billion in the third quarter, compared with $10.336 billion a year earlier, and gross profit of $9.275 billion, compared with $9.432 billion a year earlier. Revenue for the rest of Microsoft's business sector was $2.76 billion in the third quarter, compared with $1.902 billion in the same period last year, while gross profit was $1.144 billion, compared with $475 million a year earlier.

Revenue from Microsoft's corporate and other businesses in the third quarter was $20 million, compared with $127 million a year earlier, while gross loss was $37 million, compared with a gross loss of $148 million a year earlier.

By business segment, Microsoft's equipment and consumer revenue for the third quarter was $9 billion, up 8% year-on-year. Of these, Office 365 Consumer subscribers reached 12.4 million, up 35% month-on-month, Windows OEM Pro revenue was down 19% year-on-year, Windows OEM non-Pro revenue was down 26% year-on-year, and search advertising revenue was up 21% year-on-year. Bing's share of the U.S. market was 20.1 percent, up 150 basis points from a year earlier; Surface revenue was $713 million, up 44 percent year-on-year; mobile hardware revenue was $1.4 billion and Lumia's smartphone shipments were 8.6 million units.

Microsoft's third-quarter business revenue was $12.8 billion, up 5% from a year earlier. Among them, business cloud revenue grew 106% year-on-year to $6.3 billion, while revenue from server products and services grew 12 percent year-on-year thanks to Office 365, Azure and Dynamics CRM Online. Commercial products and services revenue fell 2% year-on-year, while Windows licensing revenue fell 2% year-on-year.

Microsoft also said in its earnings report that it returned $7.5 billion to shareholders in the third quarter in the form of dividends and share buybacks. Microsoft said the dollar's strength against other foreign currencies had a significant impact on its results in the third quarter. Excluding currency movements, Microsoft's third-quarter revenue and gross margin will rise by 9% and 4%, respectively, while operating profit and earnings per share will fall by 4% and 7%, respectively.

At the end of the third quarter ended March 31, 2015, Microsoft held $95,438 million in cash, cash equivalents and short-term investments, up from $85.709 billion as of June 30, 2014.

Microsoft shares rose $0.36, or 0.83 percent, to $43.34 in regular trading on the Nasdaq on Thursday. Microsoft shares rose $1.37, or 3.16 percent, to $44.70 in after-hours trading, helped by better-than-expected results. Microsoft's shares have fallen as low as $38.51 for the past 52 weeks to $50.05. At Thursday's closing price, Microsoft's market value was $355.55 billion.

Amazon's first-quarter net revenue was $22.72 billion, up 15 percent from $19.74 billion a year earlier.

Amazon reported net revenue of $22.72 billion in the first quarter, up 15 percent from $19.74 billion a year earlier, and a net loss of $57 million, compared with a net profit of $108 million a year earlier.

Amazon's first-quarter revenue rose 15 percent from a year earlier, helped by revenue growth in North America, the company's largest market, and a boost from its fast-growing cloud services division, the company said. At the same time, Amazon's first-quarter results beat industry analysts' expectations as the company's investment in fast delivery services, data centers and original video shows attracted more customers.

Amazon's second-quarter revenue forecast, however, fell short of market analysts'. Amazon's share stake rose after the day's trading, helped by first-quarter results that beat analysts' expectations.

Despite a surge in revenue in the first quarter, Amazon posted a loss in the first quarter as it continued to invest heavily in projects such as drone delivery, streaming video trading and warehousing. While some investors have complained that Amazon is expanding into less popular projects such as Fire smartphones, it sees it as a sign of the company's long-term investment in the future.

In particular, Amazon, which is also the world's largest seller of cloud computing services, today also announced AWS (Amazon's cloud services) for the first time in its separate sector. Amazon's first-quarter revenue was $1.566 billion, up 49 percent from a year earlier, meaning the service will reach at least $6.26 billion this year, compared with analysts' estimates that the service will be between $6 billion and $9 billion this year.

Amazon's AWS performance data could also make investors pay attention to the business. Amazon also claims that AWS will one day grow further and surpass the company's core retail operations in terms of revenue, which also has a huge advantage over rivals such as Microsoft, Google and IBM.

Summary of results:

Amazon's first-quarter net revenue was $22.72 billion, up 15 percent from $19.74 billion a year earlier, not only in line with the company's previous expectations, but also above Wall Street analysts' average estimate of $22.4 billion; Amazon's first-quarter net revenue should be up 22% year-on-year.

Amazon's first-quarter net product revenue was $17,084 million, compared with $15.705 billion a year earlier, while net service revenue was $5.633 billion, compared with $4.036 billion a year earlier.

Amazon's first-quarter sales cost was $15.395 billion, compared with $14.055 billion a year earlier.

Amazon's total operating expenses in the first quarter were $22.462 billion, compared with $19.595 billion a year earlier. Among them, Performance expenditure was $2,759 million, compared with $2,317 million a year earlier, marketing expenditure was $1,083 million, compared with $870 million a year earlier, technology and content expenditure was $2.754 billion, compared with $1,991 million a year earlier, and general services and management expenditure was $427 million, compared with $327 million a year earlier.

Amazon's first-quarter operating profit was $255 million, up 74 percent from $146 million a year earlier.

Amazon's net operating cash flow for the past 12 months was $7.84 billion, up 47 percent from $5.35 billion in the 12 months ended March 31, 2014. Amazon's free cash flow for the past 12 months was $3.16 billion, compared with $1.49 billion for the 12 months ended March 31, 2014.

Amazon's first-quarter net loss was $57 million, or $0.12 per diluted loss per share, in line with analysts' estimates of $0.12 and better than most analysts' expectations of a loss of $0.14, compared with a net income of $108 million, or $0.23 per diluted profit, a year earlier.

By geographic quarter, Amazon's North American division (U.S., Canada) reported net revenue of $13.406 billion in the first quarter, compared with $10.808 billion a year earlier, while Amazon's international revenue (UK, Germany, France, Japan and China) was $7.745 billion, compared with $7.883 billion in the same period last year.

Amazon's first-quarter net revenue from AWS was $1.566 billion, up 49 percent from a year earlier, and the division's first-quarter operating profit was $265 million, well ahead of Wall Street analysts' expectations.

By product, Amazon's first-quarter net revenue from electronics and other consumer goods in North America was $10.25 billion, compared with $7.829 billion a year earlier; Amazon's fourth-quarter net revenue from Media products in North America was $2.969 billion, compared with $2.825 billion a year earlier; and other revenue from North America was $187 million, compared with $187 million a year earlier. was $154 million.

Amazon's net revenue from electronic and other daily necessities from international markets was $5.378 billion in the first quarter, compared with $5.188 billion in the same period last year; media revenue from international markets was $2.32 billion, compared with $2.642 billion a year earlier; and other revenue from international markets was $47 million, compared with $53 million a year earlier.

Capital Profile:

As of March 31, 2015, Amazon held $10.237 billion in cash and cash equivalents, compared to $14.557 billion as of December 31, 2014, and held convertible bonds valued at $3.544 billion, compared to $2.859 billion as of December 31, 2014.

Stock price performance:

Amazon shares rose $0.19, or 0.05 percent, to $389.99 in regular trading on the Nasdaq on Thursday. Amazon shares continued to rise $25.01, or 6.41 percent, to $415 in after-hours trading after the results were released. Amazon's share price has been as low as $284 for the past 52 weeks, with a high of $394.60.


Google's first-quarter results were weaker than expected, growth slowed

On April 24, Google reported first-quarter results for the fiscal year ended March 31. The report showed that Google's first-quarter revenue was $17.258 billion, up 12 percent from $15.42 billion a year earlier, and that it's net income of $3.586 billion, up 4 percent from $3.452 billion a year earlier, according to U.S. General Accounting Standards.

Excluding some one-time items ,excluding GAAP, Google's first-quarter earnings per share were $6.57, less than Wall Street analysts had expected. Analysts on average had expected Google's first-quarter earnings of $6.60 per share and revenue of $17.5 billion, according to thomson reuters surveys.

Google's weaker-than-expected first-quarter results were due to slower growth and a rise in the dollar. Excluding fees paid to advertising partners, Google's revenue for the first quarter was $13.91 billion, below analysts' expectations. Analysts on average expect revenue of $14 billion, according to FactSet, a financial information provider.

In the first quarter, Google's ad sales rose 11 percent to $15.51 billion. Google's advertising revenue is already under some pressure, Reuters said, as more consumers use Google's online services from mobile devices such as smartphones and tablets, which typically have lower advertising rates. In addition, rivals such as Facebook are creating growing competition for Google in mobile advertising.

Facebook reported on Wednesday that its first-quarter revenue rose 42 percent from a year earlier to $3.54 billion, also noting that its results were affected by currency movements. But the fact that revenue is growing faster than Google's shows that Facebook is grabbing Google's share of digital advertising.

Larry Kim, founder of WordStream, an online advertising agency, says: "Just two years ago, Facebook's advertising business was a joke, but today, Facebook's ads are better than Google's in about ten different ways. He stressed that Facebook has the ability to serve ads to specific groups of people, and that its advertising network works well on a smartphone platform. A Google spokesman declined to comment.

Google shares rose $7.64, or 1.42 percent, to $547.00 in regular trading on the Nasdaq. Google shares rose another $16.50, or 3.02 percent, to $563.50 in after-hours trading at 16:47 A.m. (4:47 p.m. EST). For the past 52 weeks, Google's highs have been $599.65, with a low of $487.56.

Google's shares have risen 4 per cent in the past year, but that has fallen short of the Nasdaq composite index, which rose 23 per cent over the same period, largely because investors are worried about google's slowing growth and rising spending.

Key results:

Google's first-quarter revenue was $17.258 billion, up 12% from a year earlier. Google calculates advertising revenue in accordance with U.S. GAAP, excluding traffic acquisition costs (TAC). Google's first-quarter revenue acquisition costs were $3.345 billion, or 22% of advertising revenue.

Google's first-quarter operating profit was $4.447 billion, or 26 percent of revenue, according to U.S. General Accounting Standards. According to U.S. General Accounting Standards, Google's operating profit for the same period last year was $4.115 billion, or 27 percent of revenue. Google's first-quarter operating profit was $5.650 billion, or 33 percent of revenue, according to U.S. GAAP. Google's operating profit for the same period last year was $4.954 billion, accounting for 32% of revenue, according to GAAP.

Google's first-quarter net profit was $3.586 billion, compared with $3.452 billion a year earlier. Google's first-quarter net profit was $4.532 billion, compared with $4.299 billion in the same period last year.

Google earned $5.20 per share in the first quarter, compared with $5.04 a year earlier. According to U.S. General Accounting Standards, Google's total share dilution in the first quarter was 689 million shares, compared with 685 million shares in the same period last year. Google earned $6.57 per share in the first quarter, compared with $6.27 a year earlier, not in accordance with U.S. General Accounting Standards.

- Do not include equity incentive expenses in Google's operating profit and operating margin, in accordance with U.S. General Accounting Standards. Excluding U.S. GAAP, Google's net income and earnings per share are not included in equity incentive expenses, equity award-related tax income, and net loss from non-continuing operations. Google's first-quarter equity incentive-related expenses were $1.203 billion, compared with $839 million a year earlier. Google's operating profit, net income and earnings per share are not included in the equity incentive-related tax income, in accordance with U.S. General Accounting Standards. Google's first-quarter equity incentive-related tax revenue was $257 million, compared with $190 million a year earlier.

"Google's first-quarter revenue was $17.3bn, up 12 per cent from a year earlier," said Patrick Pichette, Google's chief financial officer. Excluding the net effect of headwinds due to exchange rate movements, revenue grew 17% year-on-year and performed healthily. We continue to see a lot of momentum in the mobile advertising business and opportunities for collaboration with brand advertisers. "

Financial analysis:

Google's first-quarter revenue was $17.258 billion, up 12 percent from $15.42 billion a year earlier and down 5 percent from the previous quarter. Google calculates total revenue in accordance with U.S. GAAP, excluding traffic acquisition costs.

Google's first-quarter revenue, or Google's own, revenue was $11.932 billion, up 14 percent from a year earlier and down 4 percent from the previous quarter.

Google's first-quarter online revenue, or $3.576 billion generated by Google Partners' adSense program, was up 1 percent from the same period last year and down 8 percent from the previous quarter.

Google's total advertising revenue in the first quarter was $15.508 billion, up 11 percent from a year earlier and down 5 percent from the previous quarter.

Google's other revenue in the first quarter was $1.75 billion, up 23 percent from a year earlier and down 2 percent from the previous quarter.

If the exchange rate were flat year-on-year (excluding the $311 million hedge gain associated with foreign exchange risk management programs), Google's first-quarter revenue would have increased by $795 million. In addition, if the exchange rate were to be flat compared with the same period last year, Google's first-quarter revenue would grow 17% year-on-year.

Google's total paid clicks, including Google's website and AdSense partner's, rose about 13 percent in the first quarter from a year earlier, down about 1 percent from the previous quarter.

Google's average cost per click, including google's website and AdSense partner's, fell about 7% in the first quarter from a year earlier and about 5% from the previous quarter.

Google's first-quarter revenue from traffic acquisition (TAC), which is shared with partners, was $3.345 billion, compared with $3.232 billion a year earlier. Google's first-quarter revenue-generating spending accounted for about 22 percent of ad revenue, down from 23 percent a year earlier.

Of Google's TAC spending in the first quarter, $2.432 billion will eventually be paid to AdSense partners, and another $913 million will eventually be paid to specific distribution partners.

Google's other revenue costs in the first quarter were $3,011 million, or 17 percent of revenue. Google's other revenue costs were $2.729 billion in the same period last year, accounting for 18 percent of revenue. Google's other revenue costs include manufacturing and inventory-related costs, data center operating expenses, amortization of intangible assets, and content acquisition costs.

Google's first-quarter operating expenses were $6.455 billion, or 37 percent of revenue. Google's operating expenses were $5.344 billion in the same period last year, accounting for 35 percent of revenue.

Google's depreciation, amortization and impairment expenses were $1.177 billion in the first quarter, compared with $1.086 billion a year earlier.

Google's equity incentive spending in the first quarter was $1.203 billion, compared with $839 million a year earlier.

Google's effective tax rate was 22% in the first quarter, compared with 18% in the same period last year.

Net cash from Google's first-quarter operations was $6.617 billion, compared with $4.391 billion a year earlier. Google's capital expenditure in the first quarter was $2.927 billion, compared with $2.345 billion a year earlier. Google's free cash flow in the first quarter was $3.69billion, compared with $2,046 million in the same period last year. Google defines free cash flow as net cash generated by operational activities less capital expenditures.

Google expects to continue its major capital spending activities in the future.

As of March 31, 2015, Google held $65,436 million in cash, cash equivalents and realizable securities. By comparison, as of March 31, 2014, Google held $59,379 million in cash, cash equivalents and realizable securities.

As of March 31, 2015, Google employed 55,419 full-time employees worldwide. By comparison, as of December 31, 2014, Google employed 46,170 full-time employees worldwide.

Google shares rose $7.64, or 1.42 percent, to $547 in regular trading on the Nasdaq on Thursday. In after-hours trading, Google's shares rose $17.1, or 3.13 percent, to $564.1. Google's shareprice has fallen as low as $487.56 for the past 52 weeks to $599.65. Based on Thursday's closing price, Google has a market capitalisation of $372.3 billion.