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Portfolio Update - 07 February 2023

📢 Portfolio Update 📢

01 February 2023 | Meta Meta reported fourth-quarter revenue that topped estimates and announced a $40 billion stock buyback. Here are the results.

  • Earnings: $1.76 per share

  • Revenue: $32.17 billion vs $31.53 billion expected, according to Refinitiv

Here are some other key numbers:

  • Daily Active Users (DAUs): 2 billion vs 1.99 billion expected, according to analysts

  • Monthly Active Users (MAUs): 2.96 billion vs 2.98 billion expected, according to analysts

  • Average Revenue per User (ARPU): $10.86 vs $10.63 expected, according to analysts

Revenue in the fourth quarter fell 4% from a year earlier, marking a third straight quarter of declining sales. The company’s cost and expenses ballooned 22% year-over-year to $25.8 billion. “Our community continues to grow and I’m pleased with the strong engagement across our apps,” Meta CEO Mark Zuckerberg said in a statement. “Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.” Meta said that its headcount increased 20% year-over-year to 86,482 as of December 31, 2022. That number includes a large chunk of the over 11,000 workers that Meta said it would lay off last November. The company expects that its total expenses in 2023 will be in the range of $89 billion to $95 billion, which is lower than its prior outlook of $94 billion to $100 billion for the year. Meta attributed the adjustment to “slower anticipated growth in payroll expenses and cost of revenue.” Meta also said that it’s lowering its capital expenditure estimates for the year to be in the range of $30 billion to $33 billion, down from $34 billion to $37 billion. That’s partly due to the company spending less money on data center construction. Instead, Meta said it’s shifting to a different kind of data center architecture intended to be more cost efficient while acting as the backbone of its various artificial intelligence projects. Meta said that it authorized a $40 billion increase to its stock repurchase plan. The company bought back $27.9 billion worth of its shares last year. Meta shares plummeted by over 60% last year, as Zuckerberg struggled to sell Wall Street on his plan to pivot the company towards the yet-to-be-developed world of the metaverse. Zuckerberg has said the metaverse, which would include virtual reality and augmented reality technologies, could represent the next major way people interact. The big bet has frustrated investors, who worry the company is putting too much focus on a futuristic endeavour while its core ad business struggles to revive growth. Meta’s Reality Labs unit, home to the metaverse ambitions, lost $4.28 billion in the fourth quarter, bringing its total operating loss for the year to $13.72 billion. Meta said it expects revenue in the first quarter of between $26 billion and $28.5 billion.

02 February 2023 | Alphabet Alphabet missed on both top and bottom lines when it reported fourth quarter earnings. Here’s how the numbers stacked up:

  • Earnings per share (EPS): $1.05 vs $1.18 per share expected, according to analysts

  • Revenue: $76.05 billion vs. $76.53 billion expected, according to analysts

  • YouTube advertising revenue: $7.96 billion vs. $8.25 billion expected, according to analysts estimates.

  • Google Cloud revenue: $7.32 billion vs. $7.43 billion expected, according to analysts estimates

  • Traffic acquisition costs (TAC): $12.93 billion vs. $13.32 billion expected, according to analysts estimates

CFO Ruth Porat said during the company’s earnings call that Alphabet added 3,455 people during the quarter, the majority of which were technical roles. Porat also told that the company is meaningfully slowing the pace of hiring in an effort to deliver long-term profitable growth, and blamed the YouTube slowdown on a pullback in both planned and direct response advertising in a challenging economic climate. YouTube advertising revenue fell short of analyst expectations to $7.96 billion — down 8% from $8.63 billion the year prior. In addition to the overall pullback in ad spending, YouTube is also facing heightened competition from TikTok in short-form videos. YouTube shorts now has 50 billion daily views, CEO Sundar Pichai said in a call with investors. Google Cloud brought in $7.32 billion — less than analysts expected, although it was a 32% increase from the year prior. It also cut its losses dramatically, from $890 million a year ago to $480 million in Q4. Operating expenses shot up 10% to $22.50 billion, driven by headcount growth, charges for legal matters and lower ad spend. The company also said it lost $1.49 billion on equity securities during the quarter. Executives on the call reiterated the company is focused on AI. CEO Sundar Pichai said “Very soon, people will be able to interact directly with our newest, most powerful language models as a companion to Search, in experimental and innovative ways.” The company is feeling pressure from the popularity of AI-based chatbot ChatGPT, launched late last year by Microsoft-backed OpenAI. Executives previously teased that the company may introduce a similar product to the public at some point this year. The company said it would take a charge of between $1.9 billion and $2.3 billion, mostly in the first quarter of 2023, related to the layoffs of 12,000 employees it announced in January. It also expects to incur costs of about $500 million related to reduced office space in Q1, and warned that other real-estate charges are possible going forward.

02 February 2023 | Amazon Amazon issued first-quarter guidance that came in light of estimates, overshadowing better-than-expected revenue for the fourth quarter. Here are the key numbers:

  • Revenue: $149.2 billion vs $145.42 billion expected, according to analysts estimates

Here’s how other key Amazon segments did during the quarter:

  • Amazon Web Services: $21.4 billion vs $21.87 billion expected, according to analysts

  • Advertising: $11.56 billion vs $11.38 billion expected, according to analysts

Operating income in the quarter came in at $2.7 billion, down from $3.5 billion a year ago. The fourth-quarter figure includes about $2.7 billion of charges, of which $640 million came from severance costs related to the layoffs, the company said. Amazon closed out its slowest year of growth in its quarter century as a public company. Revenue for the year increased 9% as inflationary pressures and rising rates reduce consumer spending. Sales in Amazon’s online stores segment contracted 2% year over year. The company has been contending with slowing sales as rising gas and food prices forced consumers to pull back discretionary spending. The pandemic-fueled e-commerce boom has also fizzled with consumers increasingly returning to physical retailers. CEO Andy Jassy has spent the past year working to reel in costs. In January, Amazon said it’s eliminating 18,000 jobs among its corporate workforce, after cutting a number of employees in November. The company has also instituted a hiring freeze in its corporate ranks, cut some projects and paused warehouse expansion in an effort to tame rising expenses. “In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” Jassy said. Amazon’s cloud business — Amazon Web Services — missed estimates for the fourth quarter, reflecting a slowdown in business spending. AWS grew just 20% in the period, down from 27.5% in the third quarter. Advertising revenue jumped 19% from a year earlier (23% excluding changes in foreign exchange rates). Amazon has emerged recently as one of the leaders in digital advertising by giving brands and sellers more ways to pay to promote their goods across the company’s website, apps and media properties. The e-retailer said it expects to post first-quarter revenue of between $121 billion and $126 billion, representing year-over-year growth of 4% to 8%. Analysts were expecting sales to come in at $125.1 billion. 02 February 2023 | Apple Here’s how Apple did versus analysts consensus expectations:

  • EPS: $1.88 vs. $1.94 estimated, down 10.9% year over year

  • Revenue: $117.15 billion vs. $121.10 billion estimated, down 5.49% year over year

  • iPhone revenue: $65.78 billion vs. $68.29 billion estimated, down 8.17% year over year

  • Mac revenue: $7.74 billion vs. $9.63 billion estimated, down 28.66% year over year

  • iPad revenue: $9.4 billion vs. $7.76 billion estimated, up 29.66% year over year

  • Other Products revenue: $13.48 billion vs. $15.23 billion estimated, down 8.3% year over year

  • Services revenue: $20.77 billion vs. $20.67 billion estimated, up 6.4% year over year

  • Gross margin: 42.96% vs. 42.95% estimated

Apple missed expectations for revenue, profit, and sales for many of its lines of business. Apple’s overall sales for the holiday quarter were about 5% lower than last year’s, the first year-over-year sales decline since 2019. Apple CEO Tim Cook said three factors hurt the results: a strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment. The quarter was a stunning miss by Apple, and its first earnings miss versus consensus expectations in almost seven years. In fact, it was only its second revenue miss since August 2017, with sales coming in more than 3% below consensus expectations. It also represented a regression from Apple’s success over the past two years driven by a need for new computers to work and go to school from home. It was Apple’s first year-over-year quarterly revenue decline since 2019 and the biggest annual quarterly revenue drop since September 2016. Cook added that the supply of iPhone 14 Pro and iPhone 14 Max was significantly reduced during the quarter, meaning there were fewer phones to sell to customers. The primary iPhone assembly plant in China was affected by Covid lockdowns during the quarter, a warning that had been made to investors in November. Cook said the challenging macroeconomic environment affected iPhone sales, Mac sales, and sales of wearables like the Apple Watch. IPhone and Mac sales were down year over year. Apple’s other products category, which includes headphones like AirPods and wearables like Apple Watch, declined over 8%. Cook said Mac sales fell because it was difficult to compare the quarter to last year’s period, in which the company released new high-end MacBook Pro laptops. There were no similar launches during this year’s December quarter, he noted. On a brighter note, Apple disclosed that it has 2 billion active devices, including iPhones, Macs, Apple Watches, and other products, an increase from the 1.8 billion active devices it revealed last year in January. IPad sales grew nearly 30% year over year after it released a low-end, inexpensive model as well as a new high-end model during the quarter. It’s a redeeming area in Apple’s hardware business and is a reversal of last December quarter, in which Mac revenue surged and iPad’s revenue fell. Apple did not provide guidance for the current quarter ending in March. It hasn’t provided guidance since 2020, at first citing uncertainty caused by the pandemic. Analysts expected the company to guide to about $98 billion in sales in the company’s fiscal second quarter. 📅 Earnings Reports for the following update 📅 08 February 2023 | Walt Disney Thank you GSerdan

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