It's earnings season again -- and tech giants are readying their latest quarterly releases. This month, in particular, is packed with action, including earnings reports from Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), Facebook (NASDAQ: FB), and Microsoft (NASDAQ: MSFT). The three will report earnings on April 23, 25, and 26, respectively.
For Alphabet, investors will want to see strength in search and more sharp growth from the company's "Google other" segment. In Microsoft's report, they'll be watching for sustained momentum in commercial cloud revenue. Finally, Facebook's guidance will come into focus amid the company's public image challenges.
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Here's a preview of each company's earnings report:
Alphabet's year-over-year quarterly revenue growth rates accelerated throughout 2017, setting the bar high going into the company's first-quarter earnings report.
In Alphabet's fourth quarter of 2017, the Google parent reported a 24% higher revenue and 15% higher operating income compared to the fourth quarter of 2016. Earnings per share increased 28% year over year when excluding the impact of the Tax Act.
Though Alphabet's strong performance was helped by a nice 21% increase in advertising revenue from its core search business, Alphabet's Google other segment, which is primarily driven by the Android app store, Google Cloud, and Google-branded hardware, is playing an increasingly larger role in the company's results. Google other revenue jumped 38% year over year in Q4. Look for a similar trend in Q1.
In its second quarter of fiscal 2018 (the fourth calendar quarter of 2017), Microsoft continued to reap the benefits of its ongoing transformation to a cloudcentric business model. Revenue and operating income were both up double digits on a year-over-year basis, climbing 12% and 10%, respectively.
But the biggest highlight from the quarter was arguably Microsoft's 56% year-over-year increase in commercial cloud revenue. Surging to $5.3 billion during the period, commercial cloud revenue now represents a meaningful 18% of revenue. Investors should expect this catalyst to keep its momentum in Q3.
Social network Facebook has been forced into the spotlight recently. Its press release in March about user data that had been mishandled by a third-party developer sent shockwaves in the media, as pressure mounted for the CEO to testify before Congress about the company's user data and privacy policies. The CEO has cooperated with requests to testify and has taken responsibility for the company's shortfalls in its efforts to mitigate abuse, fake news, hate speech, and foreign influence in elections.
With most of this negative media attention occurring toward the end of Q1 and the beginning of Q2, the company's first-quarter results won't likely be materially impacted by any headwinds with users or advertisers. But it will be interesting to see how the scandal will impact the social network's guidance, particularly its outlook for spending on user data and privacy protection. Facebook had already committed to a 45% to 60% jump in operating expenses in 2018 compared to 2017, driven in part by "sizable security investments in people and technology to strengthen our systems and prevent abuse."
Will Facebook forecast an even larger increase in expenses after its user data scandal?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.