The latest quarterly numbers from many of the tech sector’s largest companies help make it clear why the Nasdaq is sitting near its all-time high and has blown away the performance put up by the S&P 500 over the last 12 months.
Apple is now up to 21 stores in China and aims for 40 by the middle of 2016; around a quarter of Apple’s payments to iOS developers in the year went to Chinese developers.
On the other hand, Evans said the larger size of the iPhone 6 and especially the 6 Plus are clearly a big factor in declining iPad (and all tablet) sales. “For Apple, this means that the high-price, high-margin iPhone is cannibalising the cheaper, lower-margin iPad (helped in some but not all markets by operator ‘subsidies’),” Evans wrote.
For added wow factor, Apple said now has $193 billion in cash, and will extend its shareholder return program via buybacks and dividends.
A lot of that was due to the company finally breaking out the financials of its Amazon Web services business, which posted sales of $1.57 billion in the latest quarter, up 49% from a year earlier. The division now represents 7% of Amazon’s overall revenue.
The Wall Street Journal noted that part of investors’ patience stems from Amazon successfully developed a mystique around its free-spending ways, telling investors it is necessary to roll out new products and services that keep it a step ahead of competitors. It has maintained a consistent rollout of new releases this year, including new cities with one-hour delivery by bike messenger, as well as a referral service to connect buyers to plumbers, roofers and other handymen.
On the other side of the coin, some tech titans saw a hiccup in their latest quarter due to higher expenses, a strong dollar, or flat-out slowing growth.
The company’s revenue rose 12%, but the company said it would have grown 17% if not for the stronger dollar. However, according to the Wall Street Journal, the company’s ability to better control expenses boosted profit margins, which gave Google’s stock a lift.
The Wall Street Journal reported that total costs and expenses rose 83% from a year ago: research and development spending more than doubled to $1.06 billion, while the number of employees jumped 48% to 10,082.
Facebook also cited the rising dollar as hampering revenue. The company generates more than half its revenue overseas.
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1Benedict Evans newsletter, No. 110, May 4, 2015.
2Greg Bensinger, “Amazon Swings to Loss Despite Jump in Sales,” wsj.com, April 23, 2015.
3Rolfe Winkler and Alistair Barr, “Google Caps Costs as Growth Slows,” wsj.com, April 24, 2015.
4Alistair Barr and Deepa Seetharaman, “Facebook’s Spending Weighs on Profits,” wsj.com, April 22, 2015.