Shares of Google parent Alphabet hit record intraday highs on Wednesday after the company posted first-quarter earnings and revenue that beat Wall Street expectations. The tech giant was also authorized by its board to repurchase up to an additional $50 billion of its own stock.
A 34% rise in revenue supported by stronger advertising sales helped the company blow past analyst estimates.
Earnings were $26.29 per share, well above the Refinitiv estimate of $15.82 per share and earnings of $9.87 per share a year earlier.
Total revenue of $55.31 billion was ahead of the $51.70 billion estimate from Refinitiv. A year ago, revenue was $44.16 billion. The increase reflected consumer activity online and broad-based ad revenue growth, the company said.
Traffic acquisition costs came in at $9.71 billion, up from $7.45 billion a year earlier.
The stock climbed as much as 5% to $2,397 per share. It’s gained 31% year-to-date, driven in part by investors expecting the company to benefit from increased use of search services amid the pandemic.
“Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained. We’ve continued our focus on delivering trusted services to help people around the world,” said Sundar Pichai, Alphabet’s CEO, in a statement.
Revenue from Google Search rose to $31.9 billion from $24.5 billion and YouTube ads drew in $6 billion, up from $4 billion in the prior period.
“We see a permanent shift to digital drawing ever more ad dollars, with particular strength in YouTube as it is the new TV of this decade. Further, we see real momentum across Google as the global economy re-opens in stages and marketing budgets ramp up,” said Brent Thill, an equity analyst at Jefferies, in a note.
Alphabet announced its first-quarter earnings Tuesday, blowing past Wall Street’s expectations as the company’s ad business continues to see strong growth following a pandemic slump last year.
Google’s parent company brought in $45.6 billion in revenue for the quarter, minus traffic acquisition costs, versus $42.48 billion expected by analysts. Alphabet’s revenue jumped 35.3% from $33.7 billion in the same quarter a year ago.
Google Cloud brought $4.02 billion in revenue and had an operating loss of $974 million in Q1, versus $3.99 billion in revenue expected by analysts. That’s compared to $3.83 billion in revenue and $1.24 billion in operating losses during Q4 2020, the first time Google broke out its cloud business’ performance separately.
Google’s ad business also continued to rebound, following its first-ever revenue decline in Q2 2020, as advertisers reallocate their budgets back toward Google’s platforms, especially YouTube, which brought in $6.01 billion in revenue during Q1 2021.
Meanwhile, Alphabet’s “other bets,” which include Verily, Waymo, and other Alphabet businesses, reported revenue of $198 million against an operating loss of $1.15 billion, compared to analyst expectations of $1.21 billion in operating losses.
Alphabet also announced plans to buy back $50 billion of its Class C stock. The company’s stock was up more than 4% in after-hours trading.
Here’s what Alphabet reported, compared to what analysts expected, according to Bloomberg.
Total revenue: $55.3 billion (Expected $51.61 billion)
Earnings per share: $26.29 per share, adjusted (Expected $15.65)
Google Cloud revenue: $4.02 billion (Expected $3.99 billion)
YouTube ads revenue: $6.01 billion
Google’s earnings report comes as the digital advertising market has seen substantial growth over the past two quarters, though the company sent shockwaves through the industry by announcing last month that it will no longer track individual users online, which could upend how adtech companies do business.
But some experts previously told Insider’s Isobel Asher Hamilton that the move may be a clever ploy by Google to further entrench its dominance of the digital ads market – a dominance that has invited increasing antitrust scrutiny, including three separate federal lawsuits, that could mean regulatory headwinds for Google down the road.
Elon Musk told investors during the Tesla’s quarterly earnings call that the automaker has been forced to reckon with numerous supply chain issues in 2021.
Musk said the company has had “insane difficulties” with its supply chain over the last quarter. “We’ve had some of the most difficult supply-chain challenges that we’ve ever experienced in the life of Tesla,” he said on Monday.
The CEO said the global semiconductor chip shortage, which has rocked the automotive industry, as well as port delays impacted manufacturing goals.
Many automakers have since been forced to shut down manufacturing plants and prioritize the most profitable car models they produce as a result of the shortage. Computer chips account for about 40% of a new car’s cost, according to a report from Deloitte, and are used in navigation, bluetooth, and collision-detection systems.
Musk also said the company has had trouble scaling its production in China due to the pandemic, as COVID-19 restrictions in the country have made it more difficult for Tesla to bring in engineers for its plants.
Port delays and the global container-ship shortage have also impacted Tesla’s manufacturing supplies in the US.
Zach Kirkhorn, Tesla’s chief financial officer, said the company is facing high expediting costs, despite “tremendous work” from the company’s team and suppliers in keeping the plants running.
“We continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities,” Kirkhorn said.
Port delays and a global container-ship shortage have set many companies back in recent months, pushing shipping costs even higher and leading to shortages of goods. Delays at southern California ports have caused nearly 20 ships to wait weeks to dock and unload.
Overall, Tesla had a profitable quarter, after announcing it had sold the most cars in its history. During the first three months of the year, the company delivered 184,877 vehicles – a number that was largely driven by strong demand for electric vehicles in China.
Tesla will report its first-quarter earnings after the market closes on Monday, and all eyes will be on guidance as the company grapples with a shortage in semiconductors.
The company already reported first-quarter deliveries earlier this month, which exceeded analyst expectations. The company said it delivered 184,800 vehicles in the quarter, representing a new record. Most of those deliveries consisted of the Model 3 and Model Y, rather than the higher-priced Model S and Model X.
The average analyst estimate for Tesla’s upcoming earnings report includes revenue of $10.3 billion and earnings per share of $0.79, according to data from Yahoo Finance.
As a whole, Wall Street remains skeptical on Tesla despite its ramping up of vehicle production over the past year. The company currently has only four buy ratings, eight hold ratings, and seven sell ratings among analysts.
Detailed below is what four Wall Street analysts expect from Tesla’s first-quarter earnings report.
JPMorgan: ‘Remain cautious on lofty valuation’
Tesla’s strong first quarter deliveries already spurred JPMorgan to increase its earnings estimates for the company earlier this month. But the bank remains cautious on Tesla, assigning the company an Underweight rating and price target of $155, representing downside potential of 78% from Friday’s close.
“While our blended price target of $155 implies -79% downside, we do not regard it as ungenerous as it actually values Tesla as the world’s second largest automaker by market capitalization, behind Toyota and roughly tied with Volkswagen despite the automakers each currently selling on the order of magnitude of 15-20x as many vehicles annually as Tesla,” JPMorgan said.
“Tesla’s current valuation appears to us to insufficiently incorporate what is likely to be greatly intensified competition in the market for battery electric vehicles and leaves little room for less than perfect execution,” JPMorgan concluded.
Credit Suisse: ‘Upside likely from regulatory credits’
Credit Suisse is ahead of consensus expectations for Tesla’s first-quarter earnings report, and sees three key themes that investors will focus on.
“Launch of new capacity remains most critical, especially in Europe,” Credit Suisse said, adding that Tesla’s Berlin factory is of highest priority as it enables Tesla to capitalize on the electric vehicle opportunity in Europe.
“1Q delivery beat reinforces upside on 2021 deliveries,” Credit Suisse said. The bank expects Tesla to deliver 929,000 vehicles in 2021, well ahead of consensus estimates of 831,000. “We expect benefit from continued ramp of China production, industry strength in US and China, and as the launch of the Berlin and Austin facilities in 2H21,” Credit Suisse said.
“Gross margin could see little upside, but investors would look past any softness,” the bank said, adding that volume strength in the quarter will likely be offset by cost inefficiencies, a negative mix of model sales, and a reduction in vehicle prices.
Credit Suisse maintains a Neutral rating for Tesla and a price target of $800.
Wedbush: ‘Expecting good news from Musk and Co.’
Wedbush analyst Dan Ives thinks Tesla will easily be able to beat Wall Street estimates for its first-quarter earnings given the company’s strong Q1 deliveries “and tight expense controls seen in Fremont.”
“The street is now laser focused on gauging the annual delivery trajectory for 2021… which we expect to drive the stock much higher over the coming months,” Ives said.
“We now believe Tesla could exceed 850,000 deliveries for the year with 900,000 as a stretch goal, despite the chip shortage and various supply chain issues lingering across the auto sector,” Wedbush said.
“We believe the tide is turning on the Street and the ‘eye popping’ delivery numbers coming out of China cannot be ignored with the trajectory on pace to represent ~40% of deliveries for Musk & Co. by 2022,” Ives concluded.
Wedbush maintains an Outperform rating for Tesla and a price target of $1,000.
RBC tweaked its first-quarter earnings estimates for Tesla following the release of its delivery figures earlier this month. RBC expects $10.5 billion in revenue for the quarter, which is lower than its previous estimate due to lower deliveries of the Model S and X, which command higher prices and profit margins.
RBC’s estimates include $400 million in regulatory credits, which Tesla sells to other automakers that don’t produce enough electric vehicles based on government mandates.
“On the call, we believe the items that will be in focus are auto-gross margins, free cash flow, capacity expansion updates, product updates and commentary about the impact of the semi-shortage to 2021 deliveries,” RBC said.
The firm lowered its 2021 delivery estimates to 825,000 from 860,000, “given we expect some supply chain issues,” RBC said. RBC maintains a Sector Perform rating for Tesla and a price target of $725.
JPMorgan, the top US bank by assets, reported first-quarter earnings on Wednesday, beating consensus estimates of analysts polled by Bloomberg on strong trading revenue.
It is the first major bank to report results this quarter, paving the way to offer a look at how banking businesses are faring alongside progress in COVID-19 vaccinations.
The bank’s net revenue came in at $33 billion, up 14% from a year ago, driven by its performance in the corporate and investment-banking division.
“JPMorgan Chase earned $14.3 billion in net income reflecting strong underlying performance across our businesses, partially driven by a rapidly improving economy,” CEO Jamie Dimon said in a statement.
“With all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth.”
Here are the key numbers:
Net income: $14.3 billion versus $9 billion estimated
Earnings per share: $4.50 versus $3.13 estimated
Revenue: $33.1 billion versus $30.3 billion estimated
The jump in profit was partly driven by a release of loan loss reserves, in the amount of $5.2 billion this quarter. Last quarter, the bank released $2.9 billion in reserves.
The bank had set aside reserves of $26 billion in anticipation of a wave of loan defaults amid the coronavirus pandemic. Dimon said he believed the amount is “appropriate and prudent, all things considered.”
JPMorgan’s corporate and investment-banking divison was the standout performer, with a 46% jump in net revenue to $14.6 billion. Its robust performance was fuelled by a surge in deal-making as the bank advised on 126 deals worth about $208 billion in the first-quarter, according to GlobalData.
JPMorgan’s shares are up 21% since the start of this year.
Goldman Sachs and Wells Fargo are expected to report first-quarter results later on Wednesday.
Shares in Intel fell as much as 6% in early trading Friday, after the company said its corporate website was hacked, pushing the chipmaker to release its fourth-quarter earnings earlier than planned.
George Davis, Intel’s chief financial offer, told the Financial Times a hacker gained unauthorized access to sensitive data tied to its earnings report that was set to be published after the market close on Thursday. But upon finding out about the attack, the chipmaker released its results six minutes before the market close.
“An infographic was hacked off of our PR newsroom site,” Davis told the newspaper. “We put our earnings out as soon as we were aware.” Without providing further details, he said the breach was caused by an unlawful action that didn’t involve any unintentional disclosure by Intel.
An Intel spokesperson told Insider the company is investigating reports that non-authorized access may have been obtained to one graphic from its earnings report.
Intel’s fourth-quarter results exceeded investor expectations and beat the company’s own forecast on the back of strong PC sales. The chipmaker saw quarterly revenue fall 1% year-on-year to $20 billion, but still beat the $17.49 billion estimate of analysts polled by Refinitiv. Net income for the quarter came in at $1.52 per share, compared to $1.10 expected.
Intel’s shares closed up almost 7% at $62.46 on Thursday, but erased gains after the reported hacker’s access to information.