Q2 Earnings Season: 5 takeaways from the Big's 5 reports

For investors, after reviewing first quarter corporate earnings reports, they look to the following ones not only for highlights but also for clues on how things have changed quarter over quarter and year over year. This can include data, sales, new products, and more.

Artificial Intelligence (AI) was a key focus in the first quarter's earnings reports for the "Big 5," which refers to five of the most significant and influential companies in the technology sector: Apple Inc., Amazon.com Inc., Google LLC (Alphabet Inc.), Microsoft Corporation, and Facebook, Inc. (Meta Platforms, Inc.).

In the most recent quarterly reports, AI remains a topic of conversation, but there are other highlights to share. Read on to learn more common takeways in the Big 5's performances.

Five common takeaways from the Big 5's Q2 Earnings Reports

How did earnings and revenue look?

The Big 5 reported year-over-year revenue increases. There wasn't a consistent contributor to the growth, with some companies missing estimates.

For Alphabet, the company saw earnings per share (EPS) of $1.89 on revenue of $84.7 billion, slightly beating analysts forecasts and increasing from last year during the same period 31% and 14%, respectively. Advertising revenue was a bright spot as it hit $64.6 billion, up from last year's $58.1 billion.

Amazon's EPS of $1.29 (up from 2Q 2023's $0.66) beat estimates by 23%. The company's $148 billion revenue was a touch below the $148.8 billion that analysts expected, with the slight miss failing to impress.

Apple reported $85.8 billion in revenue for the three-month period of April through June. Its EPS was $1.40, up 11% year over year. These numbers represent records: a new June quarter revenue record and EPS.

Meta's second-quarter profit rose 73 percent year-on-year, to $13.5 billion (EPS of $5.16) and its revenue increased 22 percent, to $39.1 billion. Its advertising revenue increased to $38.33 billion, better than analysts' estimates.

For Microsoft, its fourth-quarter revenue was $64.7 billion, up 15% year-over-year, while its cloud revenue was $36.8 billion, up 21% year-over-year, but shy of analysts' $37.2 billion expectations. Its EPS was $2.95 for the fourth quarter fiscal year, increasing 9.7% year over year.

If AI isn't helping to drive growth, then what is?

For Alphabet, AI is still top of mind for growth. Sundar Pichai, Alphabet’s chief executive, said in company's earnings conference call that AI initiatives were“driving new growth.” Pichai explained,“Year-to-date, our A.I. infrastructure and generative A.I. solutions for cloud customers have already generated billions in revenues and are being used by more than two million developers. He noted the company was “seeing great progress with AI Overviews.” These are answer summaries highlighted in Google search results.

The remaining Big 5 members highlighted different revenue drivers.

Apple's services business was the crown jewel with its double-digit growth. This segment includes advertising revenue, AppleCare+, App Store sales, and subscription services such as Apple TV+, and more. The company reported its services revenue underwent record-high revenue at $24.21 billion in the third quarter, up 14% from last year's period. The company said it expects double-digit growth in the fourth quarter.

Amazon's cloud business, Amazon Web Services (AWS) revenue was a great contributor with its $26.3 billion as compared to an expected $26 billion, surpassing 2023's $22.1 billion during the same time period. Amazon's advertising segment, which typically grows by double-digit percentages, underwent a strong $12.8 billion in revenues, but below an anticipated $13 billion.

Meta's sales jumped to $39.1 billion, up 22% when compared to the previous year. While revenue was slower this period as compared to the first quarter, its annual revenue growth was more than 27% with advertising making up 98% of Meta’s second-quarter revenue.

And for Microsoft, Intelligent Cloud revenue was $28.5 billion, up 19%. Under this business, the company's server products and cloud services revenue rose 21% (up 22% in constant currency) driven by Azure; other cloud services revenue grew 29%.

AI is here to stay — but it can be costly.

All five companies continued highlighting AI investments but for this quarter's reports, it was more about their high costs than having a short-term effect on the bottom dollar. Here's a look.

Alphabet: Costs on the rise. In the second quarter, Alphabet spent $2.2 billion to build AI models in its DeepMind and Google Reasearch organizations, up from 2023's second quarter $1.1 billion spend. When these will start generating revenue for the company's Cloud business remains to be seen.

Amazon: Costs growing. In response to AI's rise, Amazon has increased spending on chips for computer power, data centers, and real estate. Its equipment and property shopping hit $17.6 billion in the second quarter. This represents a 50% jump from last year's number during this same time period and the company's highest quarter spend since 2021. Look for spending to continue as Amazon CEO Andy Jassy wants the company to be an AI leader.

Apple and Meta are playing the long game. Apple's AI rollout is on its way (read some specifics below).  

Meta: The company hasn't offered any spending specifics but has said increased AI spending is on the horizon. The company sees“significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.” The company's ambitions go far as Meta CEO Mark Zuckerberg said, "Meta AI is on track to be the most used AI assistant in the world by the end of the year."

Microsoft: CFO Amy Hood said nearly all of Microsoft's $19 billion in capital expenditures were related to cloud or AI investments. She added in the earnings call that the company is capacity constrained on AI in its cloud business, Azure, which has hampered growth for the business unit.

Apple's rollout is coming; Buffet continues cutting his stake

Apple offered more details in its earnings report about AI compared to last quarter's report. The company is planning a staggered rollout of the Apple Intelligence features. Siri's integration with ChatGPT is expected before the end of this calendar year while other functions will come over the course of the year. Only U.S. English will be available at launch.

For those interested in an early preview, Apple recently released its iOS 18.1 software. Signing up for a free developer account can gain you acess. The initial Apple Intelligence tools are part of this software release, which the company discussed at its June developers conference. But the full extent of the features won't come until Apple launches its new iPhones this fall.

In other Apple news, Warren Buffet's Berkshire Hathaway continued selling its stake in the company. The selling started in the fourth quarter of 2023, but it has accelerated in 2024. During the second quarter, Buffet sold almost half of Berkshire Hathaway’s Apple stake but the stock continues to be Berkshire's biggest stock position at quarter's end with its $84.2 billion value vs the end of 2023's $174.3 billion.

What was the market's reaction to the earnings reports?

After its quarterly earnings release, Alphabet shares dropped almost 2% in after-hours trading amid a net income increase of 28.6% to $23.62 billion from the same period last year.

After reaching record-highs in July, Amazon's shares fell 9% after sharing its earnings report on August 7, 2024. The company underwent its worst trading day in 2024, following the news that even though quarterly profits rose, it missed revenue estimates, leading shares to fall.

Apple's shares fared better after its earnings report, as they increased 6% in the following session. This is the stock's best post-earnings performance since 2022's fall numbers. In the three previous earnings reports, Apple shares dropped after them.  

For Meta, its second quarter stronger-than-expected results sent its shares 6% higher in after-hours trading, following their earnings announcements. The company did not share what it plans to spend on AI in 2025, but it will be signicant.

With its missed estimates, Microsoft's shares tumbled over 5% in after-hours trading after the company's earnings report. This came as CEO Nadella said customers' use of Microsoft's AI offerings was rising.

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Keep up on earnings reports with moomoo

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Earnings Calendar: Want to know when earnings are coming out? Use the calendar and link to your personal one. Investors can filter earning reports for customization and then review them based on release time and stock type. This can be done through an investor's personal watchlist or their positions in the moomoo app. For the latest news, check out our moomoo's news section.

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It's a marathon, not a sprint.

The Big 5 delivered earnings reports that both exceeded and disappointed estimates. The companies shared ongoing commitments to AI but undergoing profitable numbers from this may take time. They continue to provide positive outlooks from their varying products and services. At moomoo, we also remain committed to these as we help investors enhance their investment journeys for the long term.