Mega Caps’ Big Week

Mega Caps’ Big Week

Last week, five Mega Cap companies: Alphabet, Amazon, Apple, Microsoft, and Meta, released their results for the quarter ending 31 December 2023. All five companies are technology companies, with some similarities and differences in their respective businesses. There are overlaps in areas like cloud computing and advertising, but the approaches to leveraging and delivering technology services can differ significantly. And this affects their results differently. 

Here is a summary of the key highlights from the recent results. 

Alphabet 
Alphabet reported a 13% increase in quarterly revenue, reaching $86.3 billion, with a notable 52% growth in net profit, totalling $20.7 billion. During the earnings call, the company highlighted its strategic focus on leveraging AI to enhance existing products in addition to introducing new AI offerings such as the multi-modal (it can understand different formats of information) LLM: Gemini. Adverts from Youtube, the video-sharing platform owned by Alphabet, generated a revenue of $9.2 billion for the quarter. In comparison, Netflix generated $8.8 billion for its most recent quarter. Youtube don’t have to spend large amounts of money on creating content like other streaming platforms. Rather, content creators receive a share of advert and subscription revenues, based on how well their content does on the platform.  

Amazon 
For the quarter, Amazon witnessed a 14% increase in net sales, reaching $170.0 billion compared to the same quarter last year. Notably, the operating income showed a substantial increase from $2.7 billion in Q4 2022 to a whopping $13.2 billion in Q4 2023. Amazon have focussed on cost-cutting over the last 2 years whilst still prioritising faster and cheaper deliveries to clients. They have also continued to invest in certain strategic projects. The primary drivers of revenue and operating income growth over the last year are AWS, advertising, and third-party seller services. Amazon’s advertising service experienced a 27% growth in the quarter compared to the same period last year. 

Apple 
In the latest quarter, Apple reported a 2% increase in revenue at $119.2 billion, with net income growing by 13% to $33.9 billion. The company boasts an impressive installed base of 2.2 billion active devices. Like other major tech firms, Apple’s large and loyal user base gives it an advantage when launching new products or services. The net income growth is impressive given the low revenue growth. The expanding margin was a result of the services revenue increasing at a higher rate than what the cost of sales for the services segment increased by. 

Microsoft 
In the quarter, Microsoft reported robust financials with a revenue of $62.0 billion and a net profit of $21.9 billion, marking impressive year-on-year increases of 18% and 33%, respectively. Notably, the cloud revenue, encompassing Azure, Onedrive, and other cloud services, surged by 24% to $33.7 billion, constituting over 50% of Microsoft’s total earnings for the quarter. Despite this growth, operating expenses for Microsoft increased by 3% year over year. The company’s scalability as a tech giant allows it to boost revenue without a proportional increase in operating costs. 

Meta 
In the recent quarter, Meta achieved a revenue of $40.1 billion, accompanied by a net profit of $14.0 billion, marking a 201% increase in profit compared to the same quarter last year. Across all Meta products, including Facebook, Instagram, and WhatsApp, there were 3.19 billion daily active users, reflecting an 8% year-over-year growth. Noteworthy corporate changes include several restructurings throughout the year, resulting in a 22% reduction in headcount by the end of 2023 compared to the end of 2022. Additionally, Meta declared its first-ever dividend during this period. 
 

Amazon, Apple (via Berkshire Hathaway) and Microsoft are held in the Lunar BCI Worldwide Flexible fund. They are also held by Lunar Capital’s Offshore Portfolio clients.   

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
195.25
This Week
195.68
% Change YTD
3.90% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
75 084
This Week
74 174 Lunar Capital stocktake arrow down
% Change YTD
-3.54% Lunar Capital stocktake arrow down
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
15 455
This Week
15 629 Lunar Capital increasesymbol
% Change YTD
4.11% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
4 891
This Week
4 959 Lunar Capital increasesymbol
% Change YTD
3.96% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
18.79
This Week
18.90 Lunar Capital increasesymbol
% Change YTD
3.28% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
20.38
This Week
20.37 Lunar Capital stocktake arrow down
% Change YTD
0.99% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
83.09
This Week
77.40 Lunar Capital stocktake arrow down
% Change YTD
0.56% Lunar Capital increasesymbol
Source: Iress

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Our email address is: [email protected]

Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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