3 Tech Earnings Season Winners: Apple Inc, Facebook Inc, and Microsoft Corp

With earnings seasons largely in the rear view mirror for many of the most important tech names, let’s look at how Apple, Facebook, and Microsoft each impressed.

May 4, 2014 at 1:00PM

Flipping the calendar from April to May means one things for tech investors (sorry, not May flowers). The month's change means earnings season is for the most part in the books, barring a few noteworthy exceptions.

As is typically the case, the calendar first quarter's reports for many of our most popular tech stocks contained its fair share of fireworks, as well as a few key disappointments as well. For my money, three tech names that impressed the most this earnings season were tech giant Apple (NASDAQ:AAPL), social networking dynamo Facebook (NASDAQ:FB), and software kingpin  Microsoft (NASDAQ:MSFT).

So without further ado, let's take a look at what made Apple's, Facebook's, and Microsoft's respective reports so exemplary.

Apple
Simply said, Apple shot the lights out with fiscal second quarter report .

Apple's sales ticked up a solid 5%, especially for a company of its massive size. However, thanks to an improved product mix, Apple was able to expand its gross margin to 39.3% in the second quarter, which helped power a big beat on Apple's bottom line. All told, Apple generated $11.62 in EPS, surpassing the analysts' consensus estimate by more than 14%. 

Apple's buybacks have also proven hugely accretive for shareholders, and Apple's showed it has zero intention of taking its foot off the gas for its capital return plan. To that point, Apple's management earmarked more funds to dividends and buybacks, increasing the overall size of its current capital return plan to an astounding $130 billion all told.

Apple's iPhone was the other standout in Apple's report, blowing analysts' estimates out of the water with 43.7 million unit sales. Analysts were hoping for something closer to last year's 38 million.

Now, Apple's set itself up beautifully as its heads into the second half of its fiscal year, which is dominated by new product news. Make sure to keep a close watch on Apple, but the company certainly did plenty to regain investors' confidence with its report.

Facebook
And although Apple commands more investors attention, Facebook's earnings homerun was arguable every bit as impressive as Apple's.

Facebook shattered analysts' estimates, which called for 60% sales growth from the social networking power. Instead, Facebook grew revenue 72% while also demonstrating impressive progress in other key areas of its business as well.

Advertising revenue increased 82% overall. However, Facebook's mobile advertising business is playing an increasingly central role in its business, generating 59% of total ad revenue in the first quarter. For context, Facebook's mobile ad revenue comprised 30% of total ad revenue in the same quarter last year. We're talking serious traction here, folks. 

Facebook's user growth story also came in quite strong, increasing Facebook's daily active user (DAU) base 21% to a total count of over 800 million. However, Facebook's mobile growth story shone through in its user growth numbers as well. Facebook mobile DAUs grew 43% and now top 600 million. 

Facebook's shares surged in response to this impressive report, but it's hard to argue with the reaction. And although Facebook's shares remain by no means cheap at 79x earnings , Facebook continues to prove doubters wrong. Kudos Facebook. Kudos.

Microsoft
Much like Apple, Microsoft's earnings report portray a company having finally turned a corner.

In a quarter where analysts were calling for a moderate sales slump and a fairly drastic drop in EPS, Microsoft showed it still has some moves. Bucking estimates, Microsoft actually grew non-GAAP sales 8%, expanded its gross margin, and increased non-GAAP profits 5%.

In terms of specific segments, Microsoft saw Devices & Consumer sales increase sales 12% to $8.3 billion with particular strength in the Windows OEM Pro segment, which grew 19%. Commercial licensing on a whole also showed surprising strength given the current state of the PC market, increasing 3.3%. 

More broadly, under the stewardship of new CEO Satya Nadella Microsoft seems like a company with a clear strategic plan -- something that appeared to be sorely lacking under former CEO Steve Ballmer in recent years. Microsoft moved quickly to release its Office software on Apple's iPad last several weeks ago, and the early indications are that it's been a resounding success for Microsoft, even if not a perfect strategic option given Windows' meager presence on mobile.

This is the most optimistic I've seen at Microsoft in some time, and its recent report further cemented the notion that Microsoft's finally gotten down to addressing several of the key hurdles facing it. It's hard not to like what we've seen from Microsoft lately.

Foolish bottom line
Apple, Facebook, and Microsoft clearly raised the bar for themselves with their reports last month, and look for each company to continue to make progress on their respective key strategic initiatives.

Quarterly reports are only so helpful in assessing the overall health of a company. However, there's so much more that goes into truly understand Apple, Facebook, or Microsoft, so any interested parties will need to continue digging.

But at the end of the day, earnings season treated each of these tech names well, and that's certainly worth investors' attention if nothing else.

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Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple, Facebook, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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