Microsoft, Facebook, and PayPal were the tech stocks to watch yesterday. But Thursday brings with it a whole new set of megacap tech companies, including Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), and Apple (NASDAQ:AAPL).
Here's what investors should watch when these tech giants report for their most recent quarters.
Okay -- maybe they're not all technology stocks, but since the bulk of Amazon's operating profits come from its cloud business, and in light of its growing suite of Amazon-branded consumer technology hardware, the company is often considered a tech stock. Whatever sector you want to put Amazon in, the growing importance of technology to its overall business is impossible to ignore.
Amazon guided for fourth-quarter net sales to be between $56 billion and $60.5 billion, up 28% to 38% year over year. Management expects operating income to be between $300 million and $1.65 billion, up from $1.3 billion in the year-ago quarter.
Beyond looking for consolidated revenue at the high end of management's guidance range, investors should check on growth rates in two of its fastest-growing segments: subscription services and Amazon Web Services (AWS). The two segments saw year-over-year revenue growth of 59% and 42%, respectively, in Amazon's third quarter. Look for similar growth rates from these important growth catalysts in Q4.
After the company reported accelerating revenue growth in its third quarter, investors will eye reported quarterly revenue growth on Thursday closely. Revenue in Alphabet's third quarter increased 24% year over year to $27.8 billion. The increase was driven by a 21% year-over-year jump in Google advertising revenue and a 40% jump in "Google other" revenue.
Though "Google other" revenue only accounts for about 12% of Alphabet's total revenue, it's an important segment for investors to watch. Composed of crucial growth catalysts, including cloud, the Google Play app store, and Google-branded hardware, any meaningful deceleration in this segment would be discouraging for Alphabet's long-term prospects.
As is the case with Amazon, investors watching Apple's earnings release should also look for the tech giant's fiscal 2018 first-quarter revenue to be at the high end of management's guidance range.
Apple guided for first-quarter revenue to be between $84 billion and $87 billion, up from a record $78.4 billion in the year-ago quarter.
But investors will also likely watch Apple's guidance closely -- especially in light of rumors saying Apple slashed its orders with suppliers for iPhone X units. Currently, the consensus analyst estimate for Apple's second-quarter revenue is $67.1 billion, representing 26.8% year-over-year growth. Investors, therefore, may use this as a barometer for what to look for from the guidance management provides in its first-quarter earnings release.
All three of these companies will post their quarterly results after market close on Thursday. Investors can find their earnings releases on their investor relations websites.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Daniel Sparks owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and PayPal Holdings. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy.