Earnings season will continue this week as some major names in tech are set to report results, including Alphabet (GOOGL 0.35%) (GOOG 0.37%), Facebook (META 1.54%), and Twitter. The stakes are high for all three companies. Each has outperformed the market over the past 12 months, with Alphabet and Facebook up 21% and 28%, respectively, and Twitter up an incredible 116%.
Ahead of these companies' earnings reports, here's a quick preview for each.
Alphabet: Can "Google other" deliver massive growth again?
Alphabet, the parent company of Google, will kick off next week with its second-quarter update after the market closes on Monday. After reporting a solid 26% year-over-year increase in its first-quarter revenue (23% growth in constant currency), investors will be looking for more strong growth in Q2. On average, analysts expect Alphabet's second-quarter revenue to climb 24% year over year. For Alphabet's earnings per share, analysts expect $9.59 -- up from $8.90 in the year-ago quarter when adjusted to exclude the impact of a European Commission fine that was booked during the period.
Image source: Alphabet.
Investors should closely watch Alphabet's "Google other" segment, which includes revenue from cloud, hardware, and the Android App store. Though the segment accounted for just 14% of first-quarter revenue, its strong 36% year-over-year growth during the period meant it played a key role in Alphabet's overall growth. Can Google other keep growing at this high rate?
Facebook: Will higher expenses weigh on earnings growth?
Reporting its second-quarter results after market close on Wednesday, investors are expecting monstrous growth as usual. On average, analysts expect revenue to rise about 44% year over year -- a conservative outlook considering Facebook's revenue increased 47% year over year in 2017 and 49% year over year in the first quarter of 2018.
Facebook CEO Mark Zuckerberg. Image source: Facebook.
The big question for Facebook is how much the social network's earnings per share will increase by. In the past, Facebook has consistently seen its earnings-per-share growth outpace its revenue growth since its revenue rose at a higher rate than operating expenses. But with Facebook guiding for full-year operating expenses to increase 50% to 60%, earnings-per-share growth could decelerate significantly in Q2. On average, analysts expect Facebook's second-quarter earnings per share to rise 30% year over year -- down from 63% growth in Q1.
Twitter: Can it maintain strong momentum?
After returning to revenue growth and swinging to a profit for the first time just a few quarters ago, Twitter will need to prove that its positive momentum is here to stay.
Image source: Getty Images.
Twitter's first-quarter year-over-year revenue growth rate accelerated to 21% -- up sharply from 2% growth in Q4. Even more impressive, Twitter swung from a net loss of $62 million in the first quarter of 2017 to a profit of $61 million in the first quarter of 2018. This translates to first-quarter EPS and non-GAAP EPS of $0.08 and $0.16, respectively.
For Twitter's second quarter, the consensus analyst estimate calls for 21% year-over-year growth in revenue and non-GAAP EPS of $0.17 -- up from non-GAAP EPS of $0.08 in the year-ago quarter.
One key area Twitter investors will want to be sure to check on is the company's daily active user growth. While the company's six consecutive quarters of double-digit year-over-year growth in daily active users is notable, the key metric has decelerated for the last three quarters. Twitter's daily active users increased 10% year over year in Q1 -- down from 14% growth in the third quarter of 2017. If Twitter's daily active user growth keeps decelerating, this could mean strong growth in the metric recently was only a temporary trend.
Twitter is scheduled to report its second-quarter results before market open on Friday, July 27.
