Earnings season will continue this week as some major names in tech are set to report results, including Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), Facebook (NASDAQ:FB), 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.
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.
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.
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.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.