Earnings season has hit top gear for the stocks that make up the largest components of the Nasdaq Composite (^IXIC -0.23%). The Nasdaq has been near all-time record highs, but on Thursday, the index pulled back from what appeared to be the beginning of a record run. As of 12:30 p.m. EDT, the Nasdaq was down more than half a percent after having risen early in the session.
Investors still pay a lot of attention to the FAANG stocks, because they have such a large impact on the entire stock market. Today, investors got a chance to react to earnings reports from Facebook (META -1.52%) and Apple (AAPL 0.31%), and even a big gain in one of the stocks wasn't enough to keep the Nasdaq from losing ground. Below, we'll take a closer look at the latest from the two powerhouse tech giants to see what they had to say.
Facebook is stronger than ever
Shares of Facebook climbed almost 6% Thursday afternoon. The social media giant's first-quarter financial report showed just how dominant it has become as a global force in its niche.
Sales at Facebook climbed 48% from year-ago levels, lifted by a 46% rise in advertising revenue. The company implemented excellent cost-containment measures that kept expense expansion to a relatively low 25% figure, and that resulted in net income soaring 94%. Earnings of $3.30 per share were far above expectations and nearly doubled year over year as well.
Facebook's audience kept growing as the pandemic continued. Daily active users came in at 1.88 billion, up 8% from year-earlier levels. Monthly active users accounted for 2.85 billion people, higher by 10%. When you include the full suite of Facebook's platforms, including Instagram and WhatsApp, the numbers rise even further to 2.72 billion daily users and 3.45 billion monthly users.
In particular, Facebook has seen a huge rebound in advertising revenue in the first quarter of 2021, including a 30% boost in average prices per ad. Further pricing increases could help bolster Facebook's potential for the rest of the year, and that would be good news for the stock as the company marches toward a $1 trillion market capitalization.
Sweet success for Apple
Elsewhere, Apple also reported favorable financial results. However, the stock price didn't react the same way, falling about half a percent in early afternoon trading on Thursday.
Apple's fiscal second-quarter numbers showed many areas of strength. Revenue climbed 54% year over year, with a 62% jump in product-related sales leading the way higher. Service revenue rose as well, albeit by a more modest 27%. Margin performance was noteworthy, as gross margin climbed more than 4 full percentage points.
Apple also held operating expenses in check. Costs climbed just 11% from year-earlier levels. That helped net income more than double from fiscal 2020's second quarter, and earnings of $1.40 per share were far greater than the roughly $1-per-share consensus among those following the stock.
CEO Tim Cook reported that Apple set new all-time records in the Mac and services segments, and iPhone, wearables, home, and accessories all did better than they had ever done before in a March quarter. However, he also commented on shortages that Apple is facing with respect to vital components, and that could affect the iPad and Mac product lines going forward.
Both Facebook and Apple have growth opportunities that you wouldn't expect to find in such massive companies. That should keep both FAANG stocks among the most influential in the Nasdaq for a long time to come, even if their strong past performance might make it difficult for their share prices to keep rising at recent rates.