It’s that time of the year again: earnings season. It’s a finance nerd’s dream, but for the rest of the world, it’s important because some of the biggest technology companies in the world spill their guts to the public. We get to see who’s winning, who’s losing, what’s going wrong and how much Twitter’s monthly active user count dropped.
In short, this is where the big moves happen. Wall Street watches these events with intense scrutiny because it helps them figure out where those companies are going. Will Apple hit $1 trillion? Does Blue Apron survive? Each quarter, we get a few data points that help us tune our crystal ball algorithm and figure out where things are going.
It’s also important because these events help define larger trends in the industry. If advertisers aren’t biting on Snap, it may be that they are just cooling off to alternative platforms in general. That could have ramifications for Pinterest and other different plays.
So, on that note, here are a few big story lines we’re tracking heading into the next couple of weeks.
(Editor’s note: We’re not going to bother addressing Twitter because it’s Twitter.)
Apple: Was the iPhone 8 a hit?
We got a surprise during Apple’s last earnings report when the company signaled a better upcoming third quarter than its original forecast. Reading (semi) deeply into the tea leaves, that indicated a few things: First, the next iPhone was going to arrive on schedule; second, it meant that the next iPhone should have had a pretty good debut.
(Note: Q4 listed below is the midpoint of the forecast from Apple.)
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The iPhone X, which is probably going to define Apple’s future, still won’t be due til the holiday quarter (and it’s still to be determined how many we’ll even get our hands on). But the iPhone 8 is now in the hands of consumers, and we’ll see just how big of a launch the iPhone 8 and iPhone 8 Plus had. Apple also launched a new watch, it has the AirPods and there’s a whole lot else going on behind closed doors. We’ll get another point as to what’s happening to Apple’s march toward being a $1 trillion company.
Qualcomm: What happens with this lawsuit?
Qualcomm fired off another lawsuit against Apple on Friday, this one in China, as it looks to continue an ongoing battle with the iPhone manufacturer over its mobile technology. As one of the largest chip providers in the world, such as sticking its Snapdragon chip into the new Google Pixel phone, this lawsuit is going to have a lot of ramifications for the future of Qualcomm. The story is playing out bit-by-bit, and it definitely isn’t pretty. We’ll probably get a small-ish update on what’s going on when everyone jumps on the phone to talk about its earnings.
Netflix: How is international expansion still booming?
Netflix raised its prices, which is where everyone’s focus will probably be. But the big story line for Netflix’s future is that it’s outpaced Wall Street’s expectations for its subscriber growth several times, especially as it continues to expand abroad.
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With massive investments in original content, Netflix has been able to show that it can acquire more and more customers. It may be an escalating arms race, but we’ll find out just how well this story is playing out with the company.
Google: What happens with its traffic acquisition costs?
The latter question — about Waymo’s lawsuit with Uber — might get a nod, but Google is in the middle of a scuffle with the EU over a massive $2.7 billion fine over antitrust violations. Google continues to print money through its advertising business, but in the last quarter it went ahead and recorded the hefty loss on its balance sheet ahead of time.
Another big story, however, is what happens with Google’s traffic acquisition costs. Known colloquially as TAC, the source of revenue actually increased as a percentage of Google’s revenue year-over-year. It was certainly a small jump, but it may be one that Wall Street will zero in on as a check on the health of Google’s advertising business.
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Again, that’s inching higher, but even those tiny changes can be signals that make Wall Street adjust how they view the company. Alphabet, Google’s parent company, for a brief second, was the most valuable company in the world. That reign came to a very quick end, but now with a portfolio of new devices, we’ll see if Google can figure out its next-generation advertising plans.
Amazon: Is AWS still propping up the company?
Amazon Web Services (AWS) is probably one of our favorite things to watch. It’s a wildly perpendicular business that Amazon took a big bet on years ago, and it’s turned into a business that’s generating billions of dollars a year. But the real reason we like to look at it is to see how much of an impact it has on Amazon’s bottom line.
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Basically, were it not for AWS, it doesn’t look like Amazon would have had the crazy string of profits that it had during its multiple-quarter run. Amazon is known for gleefully spending on growth and new businesses, which for the most part Wall Street forgives if it continues to show that growth. AWS has margins that are far superior to its normal retail business, and it shows that the company at least has the ability to bulldoze into new areas that offer ways to give it a real business.
Blue Apron: Are they holding on to customers?
Blue Apron’s customers are really valuable. If they’re able to acquire them, then they can theoretically generate hundreds of dollars off them. But that being said, it has to acquire them in the first place. This tricky problem, especially for a meal-delivery service like Blue Apron, is known as a CAC-LTV (or customer acquisition cost to lifetime value) problem that requires a careful optimization if the business is going to grow and succeed.
Basically, they can’t run a promotion to get someone onto the service for a couple of meals only to see them run away — or, worse, run to a competing service because of one of their promotional campaigns. Blue Apron’s revenue per customer has held semi-steady, but as it tries to figure out its marketing strategy, it needs to ensure that the lifetime value of those customers pays that back.
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Snap: Are advertisers buying?
Snap’s big pitch isn’t really its user count, which is for better or worse Wall Street’s favorite metric. Snap wants to stress that it’s the engagement of those users that is way higher and way more robust than any other social platform that’s available. Instead of just hopping on Facebook once a day, it’s more important a Snapchat user logs in nine times a day and spends a few minutes each time. If that’s the case, advertisers get way more attention with fewer eyeballs, which the company hopes is a pitch that differentiates it from Facebook or Google.
OVERTIME — Tesla: What will Elon tweet?
This one’s good: