Last week, Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), and Google’s parent company Alphabet Inc (NASDAQ: GOOG GOOGL) reported their quarterly earnings with all of them beating market estimates. Any breathing human would pause to be amazed at some of their results. Combined top-line revenues and bottom-line income of all five club members increased 35.67% and 88.02%, respectively, compared to the same quarter last year: Google’s parent company, Alphabet, grew revenues by 61.58% and income by 166.20%. Altogether, these five companies generated $259.06 billion in quarterly revenues and $74.90 billion in quarterly net income.
These trillionaires comprise 22.55% of the Standard & Poor’s 500 Index as measured using the SPDR® S&P 500® ETF Trust, the most actively traded Standard & Poor’s 500 Index related security. Notably, all five companies underperformed the Standard and Poor’s 500 Index by whole percentage points for the week, with Amazon.com Inc, the worst performer, dropping 9.41%. However, as of July 30, 2021, among the five trillionaires, Google’s parent company Alphabet Inc outperformed, performing almost three times better than the SPDR® S&P 500® ETF Trust. The following chart compares the year-to-date performance of the trillion-dollar club members as of July 30, 2021.
Apple Sales Up, Sold Approximately 45 million iPhones
Based on a number cited from “a report from Chicago-based Consumer Intelligence Research Partners” by Ina Fried of Axios, where the average price of an iPhone was $873, Apple Inc sold approximately 45.33 million iPhones from Net Sales of $39.57 billion for Q3 21. As a result, Apple Inc generated $81.43 billion in Total Net Sales, increasing 36.44% compared to Q3 20. After iPhone, Services, the segment which includes “sales from the Company’s advertising, AppleCare, digital content and other services,” and delivers twice as better gross margins, contributed the most to Total Net Sales, at 21.47%. Net Sales in iPhones increased 49.78%, with Wearables, Home & Accessories rising 36.05%. Net Sales in Services rose 32.91% to $17.49 billion. Read Apple Inc Third Quarter Fiscal Year 2021 10-Q Statement.
51.9 Million Microsoft 365 Consumers Subscribers, Up From 42.7 million
Microsoft Corporation registered $46.15 billion in Total Revenues for Q4 21 compared to $38.03 billion in Q4 20, with the Intelligent Cloud segment revenues increasing 29.95%. The company recorded 51.9 million Microsoft 365 Consumer Subscribers for Q4 21 (up from 42.7 million in Q4 20), with revenues in Microsoft 365 Consumers segment rising 18% compared to Q4 20. Even though Surface revenue fell 20% due to “supply chain constraints,” Xbox hardware sales increased 172%, “driven by higher price and volume of consoles sold due to the Xbox Series X|S launches.” Read Microsoft Corporation Fourth Quarter Fiscal Year 2021 Earnings Press Release.
Amazon Subscription Services Up as AWS Keeps Being Profitable
Amazon.com Inc registered Consolidated Net Sales and Operating Income of $113.08 billion $7.70 billion for Q2 21 compared to $88.91 billion and $5.84 billion in Q2 20. Compared to Q2 20, Net Sales for Online Stores increased 15.82%, Subscription Services rose 31.56%, and Amazon Web Services up 37.02%. From the $7.70 billion in Operating Income the e-commerce giant generated in Q2 21, 53.91% or $4.19 billion was derived from the Amazon Web Services segment, which made up 13.10% of Consolidated Net Sales. Read Amazon.com Inc Second Quarter Fiscal Year 2021 Earnings Press Release.
Advertising+Cloud at Alphabet
Google’s parent company, Alphabet Inc (GOOG, GOOGL), recorded $61.88 billion and $18.53 billion in Revenues and Net Income for Q2 21 compared to $38.30 billion and $6.96 billion in Q2 20. Google Cloud revenues grew 53.91% to $4.63 billion, with Total Advertising revenues growing 68.90% to $50.44 billion. Revenues from Google Search, Youtube Ads, and Google Network grew 68.14%, 83.68%, and 60.41% in Q2 21 compared to Q2 20, with Google Search making up 57.93% of Total Revenues. Read Alphabet Inc Second Quarter Fiscal Year 2021 Earnings Press Release.
Advertising+User Growth at Facebook
Facebook Inc registered $29.08 billion and $10.39 billion in Total Revenues and Net Income for Q2 21 compared to $18.32 billion and $5.18 billion in Q2 20. Compared to Q2 20, Advertising Revenues increased 56.00%, with Worldwide Daily Active Users (DAUs) rising 6.89% to 1.91 billion, primarily driven in the Asia-Pacific region where DAU’s rose 12.73%. Likewise, worldwide Monthly Active Users rose 7.18% to 2.90 billion, primarily driven by the Asia-Pacific region; up 10.77% to 1.14 billion. Worldwide Daily and Monthly Active People, the metric used to assess the frequency of visits across three platforms, Facebook, Instagram, and Whatsapp, was 2.76 billion and 3.51 billion for Q2 21 compared to 2.47 billion and 3.14 billion in Q2 20. Read Facebook Inc Second Quarter Fiscal Year 2021 Earnings Press Release.
Suppose one simply viewed the stock’s weekly performance or price performance on the day earnings were released. In that case, it could be easy to conclude that market participants received the quarterly results negatively. The most visceral reaction was seen in Amazon.com Inc, declining the most at 9.42% for the week. However, peeling the curtain behind the share price and reading into the specific earnings highlights the complex and relative strength in intricate revenue streams that collaborate to form the corporation in question. The pandemic spurred years of growth and adoption into a few short months, and expecting the trend to continue would be a little too much to ask. Moreover, these trillionaires are looking for growth by investing in future projects. Investments are only possible due to the enormous sums of cash these trillionaires can generate every quarter.
Lastly, I leave you with this chart that compares the ten-year performance of the Standard and Poors 500 Top 50 against the Standard and Poors 500 Index and the Standard and Poors 500 Equal Weight Index. The Standard and Poors 500 Top 50 tracks 50 of the largest companies within the Standard and Poors 500 Index, aka mega-cap stocks.
As of August 1, 2021, the 10-year annualized return of the Standard and Poors 500 Top 50 was 90 basis points better than the Standard and Poors 500 Index and 183 basis points better than the Standard and Poors 500 Equal Weighted Index. At an expense ratio of 0.20%, the Invesco S&P 500® Top 50 ETF is an Exchange Traded Fund that tracks the Standard and Poors 500 Top 50. A review of the Invesco S&P 500® Top 50 ETF highlights that the trillionaires made up 41.4% of the holdings, with Apple Inc at 11.42%, as of July 30, 2021. Juxtaposing the Invesco S&P 500® Top 50 ETF against the SPDR® S&P 500® ETF Trust after learning that 41.4% of the holdings are members of the exclusive trillionaire club should provide the impetus for understanding the outperformance since April 2020.