Google, Microsoft, and Facebook disclosed respective Q3 2021 results this week. After a record Q2 2021, strong performances by Google Search and Cloud, as well as almost every Microsoft segment helped the two companies retain the momentum. Facebook revenue, on the other hand, declined slightly as anticipated.
This week, several technology companies, including Twitter, Juniper Networks, AMD, as well as Big Tech giants such as Facebook, Alphabet, and Microsoft released their Q3 2021 earnings.
Facebook, which was the first to present its Q3 earnings on Monday, posted a subpar performance in terms of revenue. Facebook’s earnings call followed the one by multimedia instant messaging company Snapchat, which also took a hit with a weak outlook for the upcoming (Q4) quarter.
Initially, the market seemed bearish on technology stocks considering two of the most popular social apps took a beating. To be fair to both, this was expected as the side effects of Apple’s App Tracking Transparency (ATT) which the company introduced with iOS 14.5 in April this year.
As the week progressed, technology companies presented more than strong numbers, showing that not all of them are overly dependent on online advertising. For instance, AMD and Juniper Networks, which operate in completely different tech segments, beat or matched analyst expectations.
Twitter, which is partly dependent on online ads for revenue said the impact of ATT was less than expected. The microblogging site managed to realize expectations in terms of revenue (37% year-over-year) and user growth (211 million).
Twitter’s ad revenue itself climbed over 41% YoY to $1.14 billion due to “progress on our brand and direct response offerings, strong sales execution, and a broad increase in advertiser demand.†However, profits of the company declined owing to the $809.5 million settlement of a 2016 class-action lawsuit, which Twitter agreed to in September this year.
NowIt goes without saying that Facebook, along with Microsoft and Google’s parent company Alphabet, isare in a different league altogether when it comes to revenue, and the overall size of the company. So let us take a closer look at how these Big Tech companies performed.
Facebook Q3 2021 Earnings
At its Q2 2021 earning call, Facebook correctly predicted a slump in its ad business, the main source of revenue for the largest social networking company. The company saidOpens a new window , “We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter.â€
As such, the company’s revenue peaked at $29.01 billion in Q3 2021, which is lower than market expectations of ~$29.5 billion but still 35% higher than Q3 2020. Compared to Q2 2021, however, Facebook’s revenue declined by 0.23%.
Obviously, the proceeds from advertising, which also declined compared to Q2 2021, contributed the most ($28.276 billion) in Q3 2021 revenue.
Facebook’s daily active users (DAUs) and monthly active users (MAUs) both climbed 6% YoY, to 1.93 billion on average and 2.91 billion, respectively.
Going forward, Facebook expects “significant uncertainty†from its ad business, again due to ATT in iOS 14.5 onwards, macroeconomic and COVID-19-related factors. What’s more, is that the company expects ad revenue to decline YoY in Q4 2021.
Facebook is also breaking off its Facebook Reality Labs (FRL) from its Family of Apps (Facebook, Instagram, Messenger, WhatsApp). Thus, AR/VR and related hardware/software, content, and services will operate as a separate reporting segment within the company. Facebook is also allocating $10 billion for FRL, which will carry forward CEO Mark Zuckerberg’s metaverse ambitions.
Microsoft Q3 2021 Earnings
Microsoft joined Big Tech rivals Google (Alphabet), Amazon, and Apple in terms of delivering an impressive financial performance despite the continuance of the COVID-19 pandemic. The ensuing pandemic has had a net positive effect on all of the five Big Tech or GAFAM (Google, Apple, Facebook, Amazon, Microsoft) companies.
Microsoft‘s revenue surged by 22% YoY to $45.3 billion, beating Wall Street expectations of $43.97 billion. This is attributed to almost all of Microsoft’s product lines performing well during the quarter.
Microsoft’s Intelligent Cloud was the strongest performer with a growth rate of 31%, thanks to an outstanding Azure revenue growth of 50%. Revenue from Intelligent Cloud in Q3 2021 stands at $17 billion.
Productivity and Business Processes consisting of Office Commercial products (including Office 365), Office Consumer products (Microsoft 365), LinkedIn, and Microsoft Dynamics (Dynamics 365) surged 22% to $15 billion. Office Commercial and Consumer products posted respectable earnings. However, LinkedIn continued to shine brighter in this segment with a 46% growth. This denotes an increased revenue stream from Marketing Solutions, which grew by 61% in Q3 2021.
More Personal Computing (MPC) contributed $13 billion to the overall revenue, rising 12% YoY. Proceeds from Windows OEM, Windows Commercial products and cloud services, Xbox content and services performed fairly well with a 10% and 12% rise, respectively. Revenue from Surface declined 17%, a rare blemish in an otherwise positive Microsoft Q3 2021. Search and news advertising revenue, a non-core area for Microsoft, sticks out as it increased by 40%.
Alphabet Q3 2021 Earnings
Alphabet and by extension Google was the best performer in Q3 2021 by far. The search giant added $64.12 billion revenue to its coffers, which is a 41% bump YoY and beat expectations of $63.45 billion.
Even as Microsoft is gaining ground in online search and advertising, Google remains unmatched in the area. The company generated $53.13 billion in ad revenue, with the breakdown given below:
|
Google Ad Segments |
Revenue ($ Billion) | Growth % (YoY) |
| Search | 37.926 |
44% |
|
YouTube |
7.205 | 43.04% |
| Google Network | 7.999 |
39.84% |
Two things here are noteworthy:
- Unlike Facebook, the company remained moderately affected by Apple’s privacy changes in iOS.
- YouTube is still outpacing and outearning Netflix, which grew at 22.7%Opens a new window , and generated $6.43 billion in Q3 2021.
Google Cloud also posted almost 45% gains, with revenue rising to $4.99 billion, falling just short of $5.07 expectations. However, Google Cloud is still unprofitable with losses of $644 million, although this is almost halved from the Q3 2020 losses of $1.208 billion. Google Cloud is still the third-largest cloud provider after AWS and Microsoft Azure.
Finally, Google’s Other Bets, including autonomous driving tech company Waymo, health data insight provider Verily, high-speed broadband provider Access (Google Fiber), and others, generated $182 million but incurred $1.288 billion in losses.
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