With earnings season now well underway yesterday was the turn of two of Wall Street’s highest profile ‘big tech’ companies to present their most recent results to investors. However, while Facebook announced record profits and insisted it had reformed itself ‘fundamentally’ following a series of personal user data scandals, Tesla disappointed expectations. The electric car maker that markets treat more as a tech company than traditional automobile manufacturer posted a second consecutive quarter of profit. However, at $139 million over the last 3 months of the year it was less than half that realised over the third quarter.
Despite the fact that Tesla hadn’t posted two consecutive quarters of profits since 2010, with positive cash flow of $910 million also up on Q3’s $881 million, and revenues also ahead of forecasts at $7.23 billion, the share price fell in afterhours trading. The disappointing profit figure meant the Tesla share price dropped by 1.1% to $305.5. A full year loss of $976.09 million was recorded but the company offered forward guidance that it expects every quarter over 2019 to yield a profit. 3000 job cuts designed to streamline overheads were recently announced by Tesla.
Tesla’s biggest challenge is raising production numbers and bringing down the cost of its Model 3, the company’s first mass market vehicle. The company has repeatedly missed delivery targets.
Tesla trades at a much higher multiple than other U.S. car manufacturers such as Ford and GM, regularly achieving a bigger market capitalisation despite generating a fraction of their revenues and profits. Markets are betting on a full transition to electric vehicles in coming years, and Tesla becoming a market leader on the back of that development as well as in autonomous vehicles technology.
Meanwhile, Facebook’s share price faired far better, rocketing 6.6% after it announced its record quarterly profit figure of $6.9 billion. That compares to $4.3 billion over the same three months in 2017. Revenues hit $16.9 billion from $13 billion. New user growth, albeit a modest uptick, was also announced. Stalling growth in the U.S. and Europe was a major reason for Facebook’s share price plunge last year. Daily user numbers grew to 1.52 billion in December compared to 1.4 billion the previous year.
Microsoft was another giant tech company to post yesterday. The Window’s and Microsoft Office publisher was slightly ahead of expectations on profit but slightly behind them on revenue. Its cloud computing division continued to show strong growth, with its Azure cloud service up 76%. That does represent slowing growth from 98% the previous year but it always had to come down from there and still represents the company’s biggest growth engine. Revenues across corporate cloud services including ‘legacy’ business Windows Server and SQL Server, were up 48% to $9 billion. Microsoft doesn’t separate out Azure revenues when it reports.
Microsoft’s share price dipped by 2.7% in afterhours trading.