Second-quarter earnings season will continue in full force next week, with big technology names like Microsoft, Apple, Facebook and Amazon scheduled to announce results.
According to data from Thomson Reuters, profits from S&P 500 companies are expected to grow 5 percent in the second quarter while revenue is estimated to rise 3.2 percent.
Of the 82 companies in the S&P 500 that reported earnings through Friday morning, Reuters data showed 68.3 percent beat Wall Street expectations.
After the closing bell on Tuesday, Microsoft Corporation (NASDAQ:MSFT) is expected to report fiscal 2014 fourth-quarter earnings per share of 60 cents on revenue of $23 billion, compared with a profit of 66 cents a share on sales of $19.93 billion in the year-ago period.
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Microsoft on Thursday announced it would cut up to 18,000 jobs over the next year, or about 14 percent of the software giant’s workforce. Nearly two-thirds of the layoffs are expected to come from its phone and tablet staff. Former chief executive Steve Ballmer agreed to buy Nokia Corporation’s (NYSE:NOK) handset business last fall.
“I want to hear what is going to be the financial impact as well as the business impact from those layoffs,” Keith Bliss, senior vice president and director of sales & marketing at Cuttone & Co., Inc. told IBTimes.
Chief Executive Officer Satya Nadella, who took over from Ballmer in February, said in an email to employees this week the company is realigning its structure and making reductions to “simplify” work and integrate the Nokia Devices and Services teams into Microsoft. The company will take a restructuring charge of $1.1 billion to $1.6 billion over the next four quarters.
“Ultimately, the reason that they’re doing most of these layoff is the Nokia acquisition,” Bliss said. “What’s going to happen with the phone business? They’ve not made a real go of that yet, and it’s been a drag on earnings. That’s a legacy from Steve Ballmer.”
Microsoft acquired substantially all the Finnish phone maker’s handset business in April for $7.2 billion, thereby increasing its employees by 25,000 to a total of nearly 127,000. As part of the Microsoft-Nokia deal, the software giant said it would also cut $600 million per year in costs within 18 months of closing the acquisition.
“I also want to hear about existing business,” Bliss said. “What are they doing in the enterprise area? What do they believe will be the impact of the Windows 9 operating system, which they’re packaging and bringing out now.”
Shares of Microsoft are currently trading around $44.39.
Also on Tuesday, Apple Inc. (NASDAQ:AAPL) is expected to report earnings per share of $1.23 in the third-quarter of fiscal year 2014 on revenue of $37.93 billion, compared with earnings of $1.05 per share on revenue of $35.32 billion in the year-ago period.
“There’s projections that the next iteration of their operating system inside the iPhone 5 has sold 38 million units in this quarter,” Bliss said. “That’s just a blowout quarter when you have companies like Samsung that are complaining that their new sales are actually lagging a little bit in this quarter.”
The tech giant announced on Tuesday a strategic relationship with International Business Machines Corporation (NYSE:IBM) to “to transform enterprise mobility.” IBM said it would create a class of more than 100 enterprise solutions, including native apps, developed exclusively for iPhones and iPads to run on Apple's iOS platform. In return, IBM will sell Apple's products with 100 industry-specific apps to its business clients worldwide.
“Apple is always very good at managing the expectations of the Street, and then they come in and just blow the projections and the expectations out of the water,” Bliss said. “I expect to see the same thing from them next week.”
Apple’s announced a 7-for-1 stock split in April and the new split-adjusted trade took place on June 9. Shares of the iPhone maker are trading around $94.47.
Wednesday, Facebook Inc. (NASDAQ:FB) is expected to report fiscal 2014 second-quarter EPS of 32 cents on revenue of $2.8 billion, compared with a profit of 19 cents a share on revenue of $1.8 billion in the year-ago period.
“It’s all about digital ads,” Bliss said. “Google, by the way, is still the undisputed leader in that space. Google’s shares have been shrinking on digital ad content, not mobile ad content, while Facebook has been going up.”
Although Google Inc. (NASDAQ:GOOGL) reported earnings on Thursday that fell below Wall Street expectations, shares rose after revenue jumped nearly 22 percent from a year earlier. The Internet giant issued EPS of $6.08, excluding one-time items, on $15.96 billion in revenue. Analysts had expected the company to report earnings excluding items of $6.24 a share on $15.62 billion in revenue, according to Reuters.
Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of network members, increased approximately 25 percent over the second quarter of 2013 and increased nearly 2 percent over the first quarter of 2014.
Meanwhile, Facebook’s mobile advertising revenue represented approximately 59 percent of advertising revenue for the first-quarter of 2014, up from approximately 30 percent of advertising revenue in the first-quarter of 2013.
“Facebook and Google have both added revenue on the mobile side of things,” Bliss said. "That was the big complaint about Facebook three quarters ago. They seem to have rectified that situation.”
Facebook said in its first-quarter earnings statement that daily active users were 802 million on average for March 2014, an increase of 21 percent year-over-year. The social media giant also said daily active users on mobile averaged nearly 609 million for March 2014, an increase of 43 percent year-over-year.
“The big thing with Facebook is all about how are they acquiring new users onto the platform and how are they retaining new users,” Bliss added. “But I think we’ll hear a very good quarter out of them as well.”
Facebook is trading around $67.92 per share.
Thursday, Amazon.com Inc. (NASDAQ:AMZN) is expected to report a fiscal 2014 second-quarter EPS loss of 15 cents on revenue of $19.34 billion, compared with a profit of 2 cents a share on revenue of $15.7 billion in the year-ago period.
“Amazon is not going to turn a profit. We already know that,” Bliss said. “The metric that everybody looks for is their year-on-year revenue growth. Early channel checks suggest that they’re going to have 24 percent to 25 percent year-on-year revenue growth, which is outstanding.”
Amazon today introduced Kindle Unlimited, a new subscription service that allows customers to read and listen to audiobooks unlimitedly for $9.99 a month.
“I’d be very curious to hear what their thinking is and how they’re going to combat the new competitor that’s about to hit the market in a great way, and that’s Alibaba,” Bliss added. “I’m also curious to hear about what kind of approvals their getting from the FAA on their drone program and what it means to their bottom line.”
Shares of Amazon are trading around $357.67.