After the great reception on my first earnings recap where 34 votes(100%) said they found value in the post, I decided to continue the series. Let’s recap the last week, featuring $LIFCO, AMZN 0.00%↑, GOOGL 0.00%↑, SPOT 0.00%↑,
I want this to be in a fast and concise format, so I’ll try a bullet-point approach. Let me know how you like it.
Amazon AMZN 0.00%↑
The good: Ads continue to be strong (23% growth), while most other ad businesses stagnate or decline in this environment. 3P is strong (24% growth) and subscriptions as well (17% growth). Employees down 4% Y/Y. FCF of $13 billion in the quarter.
The bad: AWS decelerating to 20% with guidance of mid teens for next quarter, while margins also compressed. Costs are still a big issue.
Comments: There is light and shadows to this report. Ads, 3P and subscriptions are growing nicely, but AWS is decelerating. I believe that AWS will accelerate again as the macro gets better, lots of customers are SMB that are cutting back right now and seeing slower business. The cloud still has tremendous runway and AWS should be one of the largest beneficiaries. We also need to keep in mind that its at a $85 billion run rate, still growing mid teens. Amazon remains one of my largest positions after I heavily reinvested the last few months under $100.
Alphabet GOOGL 0.00%↑ GOOG 0.00%↑
The good: Google Cloud is nearing break even at just - 6% operating margin versus -16% last year. Also growing at a fast 32%. Buybacks up slightly.
The bad: Operating income and revenue both down, operating margin compressed 500 bps to 24%. Youtube declining. SBC continues to grow to $5.1 billion in the quarter after Google hired another 3000 employees.
Comments: I liked this report less than Amazons, Google shows how the employee count is a much larger problem than the 12000 layoffs. The company still hired an additional 50000 employees the last 12 months! I recently wrote an article about Google, also talking about that problem.
Spotify SPOT 0.00%↑
The good: MAU beat with 20% growth (14% premium and 25% add supported growth).
The bad: Losses continue to widen to -7.3% operating margin or $231 million operating loss. FCF switches from slightly positive to -73%. Gross margin down 118 bps to 25.3%. Guided for another $194 million in losses.
Comments: Spotify has mentioned “efficiency” around 20 times in the earnings call, yet they guide for another steep loss and another compression in gross margins. MAU growth is fine, but if it mainly comes from emerging markets where the already bad ARPU is even lower, it doesn’t help much. I sold Spotify, after the stock run up after in my opinion not great earnings. I have been playing with the idea to exit SPOT 0.00%↑ for a while and the 40% run up in January made the decision easier.
Lifco $LIFCO
The good: Consolidated results were strong as usual with 21% sales, 30% EBITA and 50% operating cash flow growth. ROCE continues to be strong at 22% and 135% ex goodwill.
The bad: Dental continues to lag behind the other parts of the business.
Comments: I wrote a longer recap about Lifco on Commonstock, check it out here.
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Have you looked at the two other public companies Carl Bennet controls? Getinge and Elanders. Curious what your take is on those two