[FAANG Performance Announcement Review] Netflix Google Facebook Amazon Performance Announcement & CAPEX Review
Netflix, Google, Facebook, and Amazon have announced their performance. So today I am posting a performance review.
Let's start with Netflix. We posted strong sales growth of USD 3.7bn (+ 40.4% YoY), operating profit of USD 450mn (+ 73.8% YoY) and net profit of USD 290mn (+ 62.8% YoY) Sales were in line with the market consensus, but profit surpassed both consensus and company guidance, as subscribers surpassed expectations and the operating leverage effect accelerated. The number of subscribers in the US and global markets continued to grow, and streaming sales increased 23.8% YoY in the US and 70.3% overseas.
In the first quarter, Netflix's total subscribers reached 125 million, surging by 7.41 million from the previous quarter, surpassing the company's guidance of 6.35 million. The number of paid subscriptions was 118.9 million, up 8.26 million in the same period, 2.88 million in the United States and 5.98 million overseas. During the quarter, Netflix launched 18 original drama series, 11 new series of existing series and 14 original movies. We believe that the original content strategy has created a virtuous cycle structure that leads to an increase in subscribers.
In particular, the streaming business achieved sales of $ 3.6 billion, the fastest growth rate in Netflix history. The number of paid subscribers surged by 25% and ASP increased by 14%. The number of new subscribers was 7.41 million (19.6 million in the US and 4.46 million in overseas)
50% increase compared to the same period. It exceeded the original guidance of 6.35 million people and reaffirmed its expectations for growth. OP margin increased 232bp YoY to 12.1% YoY. We believe the company's 2Q OP margin is expected to reach 12% and annual OP margin of 10 ~ 11% with stable subscriber growth.
Netflix subscriber growth
Source: Netflix, Statista
For the Google. 1Q sales and net profit were USD 31.1bn (+ 26% YoY) and USD 9.4bn (+ 73% YoY), respectively. Sales were in line with market consensus (US $ 30.3bn), while net profit exceeded consensus (US $ 6.6bn). However, one-off factors were reflected in 1Q results. The introduction of the new accounting standard (ASU 2016-01) resulted in the recognition of unrealized gains on other assets at the same time. Excluding one-off gains and losses of $ 2.4 billion, actual net profit is $ 7 billion, which is not much different from consensus.
In this announcement, we must pay attention to aggressive facility investment execution and future plans. In the first quarter, Google's capital spending was $ 7.7 billion (or $ 7.3 billion in alphabetical terms), a 218% increase over last year's $ 2.4 billion. Capital expenditures ($ 5.3 billion) increased 119%, excluding the $ 2.4 billion used to buy real estate in the quarter (Chelsea Market, Chelsea Market). It is an analysis that aggressive data center investment is continuing to strengthen competitiveness of internet advertisement, cloud, and AI business (securing data analysis ability). In the conference call, the alphabet noted that the market's aggressive capex will continue unabated.
Google's sales growth centered on the advertising business is continuing. Google's revenue for the quarter was $ 31.1 billion (advertising business $ 26.6 billion), an increase of 24% (or 26%) from the previous year. However, the operating margin fell 3.3% p yoy and 0.5% p yoy to 26.9%. This is because of the increase in Total Acquisition Cost (TAC) in advertising business. However, it should be positive that the increase in TAC will strengthen mid- to long-term growth drivers such as strengthening mobile and Adtech technology, and investing in the Google platform (search, Youtube, Android). As a result of the strong investment from 2017, the trend of TAC increase in 2018 will be eased from the previous year. Accordingly, the risk of slowing profitability in the advertising business, which began in 2017, will gradually be resolved.
The competitiveness of the alphabet is expected to continue to strengthen. This is because we are preemptively acquiring data analysis capabilities, such as Internet advertising, cloud computing, autonomous vehicles, and IoT, which are the technological sources of growth businesses, through aggressive investments (data centers, TAC, etc.). In particular, it should be noted that the technological competitiveness of these technologies is increasingly focused on a small number of global companies such as the alphabet, Amazon, Microsoft and Alibaba.
Even excluding the Chelsea Market purchase price, CAPEX surged due to the following reasons. The development projects are ongoing, and we are constantly investing in compute power to support Google's growth. It also includes investments in data centers and submarine cables, as well as machine-learning application extensions across Google. In addition, new technologies, CPU, memory and network costs are also included. When it comes to data centers, we are investing globally, and now we have over 20 sites on four continents, each of which is in the construction phase. There are many places in the USA such as Tennessee, Alabama, Iowa.
Google STock price trend
Source: Google Stock
Facebook. In 1Q, global monthly MAU (monthly active user) and DAU (daily active user) grew by 3% QoQ to 2.20bn and 1.47bn, respectively. Average ad unit and ad impressions improved by 39% and 8%, respectively. In the first quarter, advertising revenue increased 50% year-on-year to $ 11.8 billion due to increased traffic and higher advertising costs. Total sales grew 49% to US $ 12bn, meeting the market consensus, even with a US $ 130mn increase in revenues due to changes in accounting standards. Operating profit, net
Respectively, to US $ 5.4 billion and US $ 5 billion, respectively, up 64% and 63%, respectively. The number of employees increased by 48% YoY to 27,742, while the number of employees and technical personnel charged in reviewing fake news and hateful content increased, but OP margin improved by 4.1% p yy to 45.5% as other administrative expenses were well under control.
Facebook plans to focus on strengthening connections between users over the mid to long term and responding by expanding quality content. To increase quality content, we plan to expand the video content that can be watched on the increasingly popular Watch tabs and strengthen Stories to share short videos. We are also paying attention to one of the fastest growing segments. More and more users are active in larger or smaller groups. There are 200 million users who have meaningful group activities. Facebook is trying to find the right group for its users, offering operators the ability to operate more conveniently, and plans to increase the number of group users to one billion in the next few years through connectivity through the Oculus VR device is. We are developing new ad types to keep ad revenue growth, and to ensure that we measure ad effectiveness accurately. To this end, Facebook is investing in data centers, servers and network infrastructure. In the first quarter, CAPEX also doubled YoY.
Facility investment in Facebook also increased. Facility investment in Facebook increased by 121% to $ 2.8 billion in the first quarter. In 2018, the capex guidance for the year was also estimated at US $ 15 billion. The company's facility investment in 2017 was US $ 6.7 billion. Facility investment growth is expected to increase from 50% in 2017 (US $ 4.5 billion in 2016) to 120% in 2018.
Facebook DAU
Source: Facebook
Amazon. Announced surprise results exceeding market expectations in 1Q. In addition to e-commerce, which is our main business, earnings have improved dramatically in cloud computing, subscription and advertising businesses. Sales in the first quarter were $ 51 billion, an increase of 43% compared to the same period last year. Initially, the market predicted sales of $ 49.8 billion. Net income was $ 1.6 billion, more than double the figure for the same period last year. Earnings per share for the first quarter were $ 3.27, well above the market consensus of $ 1.26.
Web services (AWS), including cloud computing, have contributed significantly to earnings. In the first quarter, AWS revenues were $ 5.44 billion, an increase of 49 percent compared to the same period last year. Which is above the market forecast (5.25 billion dollars). The subscription service also generated $ 3.1 billion in sales, more than 60 percent more than a year ago. Other sales such as advertising also more than doubled to $ 2.0 billion.
Amazon said it has surpassed 100 million subscribers of its "Premium Membership" service, which offers paid subscription members free returns, two-day delivery, and e-book, music and movie subscriptions. Amazon plans to raise the price of its prime membership service by 20% to $ 119. New members will be available from May 11, existing members will be available from June 16. We anticipate that earnings will continue to improve in the future. The company expects its second-quarter operating profit to reach $ 1.1 billion to $ 1.9 billion and revenue to reach $ 51 billion to $ 54 billion.
Amazon have a solid position in the online market that emerged as the only alternative for the distribution industry. We are expanding business not only in the United States but also overseas.