October results season: strength in search and retail but clouds loom

Amazon, Alphabet, and Meta all announced their results last week – here’s some of what we learned. 

Why big tech’s results matter

Five major companies now attract over half of global adspend; two of them are Chinese companies and the other three American, which this week reported their results. 

Following a volatile year, Amazon, Alphabet (Google + YouTube), and Meta all grew healthily as they head into the holiday season. However, their advertising gains are not evenly spread – as WPP’s forecast revisions suggest – and it appears that the trend in the business is toward a much closer relationship between inventory and retail: good news for Amazon. 

Amazon’s ad business keeps growing

Amazon had an extremely strong Q3, growing revenues 13% to $143 billion. Amazon’s advertising business beat estimates by a billion dollars, soaring 26% year-on-year to $12 billion. 

The company is now making serious money from its advertising operation, even if CEO Andy Jassy believes there is much further to go. “We have barely scraped the surface when it comes to better figuring out how to integrate advertising into video and commerce and groceries,” he told investors on a call.

News of the company’s success follows a volley of high-growth quarters for the advertising division. 

By comparison 

• Google ads grew 9% overall in the quarter, with YouTube showing healthy growth in both ad revenues and subscriptions ahead of the company’s total revenues, as it celebrated a “stabilization” in spending by advertisers. 
• Meta, meanwhile, enjoyed a strong and profitable quarter as cost-cutting measures bolstered the social network’s bottom line. Revenues, almost all of which come from advertising, were up 23% to $34bn. However, the company warned of some volatility coming into the current quarter, which was causing adspend to soften.

The cloud game

The market’s eye was firmly on Amazon Web Services, the cloud computing division, which brought in $23bn, slightly less than expected. It suggests that the market leader may be losing some of its market share, having grown revenues by less than its rivals Microsoft Azure (29%) and Google Cloud (22%). 

In part, this reflects one of the main reasons for choosing cloud computing as a business: namely that you are able to scale back computing spending in leaner times. But it also hints that Microsoft and Google’s vocal adventures in the world of artificial intelligence are drawing businesses’ attention.

Sourced from Amazon, Alphabet, Meta, Financial Times, WARC