The Big Six in Q1 2016

Every quarter, once earnings season is over, I put together a set of comparisons for the “big six” consumer technology companies: Alphabet, Amazon, Apple, Facebook, Microsoft, and Samsung. The full analysis goes into a deck which is part of the Jackdaw Research Quarterly Decks Service, which you can read more about and sign up for here. This post summarizes some of the key findings from that analysis in the form of four charts, representing four of the key metrics I look at. As I’ve said in past quarters, Facebook isn’t in the same league as the others in terms of scale – it’s significantly smaller. But it’s one of the most profitable mid-to-large-sized tech companies out there and also one of the fastest growing, so that’s why I include it in this analysis.

Revenue growth – Apple falls to last place

This quarter was notable, among other things, for the fact that Apple, which was briefly one of the fastest growing of these companies, dropped to last place as its revenue growth was negative for the first time in a long time. Even Microsoft, which has struggled with growth since the anniversary of its acquisition of Nokia’s devices business, grew slightly faster in Q1 2016:

Screenshot 2016-05-13 15.33.31

It’s notable Facebook continues to be far and away the fastest growing of this group and has been for the last three years. Apple came closest to matching its growth rate in the throes of its iPhone 6 year but even then was several percentage points behind. Meanwhile, Microsoft continues to ride the doldrums of the maturity of its business, while Samsung is beginning to recover in earnest from its own crisis and was back in positive territory in Q1. Amazon and Alphabet, on the other hand, have been duking it out for second place since Apple’s growth stalled, with Amazon consistently slightly ahead.

Margins – Facebook back on top

The chart below shows margins on a trailing four quarter basis, which helps to eliminate some of the cyclicality in each of these companies’ margins. As you can see on that basis, Facebook came out on top this quarter, having dipped below Apple and Microsoft last quarter:

Screenshot 2016-05-13 15.31.28

Despite Amazon’s recent progress in generating more operating profit, this chart also puts into stark perspective just how little margin it still generates compared with its peers. Even Samsung, whose margins were squeezed by its shrinking mobile business from 2013 through 2015, is now back well into the mid-teens. Alphabet, meanwhile, has had the most consistent growth trajectory over this period, with modest increases over time.

Capital investment spikes at Facebook, falls at Alphabet

Facebook has always been one of the heavier spenders among this set of companies on capital expenditures, but this quarter its capex spiked to over 20% of revenues, a milestone it hasn’t hit for three years and hasn’t exceeded regularly for even longer. On the other hand, Alphabet’s spending has been trending downwards for the better part of a year, though it saw a brief blip this quarter:

Screenshot 2016-05-13 15.32.04

It appears Apple curtailed capital spending fairly significantly this quarter, perhaps in response to its lower revenues and a broader attempt at greater fiscal discipline to try to keep margins on track. It’s often been the lowest spender in this group in percentage terms and occupied that position again for the last two quarters, but this quarter was also the lowest in dollar terms for the first time. Meanwhile, Facebook’s spending, in dollar terms, eclipsed Amazon’s for the first time this quarter as well.

Revenues per employee – Apple and Facebook closer than usual

For the most part, Apple is miles ahead on the metric of revenues per employee, generating almost half a million dollars per quarter on average. This quarter though, with the overall drop in revenue, revenue per employee dropped as well to just over $400,000, a level it’s only hit once before in recent memory, in Q2 2014. Meanwhile, Facebook’s revenue per employee keeps rising and this quarter was just barely behind Apple:

Screenshot 2016-05-13 15.32.16

Amazon continues to be the laggard on this list, with declining revenue per employee as it continues to hire ten thousand or more new employees each quarter. In the past year, Amazon added 80,000 new employees, which is more than Alphabet employs in total and over five times as many as Facebook employs. Microsoft continues to widen the gap with Amazon on this metric, thanks largely to its workforce reductions over recent quarters, though its numbers are still declining, as are Alphabet’s.

Published by

Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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