This is the latest in a regular series of posts I do each quarter once the major consumer technology companies have reported their financials. The data comes from the tracking I do for the Jackdaw Research Quarterly Decks Service, which includes a quarterly deck on the full set of comparisons between these companies. As a reminder, though I refer to these companies as the “big six”, they’re not, strictly speaking, the biggest companies in this sector – Facebook in particular is significantly smaller from a revenue perspective, but outperforms in other ways which justifies its inclusion. As usual, I’ll run through just a few of the charts here to provide some highlights on what was interesting in the quarter.
Revenues and revenue growth
The first chart shows revenue for the big six. As you can see, Samsung passed Apple for the top spot – the first time that’s happened in roughly two years, while Alphabet also passed Microsoft in the quarter for the first time ever:
Though this quarter pits one of Apple’s slowest of the year against one of Samsung’s best, the longer-term changes in position are all about diverse rates of growth, with Apple and Microsoft bringing up the rear in terms of year on year revenue growth, and Samsung and Alphabet both fairing better:
Facebook continues to be the fastest-growing company in this group helped, to be sure, by its smaller size but also by its combination of user growth and user monetization, which continues to be unmatched in the industry. What’s interesting to me is Microsoft’s negative growth has now begun to feel at least semi-permanent, while I still suspect Apple’s is temporary in nature and will turn around over the next few quarters as some short-term pressures ease. It’s worth noting, too, that Microsoft’s growth troubles are down to a mix of real-world issues, like the near death of its phone business and the transition from legacy software to SaaS models, and accounting issues relating to Windows 10, which has caused significant deferral of reported revenue (over $6 billion this past financial year).
When it comes to profits, Apple still dominates, despite a drop over the last few quarters due to declining revenue. Samsung is second for the fourth quarter in a row, while Microsoft this quarter generated just barely more operating profit than Facebook, on several times the revenue:
Amazon, of course, continues to bring up the rear, with its legendarily low operating profits, though those have been getting slightly less meager recently. When it comes to operating margins, we get a somewhat different picture:
Here Facebook leads, as it has for the past year, with operating margins over 40%, while Apple has dropped below Alphabet into third place for the first time. Microsoft, on the other hand, has dropped from first place a year ago to fifth behind Samsung, following its poor performance this quarter.
Capex and Headcount
We’ll finish with two last metrics – capital expenditures and headcount, or investments in infrastructure and people There have been some interesting transitions in recent quarters:
When it comes to dollar spending, Samsung has led for the vast majority of the last four years, with occasional slips to second place behind Apple. It’s interesting to note where Apple’s biggest spikes have come, typically every two years as it releases new form factors for the iPhone. What’s striking then, is that Apple’s Q2 2016 capex spiked to its highest level ever, even though we’re reportedly not getting a completely new design for the iPhone this year. We don’t have Samsung’s capex number for the quarter yet, but it’s very likely it was below Apple’s number. If we look at capital intensity (capex/revenues), we get a different picture once again:
Here, it’s clear just how much Facebook spends on capex, as the leader in capital intensity for most of the period shown. For context, that level of capital intensity is similar to what the major US mobile operators spend in one of the most capital-intensive industries. The exception to Facebook’s dominance was the period around 2014, when Alphabet scaled up its capex significantly and took the top spot for several quarters, though as you can see, its capital intensity has decreased considerably in the last six quarters. During the same time period, Microsoft has been ramping up its capital investment as a percentage of revenue fairly significantly, while Amazon’s has remained fairly constant.
On the headcount side, it’s impossible to avoid the sheer scale of what’s been happening at Amazon over the last several years:
Given that it spent 2012 sandwiched between Apple and Microsoft in terms of workforce size, it’s astonishing to see what’s happened since. Microsoft’s headcount spiked when it acquired Nokia’s devices business, but has since shrunk due to layoffs. Apple’s has grown steadily but more modestly, whereas Amazon’s headcount now stands at over twice Apple’s. It’s grown by over 85,000 in the past year alone, more than the combined current workforce at Google and Facebook. That investment, of course, has been largely in warehouse staff and other low-skilled positions, leading to a revenue per employee at Amazon that’s far lower than at any of its competitors, at $113k per quarter, versus $339k for usual leader Apple and $444k for Facebook, the leader for the first time this quarter.