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Who Conquered Q4?

Apple’s back on top, Facebook shrugs off a lawsuit, and Yahoo may still be screwed

(Getty Images)
(Getty Images)

The end of the year is always a boom time for tech companies. Moms are buying their kids iPhones for Christmas. Corporations are bludgeoning us with holiday shopping ads on Facebook. Millennials are using slightly colder weather to rationalize staying in and watching Netflix all weekend. If a consumer tech business can’t rake in cash during Q4, it’s having serious problems.

So it should come as no surprise that many of Silicon Valley’s brightest turned in a solid performance in the last quarter of 2016. Apple forced us to hold back our “Apple is doomed” takes for at least three more months, Facebook’s devouring of all internet communication continued apace, and Microsoft kept quietly performing way, way better than any former Zune or Windows Phone owner would reasonably expect. Welcome to earnings season.



“iPhone sales are in an ongoing slump,” they said. “Apple evangelists hate the new MacBook Pros,” they said. (OK, I actually said those things.) Turns out, the king stay the king. Apple sold the most iPhones ever last quarter, moving more than 78 million units. Revenue, at $78.4 billion, beat analysts’ expectations, as did earnings of $3.36 per share. And, critically, the average selling price of the iPhone was up year over year, indicating that people were happy to upgrade to the iPhone 7 even though it lacks a headphone jack. Apple still faces some headwinds — sales in China are down, and an ambitious plan to double the size of its services such as Apple Music will face stiff competition — but there’s no denying it was a great quarter following a few disappointing ones.


Netflix’s flood-the-zone strategy when it comes to original content continues to pay off. The company added a record 7 million subscribers in Q4, beating its own projection of 5.2 million. At $2.48 billion, revenue was in line with analysts’ estimates, while earnings of 15 cents per share beat estimates. Netflix didn’t launch a Stranger Things–esque cultural flash point in Q4, but it released a lot of programming that maintained a simmering buzz: the British royals drama The Crown, the Ava DuVernay–directed documentary 13th, as well as new seasons of Black Mirror, Gilmore Girls, and Fuller House. There is something new to watch on Netflix nearly every week now, and users appear to be responding to that programming. “Very few people will join Netflix for just one title,” CEO Reed Hastings said during the company’s earnings call. “But there’s a tipping point, one more title you’re hearing about, that causes you to join.”


Microsoft has a habit of throwing its weight behind emerging sectors either too early (RIP Windows Mobile) or too late (the Surface line includes tablets and PCs, two declining markets). But the company appears to be drafting behind Amazon at just the right time when it comes to cloud computing. Microsoft’s flagship cloud product, Azure, nearly doubled in revenue year over year, and its overall cloud business beat analysts’ estimates with $6.83 billion in revenue. Company earnings of 83 cents per share topped estimates by four cents.


Samsung had a really good quarter. Yes, the same Samsung that sold us all phone grenades and was getting bad publicity on the daily from U.S. airlines for months. The company had an operating profit of $7.9 billion, up 50 percent from a year prior. The boost was in large part due to the company’s components business, through which it sells chips for mobile devices like the iPhone. The company also tried to put the Galaxy Note 7 fiasco behind it by explaining in detail the battery issues that led the devices to explode (essentially, the positive and negative diodes within the battery were allowed to get too close for comfort due to faulty construction). I guess sometimes honesty works.


Facebook took a small L this week when a jury found it must pay $500 million in damages to Zenimax, a gaming company that claimed Facebook’s acquisition Oculus had stolen its trade secrets to build its VR headset. But on the same day news of the verdict broke, Facebook reported revenue ($8.8 billion), monthly active users (1.86 billion), and daily active users (1.23 billion) that exceeded analysts’ expectations. The company’s stock shot to an all-time high. Somehow even when Facebook does wrong, it does well.



Let’s be honest — Google’s parent company continues to perform well, and its search business remains unassailable in the near term. But the company’s earnings of $9.36 per share did miss analysts’ estimates (Alphabet blamed an increase in taxes) and its stock dipped upon the release of the report. If there are anxieties about Alphabet, they’re less about Google and more about whether any of the company’s moonshots (lumped together as “Other Bets” and posting a $1.1 billion operating loss during the quarter) will ever evolve into lucrative businesses.


Two decades in, Amazon appears to have finally figured out how to consistently remain profitable quarter to quarter. It generated earnings of $1.54 per share in the fourth quarter, beating analysts’ estimates. However, revenue of $43.7 billion was off from analysts’ expectations, and revenue projections for the first quarter of 2017 are also below Wall Street estimates. In short, good isn’t good enough for one of the world’s most ambitious companies. Amazon stock slipped more than 3 percent in after-hours trading.


OK, this is getting awkward. After Yahoo released its earnings report (it beat Wall Street expectations, but that doesn’t really matter), the company said its acquisition deal with Verizon would close in the second quarter. Meanwhile, Verizon, which is still making sense of Yahoo’s multiple, massive data breaches, could say only: “We have not reached any final conclusions yet” regarding the deal. Unrequited love is the worst.