Alphabet delivered solid growth again in the third quarter. Not only did revenue increase substantially, but most of the individual segments increased substantially as well. It particularly stood out to me that the Google Advertising revenue and Paid click segments increased nicely year over year, following past struggles. Margins also improved within the segment as the cost per click metrics, further down the page, decline both year over year and quarter over quarter. With a solid core business and innovative new projects....it's tough to see how Alphabet doesn't succeed in the near and intermediate terms
I was pleased to see the services business growing, because I think investors will value recurring revenue from the services business higher than revenue from one time product sales. I think this is especially true currently....... as increased competition, lower margins, and a weak upgrade cycle are all affecting the products division. 2017 should offer better product sales, but the company needs to maintain current margins on their products while also growing the Services business. If they can do that, Apple's shares will climb
After 17 straight quarters of declining revenue, IBM finally grew the growth (strategic imperatives) businesses enough to make up for the declining legacy businesses. At 40% of gross revenues, these businesses are finally getting close to the point where they are large enough to transform IBM. I am personally concerned with the company's debt load and capital allocation strategy, but IBM will be fine going forward if business lines like Watson and Cloud operations continue to grow like they have been.
Alphabet continued to produce solid revenue growth year over year, and even expanded margins slightly. I was pleasantly surprised to see almost no impact from the Brexit situation, and currency headwinds were fairly minor given the strengthening of the US dollar. The core Google business looks to be strong
While a fairly small amount of Amazon's overall revenue at 10%, Web Services continues to be the standout segment for the company in terms of margins and profitability. This segment is number 1 in the niche, but other large tech names are now gunning for it. Amazon can flip the switch and be quite profitable by reinvesting less of the revenue in the business, but it appears that management still has a "grow now-profit later" attitude. I was happy to see the international expansion and hope the company can execute internationally as well as it does at home.
Margins declined, as did the average selling price of iPhones sold, as a result of selling more of the company's less expensive phones. Apple is also trying to move out the existing inventory ahead of the release of the new iPhone this fall. Most analysts seem to be thinking that the fall 2016 release will start a massive up wave of phone upgrades, which would be very good for the Apple's earnings
This marked the 17th consecutive quarter with lower revenue for IBM. Management keep saying it will get better, but there won't be growth until their growing "new businesses" outpace the shrinkage of the "legacy businesses". Personally, I am getting really concerned about IBM's debt load.