Comprehensive Analysis of Tech Giants: Alphabet Inc, Amazon, Apple, and Microsoft

Date of Report: 12 July 2024

Broker Name: Oversea-Chinese Banking Corporation Limited (OCBC Bank)

Alphabet Inc: A Detailed Overview

Alphabet Inc, a dominant force in the tech world, continues to impress with its robust financial performance in 3Q24. The company’s strong momentum across various business segments, particularly Google Cloud and AI offerings, has driven significant growth.

Key Financial Highlights

• Revenue: Alphabet’s revenue for 3Q24 surged by approximately 15% year-on-year (YoY) to around USD 88.3 billion.
• Operating Income: Improved by around 34% YoY to approximately USD 28.5 billion, with an operating margin expanding to 32%.
• Earnings Per Share (EPS): Increased by approximately 37% YoY to USD 2.12.

Alphabet’s various segments contributed significantly to its overall performance:

• Search: Revenue grew by approximately 12% YoY, driven by strong performance across verticals, especially in the financial services sector.
• YouTube: Advertising revenue increased by around 12% YoY, with robust growth in watch time across the platform.
• Subscription, Platforms, and Devices: Revenue surged by approximately 28% YoY, thanks to more paid subscribers for YouTube TV, YouTube Music Premium, and Google One, along with the launch of new Made by Google devices.
• Google Cloud: Revenue jumped by 35% YoY, reflecting accelerated growth in AI infrastructure, generative AI solutions, and core Google Cloud Platform (GCP) products.

Strategic Advancements

Alphabet has made notable progress in AI Overviews, rolling out to 100 new countries and territories. This expansion has increased overall Search usage and user satisfaction, with strong engagement among existing users. The integration of advertisements within AI Overviews is already monetizing at a rate comparable to traditional search.

In terms of costs, Alphabet has significantly reduced its machine cost per query by more than 90% over the last 18 months through hardware, engineering, and technical breakthroughs, while doubling the size of its Gemini model.

ESG Updates

Alphabet’s ESG rating remained unchanged in July 2024. The company has robust initiatives to reduce carbon emissions and derives significant revenues from clean tech product lines compared to peers. However, it continues to face regulatory probes in key regions over alleged data security practices and lags behind global peers in overall governance practices.

Potential Catalysts and Investment Risks

• Leveraging AI in Search and Cloud to deliver better-than-expected engagement.
• Better-than-expected operating profit margin driven by cost discipline efforts.
• Better-than-expected revenue growth in YouTube segment.
• Risks include larger-than-expected capital expenditure, greater impact due to AI competition, and uncertainties in the macroeconomic environment and ongoing regulatory issues.

Amazon.com Inc: A Closer Look

Amazon, a leading player in e-commerce and cloud computing, continues to show strong performance. The company’s financial metrics indicate substantial growth and a positive outlook.

Financial Metrics

• Price/Earnings (P/E) Ratio: 40.4 (FY24E) and 33.0 (FY25E).
• Price/Book (P/B) Ratio: 7.2 (FY24E) and 5.7 (FY25E).
• EV/EBITDA: 14.7 (FY24E) and 12.7 (FY25E).
• ROE (%): 21.7 (FY24E) and 20.6 (FY25E).

Growth Drivers

Amazon’s growth is driven by its e-commerce dominance, expansion in cloud computing through Amazon Web Services (AWS), and continuous innovation in logistics and delivery systems.

Apple Inc: Financial Performance and Prospects

Apple, known for its iconic products and strong brand loyalty, continues to deliver impressive financial results. The company’s focus on innovation and ecosystem expansion remains a key driver of its success.

Financial Metrics

• Price/Earnings (P/E) Ratio: 34.9 (FY24E) and 31.3 (FY25E).
• Price/Book (P/B) Ratio: 56.1 (FY24E) and 47.4 (FY25E).
• EV/EBITDA: 26.7 (FY24E) and 24.7 (FY25E).
• ROE (%): 165.2 (FY24E) and 189.4 (FY25E).

Innovation and Ecosystem

Apple’s continuous innovation in product development, including the iPhone, iPad, Mac, and services like Apple Music and Apple TV+, drive its financial performance. The company’s strong ecosystem fosters customer retention and recurring revenue streams.

Microsoft Corp: A Tech Powerhouse

Microsoft remains a formidable player in the tech industry, with strong financial performance driven by its cloud computing and software solutions.

Financial Metrics

• Price/Earnings (P/E) Ratio: 33.0 (FY24E) and 28.4 (FY25E).
• Price/Book (P/B) Ratio: 9.1 (FY24E) and 7.1 (FY25E).
• EV/EBITDA: 21.7 (FY24E) and 18.7 (FY25E).
• ROE (%): 33.2 (FY24E) and 28.7 (FY25E).

Cloud Computing and Software Solutions

Microsoft’s growth is largely driven by its cloud computing arm, Azure, and its suite of software solutions, including Office 365 and Dynamics 365. The company’s continuous focus on AI and machine learning further strengthens its market position.