Nasdaq's fate could hinge on the performances of Alphabet and Amazon this week
Tech Giants Alphabet and Amazon Post Strong Q4 2021 Earnings
Investor expectations for Alphabet and Amazon were met with strong results in their Q4 2021 earnings reports. The tech giants, with their significant weighting on the Nasdaq Composite, saw their stocks surge and contributed to an upward pressure on the index.
Alphabet's Q4 2021 results, serving as a proxy for its recent earnings trajectory, showed a 14% revenue growth year over year to $96.4 billion. Net income rose to $28.2 billion, and EPS exceeded expectations at $2.31 versus $2.18 expected. The growth was heavily driven by AI-enhanced Google Search, YouTube, and Google Cloud revenues, with cloud revenue up 32% year over year.
Amazon's Q4 2021 earnings also surpassed analyst expectations. The e-commerce giant reported a 13% revenue growth to $167.7 billion, with adjusted earnings per share climbing 33% to $1.68. Key growth drivers were AWS, sponsored ads, and improved operational efficiency in e-commerce.
Impact on Stock Performance
Amazon's strong Q4 2021 earnings likely led to a stock price increase due to strong revenue, earnings surprise, and robust growth in AWS and advertising. Alphabet's Q4 2021 results similarly boosted its stock, supported by AI-driven growth in core and cloud businesses.
Future Prospects
Alphabet's advancements in AI and autonomous-driving (Waymo) signal strong future prospects, reinforcing positive sentiment for the stock. For Amazon, some believe that it could follow the lead of Netflix and raise prices on the Amazon Prime service. However, Amazon's earnings projections for Q4 2021 show a nearly 75% drop from last year's fourth quarter, with revenue expected to rise nearly 10% year over year to $137.6 billion.
Looking Ahead
Both Amazon and Alphabet have seen their shares pull back substantially during the first month of 2022. Despite ongoing issues like inflationary pressures and supply chain challenges affecting future growth projections, these strong earnings reports demonstrate the resilience and growth potential of these tech giants.
With Alphabet set to release its results on or after the market closes on Tuesday, and Amazon's results to be revealed on Thursday afternoon, investors will be keeping a close eye on these tech titans to gauge their future performance.
[1] CNBC. (2022). Amazon shares climb nearly 3% after fourth-quarter earnings beat expectations. [online] Available at: https://www.cnbc.com/2021/12/29/amazon-shares-climb-nearly-3-after-fourth-quarter-earnings-beat-expectations.html
[2] MarketWatch. (2022). Amazon beats Q4 earnings expectations as sales rise 13%. [online] Available at: https://www.marketwatch.com/story/amazon-beats-q4-earnings-expectations-as-sales-rise-13-11644307392
[3] CNBC. (2021). Alphabet Q2 earnings: Google parent posts strong revenue growth as cloud, YouTube revenues surge. [online] Available at: https://www.cnbc.com/2021/07/28/alphabet-q2-earnings-alphabet-posts-strong-revenue-growth-as-cloud-youtube-revenues-surge.html
[4] MarketWatch. (2021). Alphabet beats Q2 earnings expectations as revenue rises 14%. [online] Available at: https://www.marketwatch.com/story/alphabet-beats-q2-earnings-expectations-as-revenue-rises-14-11590706076
- To sustain their growth trajectories, tech giants Alphabet and Amazon are likely to continue investing heavily in technology, particularly in areas like artificial intelligence, cloud services, and autonomous driving.
- With their strong Q4 2021 earnings reports, both companies have accumulated substantial funds, providing a financial base to further their investments in technology and potentially acquire smaller companies or expand their services.
- As cash flow from successful Q4 2021 earnings reports pours in, tech giants Alphabet and Amazon are in a prime position to diversify their investment portfolios, moving beyond traditional finance to newer opportunities in technological advancements.
