What’s Happening with Tech Earnings?

Some of the world’s largest technology companies reported their earnings last week. Among them are Amazon, Facebook, Google, and Twitter.

An earnings report is a snapshot of a company’s health over a three-month period. Among the things you’ll find are reports about a company’s revenue and profit, which show how much money they’re making and how well they’re using that cash.

You can find out more about earnings reports here.  

What’s inside the report?

The tech sector has been on a growth tear for quite some time, and the NASDAQ, the market index laden with the biggest tech stock names, is up about 25% for the year. The stocks reporting this week are important bellwethers (or indicators) for the technology market, and in some cases for the broader economy.

Something else to keep in mind: the tech sector is volatile, which means the stocks of companies in these industries may be subject to sudden fluctuation. Stocks stumbled in June as investors sold stock to cash in on their profits.

(Lean more about tech stock volatility here.)

Here are some highlights from top tech company earnings reports this week:

• Google parent Alphabet, which reported earnings on Monday, saw its stock fall despite revenue growth of 21% to $26 billion for the quarter. The problem? The price advertisers are paying for ads went down.

Google is the biggest advertiser in the world, and the slip  in revenue is the result of a shift to mobile devices, where the search engine company charges less per click. Desktop ads are still the most profitable for Google. The company’s stock fell nearly 3.5 % after it reported earnings on Monday.

• Facebook, the social media giant, reported its second quarter revenue increased 45% to $9 billion, and its profit jumped 71% to $3.9 billion, driven by advertising revenue. That’s a huge increase by any measure, and especially for a mature company in the social media space, according to analysts. Its stock increased 6% Thursday, following the earnings report. Facebook is now approaching a $500 billion market cap, which puts in the company of tech giants including Apple and Microsoft.
  
• Amazon’s revenue increased by 25% to $38 billion. Profits for the world’s largest e-commerce retailer dropped 77% to $197 million, however, as the company continues to spend on things like new products, warehouse infrastructure, and video content. On Thursday, Amazon’s stock traded at a record high of $1,081 per share, making company founder Jeff Bezos the richest person in the world. He is now worth more than $90.6 billion.
• Twitter reported 328 million monthly active users, about the same as the previous quarter, but fewer than analysts expected. The lack of increase in users sent the company’s stock down 5% on Thursday.

The generally positive earnings for these companies sparked stock market gains last week, as the Dow Jones Industrial Average, a composite index of 30 of the most prominent U.S. stocks, climbed to new heights.

Key takeaways:

Prominent tech companies reported their second quarter earnings this week. Quarterly earnings reports are important snapshots of business health. The tech sector is a rapidly growing part of the U.S. economy, and it continues to drive broader market gains. Tech stocks are volatile, which means they can fluctuate up and down suddenly.

Read more: What The Recent Tech Sell-Off Teaches Us About Diversification