The Magnificent 7 in Q2 2024

Here is a summary of key conclusions drawn from both the financial summary and year-over-year (YoY) percentage change tables for Meta, Tesla, Apple, Amazon, Microsoft, NVIDIA, and Google:

1. Revenue Growth and Scale:

? Amazon and Apple remain the largest companies by revenue, generating $148 billion and $85.8 billion, respectively. Both companies also saw moderate revenue growth YoY, with Amazon increasing by 10% and Apple by 5%.

? Meta and Microsoft showed strong YoY revenue growth of 22% and 15%, respectively, driven by strong demand in their core products and services (advertising for Meta, cloud and productivity services for Microsoft).

? Tesla experienced only modest revenue growth of 2%, while NVIDIA saw impressive revenue growth of 15% as it capitalized on the AI and data center boom.

2. Profitability and Efficiency:

? NVIDIA leads in terms of gross profit margin (75%) and net profit margin (55%), showing that it not only generates substantial revenues but also retains a large portion of it as profit. Its margins are also increasing YoY (+3pp for gross and +2pp for net), which indicates further efficiency gains.

? Meta and Microsoft both have strong operating profit margins at 38% and 43%, respectively. Their YoY increases in operating profits, especially Meta’s +9%, reflect improved cost management.

? Tesla operates with the lowest gross profit (18%) and net profit (6%) margins, as well as only a 3% YoY increase in operating profit. This reflects the company’s ongoing reinvestment into scaling production and R&D, prioritizing growth over profitability.

? Google also has solid profitability with 28% net profit margin, though its margins are increasing only gradually (+3pp YoY for net profit).

3. Tax Efficiency:

? Amazon stands out for its low tax percentage (1%), which indicates that it is effectively managing its tax burden, potentially benefiting from tax incentives. Other companies like Tesla and Meta also maintain low tax rates at 2% and 4%, respectively.

? Microsoft and NVIDIA face higher tax burdens, at 8% and 9%, yet they still maintain strong profitability, which reflects their operational strength despite higher tax expenses.

The tax percentage differences among the “Magnificent Seven” tech companies are due to the following factors:

1. Geographic Distribution of Revenue and Operations: Companies earn revenue in regions with varying tax rates, impacting their overall tax burden.

2. Tax Deductions, Credits, and Incentives: R&D and capital investments can lead to tax credits that lower the effective tax rate.

3. Use of Offshore Tax Strategies: Profit shifting to low-tax jurisdictions helps reduce taxes.

4. Industry-Specific Exemptions: Sectors like electric vehicles and semiconductors often receive government tax incentives.

5. Tax Management and Timing Differences: Strategies like deferred taxes and asset depreciation reduce liabilities.

6. Legal Disputes and Settlements: Tax liabilities can change based on disputes or settlements with governments.

7. Financial Performance Fluctuations: Companies with past losses can use them to offset future taxes.

4. Operating Profit and Margins:

? Microsoft and Meta are the most efficient in terms of turning revenue into operating profit, with margins of 43% and 38%, respectively. Both companies maintain strong operational efficiency, which is further supported by their YoY improvements in these figures.

? NVIDIA leads in operating profit growth (+3pp YoY) and has the highest operating profit margin at 62%, reflecting its ability to turn a significant portion of revenue into profit as demand for its products surges.

? Amazon and Tesla operate with thinner operating margins, at 10% and 6%, due to high operational expenses in fulfillment, technology, and scaling.

5. Growth Focus vs Profit Focus:

? Tesla remains focused on growth, with relatively low profit margins. Its R&D and operational investments continue to reduce profitability in the short term, but the company is positioned for long-term scale and market expansion.

? NVIDIA is benefiting from the AI revolution and maintains exceptional profitability, while also showing strong YoY growth in revenues and profits. Its high profitability positions it as a leader in cutting-edge technologies.

? Meta is bouncing back with significant YoY growth in revenue (+22%) and operating profit (+9%), indicating a shift towards improved operational efficiency after a challenging period.

6. Steady Growth for Giants:

? Apple and Google maintain steady, consistent growth, with Apple seeing 5% YoY revenue growth and maintaining 25% net profit margin. Google’s revenue grew by 14% YoY, with increasing gross and operating margins, showing a steady pace of expansion in advertising and cloud services.

Conclusion:

? NVIDIA is the standout performer in terms of both growth and profitability, with impressive revenue and profit margins that continue to rise YoY.

? Meta and Microsoft are highly efficient companies, boasting strong profit margins and YoY improvements in revenue and operational metrics.

? Amazon dominates in scale but faces high operational costs, which limit profitability, though its low tax burden helps sustain net profits.

? Tesla remains focused on growth and investment, leading to thinner margins, while Google and Apple maintain consistent growth with solid profitability metrics.