Tesla, Apple, Meta, and The Path Forward

Earnings Report Preview

This week’s earnings reports showcase a range of industries, with insights into technology, finance, energy, and consumer sectors. As companies navigate economic challenges and leverage new opportunities, we delve into their recent performance and expectations for the upcoming earnings season. Let’s begin with Tesla.

1. Tesla (TSLA)

Q3 2024 Recap: Tesla delivered strong results in Q3 2024, achieving an 8% year-over-year increase in total revenue to $25.2 billion. The company’s automotive segment remained the primary driver, supported by a 6% increase in vehicle deliveries and record-low costs of goods sold per vehicle at ~$35,100. Operating income rose 54% YoY to $2.7 billion, reflecting improved gross margins of 19.8%. Tesla’s energy business also saw robust growth, with energy generation and storage revenue climbing 52%, driven by record deployments of Powerwall 3 and increased Megapack production.

Key highlights included the successful ramp-up of Cybertruck production, which became the third best-selling EV in the U.S. for Q3. Additionally, Tesla expanded its Supercharger network by 22% year-over-year and achieved notable milestones in AI development, including a 75% increase in training compute capacity for Full Self-Driving (FSD) systems.

What to Watch For in Q4 2024:

1. Vehicle Deliveries: With ongoing macroeconomic challenges, Tesla expects slight growth in vehicle deliveries. Watch for updates on Cybertruck production ramp-up and its contribution to overall volume.
2. Energy Business: Tesla’s energy storage deployments are projected to more than double year-over-year. Focus will be on the continued ramp-up of Powerwall 3 and the Megafactory in Lathrop, which recently hit a production rate of 200 Megapacks per week.
3. Margins and Costs: With raw material costs declining and operational efficiencies improving, Tesla’s ability to maintain or expand margins will be critical. Pay close attention to updates on cost-reduction strategies and average selling prices.
4. AI and Autonomy: Tesla’s advancements in FSD and its AI-driven products, such as Robotaxi and Robovan, could signal future growth potential.
5. Guidance for 2025: Tesla’s plans to launch more affordable models on its next-generation vehicle platform will be a key topic. Updates on production timelines and cost efficiencies could provide insights into the company’s long-term strategy.

2. Meta (META)

Q3 2024 Recap: Meta reported a 19% year-over-year increase in revenue to $40.6 billion in Q3 2024, with operating income surging 26% to $17.4 billion. This growth was driven by a combination of higher ad impressions (up 7% YoY) and an 11% increase in the average price per ad. The Family of Apps segment continues to dominate, contributing over 98% of total revenue, while Reality Labs posted modest revenue growth of 29%, although it remains a loss-making segment.

The company highlighted significant progress in its AI initiatives, particularly the adoption of Llama and AI-powered glasses. Family daily active people (DAP) reached 3.29 billion, reflecting a 5% YoY increase. Meta also repurchased $8.86 billion of Class A shares, reflecting confidence in its financial strength.

What to Watch For in Q4 2024:

1. Ad Revenue Growth: With a forecasted revenue range of $45-48 billion, ad performance will remain the primary focus. Key metrics to monitor include ad impression growth and average price per ad.
2. Reality Labs Performance: Expect updates on the cost trajectory for Reality Labs, as Meta continues heavy investments in AR/VR technologies. Watch for developments in their AI-powered hardware ecosystem, including glasses and the metaverse.
3. Expense Management: Meta has guided full-year expenses to $96-98 billion. Pay close attention to whether cost management initiatives are sufficient to meet this range while sustaining growth in R&D.
4. Headwinds from Regulation: Meta is navigating increasing regulatory scrutiny, especially in the EU. Updates on compliance measures and their potential impact on operations will be critical.
5. AI and Engagement Metrics: Meta’s AI integrations across Facebook, Instagram, and WhatsApp remain a significant growth driver. Metrics like engagement levels and DAU/MAU growth could provide insights into user satisfaction and monetization potential.

3. Apple (AAPL)

Q4 FY2024 Recap: Apple’s Q4 FY2024 results showcased resilience in a challenging macroeconomic environment. The company reported $94.9 billion in net sales, a 6% year-over-year increase. Products revenue reached $70 billion, up 4%, driven by the launch of the iPhone 16 series, while Services revenue surged 12% to $25 billion, led by strong growth in Apple’s ecosystem services such as iCloud, Apple Music, and the App Store.

Operating income improved to $29.6 billion, representing a 9.7% YoY growth, supported by cost optimization in manufacturing and supply chain operations. While wearables and accessories experienced a slight decline in sales, the iPhone, Mac, and iPad segments all saw solid performance across key geographies, with Europe and the Americas leading growth.

What to Watch For in Q1 FY2025:

1. iPhone Sales Momentum: The iPhone 16 lineup, with advanced camera and battery technology, will be a focal point. Analysts will closely monitor whether initial demand can sustain into Q1 FY2025, particularly in Greater China and Europe.
2. Services Growth: Continued momentum in subscription-based services is expected, especially with upcoming enhancements to Apple TV+ and the launch of more exclusive content.
3. Mac and iPad Performance: Look for insights on seasonal demand trends and the impact of new M-series chips on product adoption.
4. Margins Amid Supply Challenges: Cost pressures from supply chain disruptions will be a key area of focus. Updates on Apple’s diversification of its manufacturing base outside China could provide longer-term clarity.
5. Wearables and Accessories Recovery: Watch for any signs of recovery in this segment, particularly with new iterations of AirPods and Apple Watch expected to drive incremental demand.

Apple’s guidance for Q1 FY2025 will also be critical, as the company’s ability to navigate macroeconomic headwinds and sustain its strong ecosystem performance will set the tone for the year ahead.

4. Microsoft (MSFT)

Q1 FY2025 Recap: Microsoft delivered an impressive performance in Q1 FY2025, with revenue growing 16% year-over-year to $65.6 billion. The company’s operating income rose 14% to $30.6 billion, while net income increased by 11% to $24.7 billion. These results were underpinned by strong execution in Microsoft’s cloud and AI offerings. Microsoft Cloud revenue reached $38.9 billion, marking a 22% YoY increase, driven by Azure’s 33% growth.

The Productivity and Business Processes segment, which includes Microsoft 365 and LinkedIn, grew 12% YoY to $28.3 billion. LinkedIn revenue increased 10%, while Dynamics 365 grew 18%, reflecting strong demand for enterprise software. The Intelligent Cloud segment grew 20% YoY to $24.1 billion, showcasing the strength of Azure and other server products. More Personal Computing revenue grew 17% to $13.2 billion, supported by Xbox content growth of 61% and a positive impact from the Activision acquisition.

What to Watch For in Q2 FY2025:

1. Azure’s Momentum: Expect updates on Azure’s growth trajectory as it continues to drive overall cloud revenue. Pay attention to partnerships and new product launches.
2. AI Adoption: Microsoft’s integration of AI tools like Copilot across its product lines remains a key area of focus. Analysts will look for signs of broader enterprise adoption.
3. Gaming Expansion: With the Activision acquisition finalized, Microsoft’s gaming segment is poised for growth. Updates on Xbox content and Game Pass subscriptions will be closely monitored.
4. Microsoft 365 Performance: The performance of Microsoft 365 in both commercial and consumer segments will offer insights into subscription trends and overall adoption.
5. Regulatory Challenges: With the Activision deal completed, updates on regulatory concerns and potential impacts on future acquisitions will be of interest.

Microsoft’s guidance for Q2 FY2025 will be key in assessing how the company plans to balance investments in AI and cloud with continued profitability growth.

5. Starbucks (SBUX)

Q4 FY2024 Recap: Starbucks faced challenges in Q4 FY2024, with global comparable store sales declining 7%. Consolidated net revenues decreased by 3% year-over-year to $9.1 billion. The decline was driven by an 8% drop in comparable transactions, partially offset by a 2% increase in average ticket size. North America sales fell 6%, reflecting reduced customer traffic despite a 4% increase in ticket size. International sales decreased 9%, with China reporting a 14% drop in comparable store sales due to declining transactions and average ticket sizes.

Operating margin contracted 380 basis points to 14.4%, impacted by wage investments, increased promotional activity, and deleverage. The company opened 722 net new stores in the quarter, ending FY2024 with 40,199 locations worldwide, 52% of which are company-operated. The Starbucks Rewards program grew its U.S. active membership base by 4% YoY to 33.8 million members.

What to Watch For in Q1 FY2025:

1. Recovery Efforts with “Back to Starbucks”: Management’s new strategy aims to refocus on enhancing the customer experience, emphasizing operational efficiency and barista satisfaction. Updates on these initiatives will be closely watched.
2. China Market Performance: As a critical growth region, monitoring whether traffic recovers and transactions stabilize in China will be key for international growth prospects.
3. Margin Improvement Strategies: Look for details on pricing initiatives and cost control measures aimed at improving operating margins, especially in North America.
4. Loyalty Program Evolution: Starbucks Rewards continues to grow, but new innovations and benefits within the program could play a critical role in driving customer engagement and repeat visits.
5. Store Expansion Plans: Updates on new store openings and strategies to penetrate underserved markets will highlight the company’s growth trajectory for FY2025.

Starbucks’ ability to execute on these strategic priorities will determine how quickly it can rebound and return to sustainable growth.

6. Visa (V)

Q4 FY2024 Recap: Visa reported strong Q4 FY2024 results, with net revenues increasing by 11% year-over-year to $8.6 billion, driven by a 9% growth in payment volume and a 13% increase in cross-border volume. The company’s operating income grew 12% YoY to $5.6 billion, maintaining an impressive operating margin of 65%. Net income rose to $4.1 billion, reflecting Visa’s ability to capture growth across key segments.

Key drivers included continued strength in consumer spending, particularly in travel-related cross-border transactions, which outpaced pre-pandemic levels. The company also expanded its partnership network, adding fintech collaborators and securing long-term agreements with major issuers and merchants globally.

What to Watch For in Q1 FY2025:

1. Cross-Border Growth Sustainability: Visa’s cross-border business remains a key growth driver. Analysts will focus on whether robust travel-related spending trends persist.
2. Digital Payments Expansion: Updates on Visa’s digital wallet and tokenization initiatives will highlight its efforts to stay ahead in the digital payments space.
3. Partnership Developments: New partnerships or extensions with financial institutions, fintechs, and merchants could provide insights into Visa’s strategic growth avenues.
4. Macro Sensitivities: Pay close attention to how Visa manages macroeconomic headwinds, including foreign exchange fluctuations and slower consumer spending in certain regions.
5. Share Buybacks and Capital Allocation: Visa’s ongoing share repurchase program will be monitored as a reflection of its capital efficiency and shareholder return focus.

7. Mastercard (MA)

Q3 FY2024 Recap: Mastercard reported strong Q3 FY2024 results, with net revenue increasing 14% year-over-year to $6.5 billion, supported by solid growth in gross dollar volume (GDV) and cross-border transaction volumes. Cross-border volumes, a key driver of Mastercard’s revenue, surged 17%, reflecting sustained growth in global travel and commerce. Operating income grew 18% to $3.6 billion, demonstrating robust cost management alongside revenue expansion.

Net income rose to $2.9 billion, up 20% year-over-year, with a net profit margin of 45%. The company highlighted ongoing investments in AI and cybersecurity to enhance its fraud prevention capabilities and digital payment solutions. Mastercard also expanded its strategic partnerships with major financial institutions and fintech players globally.

What to Watch For in Q4 FY2024:

1. Cross-Border Spending Trends: Mastercard’s ability to sustain cross-border growth in the face of potential macroeconomic headwinds will be a key focus.
2. AI and Cybersecurity Investments: Updates on Mastercard’s innovation in fraud prevention and payment security could showcase how it is staying ahead in the competitive digital payments landscape.
3. Partnership Expansion: Analysts will monitor new or expanded collaborations with financial institutions, retailers, and fintechs to drive further adoption of Mastercard’s services.
4. Digital Payment Growth: With increasing digital wallet usage, Mastercard’s role in tokenization and seamless payment integration will be critical areas to watch.
5. Macro Environment Sensitivities: Key insights into how Mastercard navigates foreign exchange volatility and inflationary pressures globally will help gauge its performance resilience.

Mastercard’s strategic focus on innovation and partnerships positions it well for continued growth as digital payments become more integral to the global economy.

8. AT&T (T)

Q3 FY2024 Recap: AT&T reported Q3 2024 revenues of $30.2 billion, a slight year-over-year decline of 0.5%, primarily driven by lower Business Wireline and Mobility equipment revenues. However, Mobility service revenue grew by 4% YoY to $16.5 billion, and Consumer Wireline revenue increased by 2.6%, supported by ongoing strength in broadband demand. Adjusted EBITDA rose to $11.6 billion, reflecting a 3.4% increase, driven by growth in Mobility and Fiber services.

Postpaid phone net additions were strong at 403,000, with an industry-leading postpaid phone churn of 0.78%. AT&T Fiber also demonstrated resilience, adding 226,000 net customers in the quarter and achieving 19 consecutive quarters of 200,000+ net additions. Despite operating income declining due to a $4.4 billion goodwill impairment in Business Wireline, AT&T continues to strengthen its market position in converged connectivity solutions.

What to Watch For in Q4 FY2024:

1. 5G and Fiber Growth: AT&T’s ability to sustain its momentum in postpaid phone and fiber net additions will be critical. Watch for updates on 5G network deployment and penetration levels.
2. Profit Margins: The impact of strategic investments and operational efficiencies on margins, particularly in Mobility, will be a key focus.
3. Broadband Expansion: Insights on the progress toward 30 million locations passed with fiber by the end of 2025 could signal long-term growth potential.
4. Debt Reduction: Updates on debt-to-adjusted EBITDA ratios and cash flow generation will provide clarity on AT&T’s financial health.
5. Outlook for Business Wireline: With ongoing secular decline, pay attention to management’s strategy for mitigating revenue losses in this segment while focusing on high-growth areas.

AT&T’s focus on converged solutions and a robust investment in 5G and fiber technologies position the company for continued growth amid a competitive landscape.

9. ExxonMobil (XOM)

Q3 FY2024 Recap: ExxonMobil delivered strong Q3 FY2024 results, achieving net income of $8.6 billion, or $1.92 per share. Revenues totaled $90 billion, reflecting continued strength in upstream and downstream operations. Upstream production reached a 40-year high with 3.2 million barrels of liquids per day, boosted by contributions from the Permian Basin and Guyana assets. In downstream operations, record high-value product sales grew by 10% year-to-date. The energy giant also highlighted significant structural cost savings, achieving $11.3 billion in cumulative savings since 2019.

ExxonMobil maintained a robust capital allocation strategy, returning $9.8 billion to shareholders through dividends and share repurchases during the quarter. Additionally, it advanced its carbon capture and storage (CCS) initiatives, solidifying its position as an industry leader in committed CO2 offtake volumes, which now total 6.7 million metric tons per year.

What to Watch For in Q4 FY2024:

1. Production Growth and Asset Performance: Updates on upstream production growth, particularly in the Permian Basin and Guyana, will be key indicators of ExxonMobil’s operational strength.
2. Refining Margins and Product Sales: Analysts will monitor ExxonMobil’s ability to sustain growth in high-value product sales amid fluctuating refining margins.
3. Carbon Capture and Sustainability Goals: ExxonMobil’s leadership in CCS and hydrogen production will be closely watched as the company continues to scale its low-carbon solutions.
4. Capital Discipline and Shareholder Returns: ExxonMobil’s focus on balancing capital expenditures, debt reduction, and shareholder returns will be critical for its long-term growth strategy.
5. Guidance for 2025 and Beyond: Management’s outlook for upstream production, energy transition projects, and potential macroeconomic challenges will provide insights into ExxonMobil’s resilience and adaptability.

ExxonMobil’s strong operational performance and strategic investments in both traditional and renewable energy sectors position the company as a key player in the evolving energy landscape.

Conclusion/Takeaways:

This week’s earnings reports offer a window into how leading companies across diverse industries are navigating an evolving economic landscape. Several themes emerged from the results:

1. Tech Innovation Leading the Charge: Companies like Tesla, Microsoft, and Meta continue to emphasize advancements in AI, cloud computing, and energy storage, setting the stage for transformative industry shifts.
2. Consumer-Focused Strategies: Starbucks and Apple demonstrated the importance of consumer engagement and loyalty in driving growth, whether through innovative products or enhanced customer experiences.
3. Resilience Amid Challenges: Firms such as ExxonMobil and AT&T showcased their ability to sustain growth while managing macroeconomic pressures, with a focus on long-term investments in infrastructure and sustainability.
4. Financial Sector Momentum: Visa and Mastercard highlighted the ongoing growth in digital and cross-border payment trends, supported by strong partnerships and innovative technology.

As we look ahead, these companies are well-positioned to adapt and thrive despite economic uncertainties, providing valuable insights into market trends and future opportunities. Stay tuned for the next edition as we continue to track the leaders shaping our economy.

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