Like clockwork, the tech giants are announcing billions in profits quarter after quarter. But with which products and services do they earn their money? These graphics show it at a glance.
Alphabet (Google) lives on advertising
Net income was $15.1 billion in the first quarter of 2023 alone. The tax expense is 3.1 billion. image: @economyapp
By far Alphabet’s most important source of revenue remains the advertising business related to Google web search. Other significant sources of revenue are YouTube and mobile advertising, the Play Store on Android devices, and cloud services including office software for business customers. The Play Store category also includes products sold through it such as Fitbit, Google Nest, Pixel devices and YouTube Premium.
Google’s cloud business is growing, posting a small profit for the first time in 15 years. picture: @economyapp
Google’s cloud division is only responsible for about ten percent of total group sales. It is a trail behind the cloud giants Amazon Web Services and Microsoft Azure but was able to make a small profit in the first quarter of 2023 for the first time in 15 years. This is all the more important for Alphabet because the advertising business has been under pressure for some time. It is currently difficult to estimate how new AI services such as ChatGPT will affect Google’s core business.
Amazon is far more than an online retailer
Net income for the first quarter of 2023 was $3.2 billion. The tax expense is 0.9 billion. picture: @economyapp
Amazon’s online shop still accounts for 40 percent of the group’s sales. Another 23 percent generate items sold through the Amazon marketplace by third-party sellers. The third important pillar is the cloud division of Amazon Web Services (AWS), which generates more sales than the subscription and advertising business combined. With the physical shops, Amazon has another source of revenue, with the areas of cloud, subscription services (Prime Video, etc.), and advertising including Twitch growing particularly quickly.
Apple is stuck on the iPhone drip
Net income for the second quarter of fiscal 2023 was $24.2 billion. The tax expense is 4.2 billion. picture: @economyapp
At Apple, the blockbuster iPhone (more than 50 percent of sales) remains the key product. iPad and Mac each generated 7 percent of sales. Other products such as Apple Watch, AirPods and various accessories together accounted for 9 percent, while the App Store, including subscription and financial services, already accounts for a fifth of sales.
The iPhone remains central, subscription and financial products via the App Store are becoming increasingly important. picture: @economyapp
Apple’s service business has been growing the fastest for years. This includes App Store, Apple Music, Apple Pay, AppleCare, Apple TV+, Apple Arcade, Apple Fitness+, iCloud+ and more. Apple is pushing these subscription and financial services (Apple credit card, Apple savings account) around the App Store, as they bind customers to their own ecosystem and, with the App Store monopoly on iOS devices, generate fantastic returns on sales estimated at more than achieve 90 percent.
Incidentally, the thriving Services category also includes Google’s hefty annual payment — reportedly up to $20 billion a year — to remain the default search engine on Apple devices.
Disney’s amusement parks beat Disney’s streaming service
Disney’s amusement parks are profitable, the still young streaming service Disney Plus is weakening. image: @economyapp
The Disney group earns its money primarily with TV stations and of course the amusement parks, which continue to bring in the most money. The income from license fees and merchandising products is also not insignificant.
The streaming service Disney Plus, which was launched in 2019, is developing into a problem child. After a brilliant start, the number of users has recently even been declining.
Disney’s streaming service got off to a strong start at the end of 2019, but now customers are jumping off again. picture: @economyapp
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Meta lives from our data
Net income for the first quarter of 2023 was $5.7 billion. The tax expense is 1.6 billion. picture: @economyapp
Meta basically has two lines of business: on the one hand the advertising business with Facebook, Instagram, WhatsApp and Messenger, on the other hand the hardware division with virtual reality glasses. Advertising accounts for around 99 percent of sales.
Meta was able to increase the number of users on Facebook, Instagram, WhatsApp and Messenger from 2.83 to 3.02 billion in early 2022 and early 2023. Still, revenue growth has slowed, in part because other tech giants like Apple and Amazon are ramping up their advertising businesses to grab a piece of the pie and find revenue streams beyond their core products.
Meta’s advertising business compared to Google and Amazon. picture: @economyapp
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Microsoft mutated from a Windows to a cloud company
Net income for the third quarter of fiscal 2023 was $18.3 billion. The tax expense is 4.4 billion. picture: @economyapp
Microsoft is no longer the Windows group of the past, but primarily the world’s largest software and second-largest cloud provider. The booming cloud business around the Azure platform, which sells computing capacity and applications to other companies on the Internet, now generates 42 percent of sales. Microsoft’s office and server products and, increasingly, the social network LinkedIn and income from the game subscription service Game Pass continue to be key sources of revenue.
Software subscriptions and cloud services make the cash register ring at Microsoft. picture: @economyapp
Microsoft has the advantage that it can use its strong market position of Office and Windows with corporate customers to tie them to its cloud services by bundling products. Google and other rivals therefore accuse Microsoft of abusing its market power .
Microsoft relies heavily on AI in order to remain the market leader in Office products, for example, or to capture market share from Google with Bing. For Microsoft, at least at the moment, the recently stagnating or even falling sales of Windows licenses, Xbox game consoles or Surface devices are of secondary importance.
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Netflix remains the streaming king
Net income for Q1 2023 was $1.3 billion. The tax expense is 0.2 billion. picture: @economyapp
Most Netflix subscribers come from the North America region including Australia and New Zealand (UCAN) and the EMEA region, i.e. Europe, the Middle East and Africa . Central and South America (LATAM) and the Asia-Pacific region with China and Japan (APAC) are much less important.
Netflix is growing at a much slower pace. Therefore, advertising-financed subscriptions should attract more users. picture: @economyapp
Unlike Disney Plus, the video streaming market leader Netflix continues to grow slightly in terms of global user numbers. And unlike the music streaming giant Spotify, it regularly posts profits.
Since further user growth with paid subscriptions is limited, Netflix is trying to continue growing with ad-supported subscriptions and measures against password sharing . The latter will cost users in the short term, but should pay off in the long term.
Tesla is a margin leader
Net income for the first quarter of 2023 was $2.5 billion. The tax expense is 0.3 billion. picture: @economyapp
Tesla earns most of its revenue from the sale of electric cars (86 percent of sales), followed by revenue from various services and the energy generation and storage division. Revenue from CO 2 certificates (regulatory credits) is increasing, but is now almost negligible for Tesla .
Due to the growing competition, Elon Musk’s US tech group was recently only able to boost its sales with sharp price cuts, which is putting pressure on profitability. Nevertheless, Tesla still achieves an extraordinarily high profit margin for the auto industry, as the e-car pioneer is much leaner with just a few models than its larger rivals, which operate complex production lines for various petrol, hybrid and e-cars. Or to put it another way: probably nobody is better prepared for a price war than Tesla.
