May 20, 2024
How Big Tech Co’s Make Money - Magnificent 7 - MSFT, FB, NVDA, Apple, Google, Amzn, Tesla
AZ TRT S05 EP19 (234) 5-12-2024
What We Learned This Week:
Notes:
Breakdown of Revenue Sources, Market Cap / CEO / Start
Google / Alphabet – ads / search, playstore, hardware, services, YouTube premium content + TV, cloud
Microsoft – gaming, services, software, devices, cloud
Apple – devices, services, apps
Nvidia – AI Chips, Graphic Cards, & components
Tesla – EV Cars
Amazon – E Commerce, cloud, services
Meta / Facebook – ads, devices
Big drops in two of the Magnificent Seven stocks haven't dented the group's influence on the S&P 500. In fact, the trendy stocks dominate now more than ever.
The seven megacap stocks — Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG), Amazon.com (AMZN), Meta (META) and Tesla (TSLA) — account for 29.7% of the S&P 500 as of April 17, says Datatrek Research. That's up from the group's 27.9% weight in the S&P 500 in 2023.
Seeing the group's hold over the world's most popular index grow this year might surprise you. Shares of Tesla are down 37.4%.
"Despite all the buzz around the death of the 'Magnificent 7,' U.S. big tech is actually a more dominant force in American stock markets than at the end of 2023," said Nicholas Colas of Datatrek in a report.
Source:4/2024 - https://www.investors.com/etfs-and-funds/sectors/sp500-magnificent-7-stocks-dominate-even-more-now/
CEO Sundar Pinchai
c 1998 Sergey Brin and Larry Page
Mkt Cap $2.1 Tr
Source: https://www.oberlo.com/statistics/how-does-google-make-money
Google / Alphabet – ads / search 56% of rev at $175 bil in 2023, playstore, hardware, services, YouTube premium content + TV, cloud 11% of rev at $31 bil
Google revenue breakdown: top Google revenue sources in 2023
· Ads (Google Search & other properties): $175.03 billion (56.9%)
· YouTube ads: $31.51 billion (10.3%)
· Google Network ads: $31.31 billion (10.2%)
Source: https://www.investopedia.com/articles/investing/020515/business-google.asp
Microsoft CEO Satya Nadella.
C 1975 Bill Gates / Paul Allen
Mkt Cap 3.1 tr
Source: https://www.investopedia.com/how-microsoft-makes-money-4798809
Source: https://techbehemoths.com/blog/how-microsoft-makes-billions
First thing’s first and just before we dive into the financial story, we should identify the major sources of revenue Microsoft has:
· Cloud computing - The entire business suite of Microsoft is focused on cloud services. Microsoft Azure for example is the leading direction in the company’s cloud services. But, things are more complicated
· Windows OS - from Windows 95 till 10th version is only 15 years. And in May 2021 with the 21H1 update rumors are saying that the next thing that will happen in Autumn 2021 is the release of Windows 11. It was and continues to be one of the largest sources of revenue for Microsoft.
· Microsoft Teams - An alternative to Slack, some would say, but Microsoft is putting more than just a comfortable chat for users. It is designed to become a digital environment for companies and employees of any company in the world.
· Xbox - the gaming industry is growing, and Microsoft couldn’t stay apart from this topic. Sony needed competition and Xbox is the best possible alternative to it at the moment
· LinkedIn - Since 2016 when Microsoft acquired LinkedIn, the professional social network continued to grow and became a unique and indispensable tool for HR professionals all over the world.
· Minecraft - as if Xbox was not enough, Microsoft dive into the gaming industry even more with Minecraft.
So, there is a good portfolio for Microsoft which in its turn provides a series of exclusive services, or competitive
Microsoft Azure is a top cloud service provider competing with Google Cloud and AWS from Amazon.
In its 2023 financial year, Microsoft generated 69 billion U.S. dollars from its productivity and business processes segment and a further 88 billion through its intelligent cloud segment. Thanks in part to the rapid growth in these two areas, 2023 proved to be the company’s most successful year ever in terms of annual revenue, with the total figure reaching over 211 billion dollars.
Source: https://www.visualcapitalist.com/microsofts-revenue-by-product-line/
In 2023, Microsoft revenues soared to a record $211 billion as demand for AI services accelerated.
As one of the world’s largest companies by market cap, Microsoft reached a $2.8 trillion valuation as investors flocked to big tech and AI-related stocks last year. Amid strong growth, here’s how much revenue was generated from Microsoft’s product lines in 2023:
Product LIne |
FY2023 Revenue |
Share of Revenue |
Cloud Computing Services |
$80B |
38% |
Cloud Office Suite Software |
$49B |
23% |
Operating Systems |
$22B |
10% |
Gaming Consoles |
$15B |
7% |
Employment Listing Platform |
$15B |
7% |
AI-Enabled Search Engine |
$12B |
6% |
Other |
$19B |
9% |
Total Revenue |
$211B |
100% |
Source: https://blogs.microsoft.com/blog/2023/01/23/microsoftandopenaiextendpartnership/
Microsoft and OpenAI
This agreement follows our previous investments in 2019 and 2021. It extends our ongoing collaboration across AI supercomputing and research and enables each of us to independently commercialize the resulting advanced AI technologies.
· Supercomputing at scale – Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.
· New AI-powered experiences – Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology. This includes Microsoft’s Azure OpenAI Service, which empowers developers to build cutting-edge AI applications through direct access to OpenAI models backed by Azure’s trusted, enterprise-grade capabilities and AI-optimized infrastructure and tools.
· Exclusive cloud provider – As OpenAI’s exclusive cloud provider, Azure will power all OpenAI workloads across research, products and API services.
Meta / FB - Mark Zuckerburg + others c 2/2004
Mkt Cap 1.2 tr
Source: https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp
Instagram, Messenger, WhatsApp
In 2023, the revenue general by Meta Platforms (formerly known as Facebook Inc.) amounted to roughly 134 billion US dollars, up from around 116 billion U.S. dollars in the previous fiscal year. In 2022, Meta's revenue stood at 117.9 billion USD.
Meta Revenue Breakdown |
2022 |
% |
Advertising |
$113.64B |
97.5% |
Other revenue (payments and fees) |
$809MM |
0.7% |
Reality Labs (primarily sales of Oculus, now called Meta Quest) |
$2.16B |
1.9% |
Total |
$116.6B |
Apple c 1976 Steve Jobs and Steve Woz
CEO Tim Cook
Mkt Cap 2.9 tr
Source: https://www.tutor2u.net/economics/reference/why-is-apple-so-profitable#:~: .
Diversified revenue streams: Apple generates revenue from a variety of different sources, including iPhone sales, iPad sales, Mac sales, as well as services like the App Store, Apple Music, and iCloud. This diversification helps to minimise risk and ensure a steady stream of income for the company.
Source: https://www.investopedia.com/how-apple-makes-money-4798689
Apple Revenue |
iPhone |
Accessories |
Mac |
iPad |
iPod |
Services |
2023 |
$200.6B |
$39.8B |
$29.3B |
$28.3B |
- |
$85.2B |
Total 2023 Rev - $382 B
Nvidia c 1997
CEO Jenson Huang – Hong
Mkt Cap 2.3 Tr
Source: https://www.investopedia.com/how-nvidia-makes-money-4799532
Revenue $26 bil in 2023, and $60 bil in 2024 so far
Graphics and computers / networking – gaming, data centers
Nvidia partners with all – Google, FB, Amazon, Dell, Tesla, OpenAI, Oracle
March 18, 2024
Blackwell
Innovations to Fuel Accelerated Computing and Generative
AI
Blackwell’s six revolutionary technologies, which together enable
AI training and real-time LLM inference for models scaling up to 10
trillion parameters, include:
A Massive
Superchip
The NVIDIA
GB200 Grace Blackwell Superchip connects two NVIDIA
B200 Tensor Core GPUs to the NVIDIA Grace CPU over a 900GB/s
ultra-low-power NVLink chip-to-chip
interconnect.
For the highest AI performance, GB200-powered systems can be connected with the NVIDIA Quantum-X800 InfiniBand and Spectrum™-X800 Ethernet platforms, also announced today, which deliver advanced networking at speeds up to 800Gb/s.
The GB200 is a key component of the NVIDIA GB200 NVL72, a multi-node, liquid-cooled, rack-scale system for the most compute-intensive workloads. It combines 36 Grace Blackwell Superchips, which include 72 Blackwell GPUs and 36 Grace CPUs interconnected by fifth-generation NVLink.
Tesla c 7/2003
CEO Elon Musk
Mkt Cap 567 bil
Source: https://fourweekmba.com/tesla-revenue-breakdown/
Revenue Breakdown |
2023 |
Contribution |
Automotive Sales |
$78.5B |
81% |
Regulatory Credits |
$1.79B |
1.85% |
Leasing |
$2.12B |
2.19% |
Services |
$8.32B |
8.6% |
Energy generation and storage |
$6.03B |
6.24% |
Total |
$96.77B |
Source: https://www.investopedia.com/tesla-s-largest-revenue-source-is-automotive-sales
Amazon c 1994 by Jeff Bezos
CEO Andy Jassy
Mkt Cap 1.9 tr
Amazon Revenue Breakdown - $575 B in 2023
Online stores $231.87B Physical stores $20.03B
Third-party seller services $140.05B Subscription services $40.21B
AWS $90.76B Advertising $46.9B Other2023 $4.96B
Source: https://www.investopedia.com/how-amazon-makes-money-4587523
AWS
Amazon Web Services offers a broad set of global cloud-based products including compute, storage, databases, analytics, networking, mobile, developer tools, management tools, IoT, security, and enterprise applications: on-demand, available in seconds, with pay-as-you-go pricing.
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