Big Tech Sales Growth: Past, Present and Future

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Big Tech Sales Growth: Past, Present and Future

US Big Tech has become such a large part of the global equity landscape that every investor, no matter how “macro”, needs to understand at least a little bit about the fundamental drivers that power the stocks of Apple, Microsoft, Google, Amazon, and Facebook. Not only are those 5 names 22.2 percent of the S&P 500, but they are 12.6 percent of all the freely traded equity market cap on the planet (using MSCI All-World as the benchmark).

We recently reviewed Wall Street’s earnings expectations for these companies, and today we will pull back the lens and examine their recent and projected revenue growth. The goal here is to both put some real-world numbers alongside these widely watched names as well as assess how the pandemic potentially altered their longer-term growth profiles. We’ll go through each name in turn:

Apple’s annual revenues 2016A – 2022E (September fiscal year end):

  • 2016: $215.6 billion
  • 2017: $229.2 bn
  • 2018 $265.6 bn
  • 2019: $260.2 bn
  • 3-year CAGR: +6.5 percent
  • 2020: $274.5 bn (+5.5 pct annual growth from prior year)
  • 2021 (E): $366.6 (+33.6 pct annual growth)
  • 2022 (E): $380.8 (+3.9 pct annual growth)
  • 3-year post-pandemic CAGR: +13.5 pct

Comment: Apple got a huge revenue boost during the pandemic (34 percent growth from 2020FY to 2021FY) but analysts expect that to wane considerably. In fact, expected 2022 revenue growth of 3.9 percent is only a little over half (60 pct) of its pre-pandemic sales growth run rate of 6.5 pct. Apple is a huge and highly profitable business, which is why it is the largest company by market cap in the world. But … It is not expected to be an especially fast-growing one in the near term.

Microsoft’s annual revenues 2016A – 2023E (June fiscal year end):

  • 2016: $91.1 billion
  • 2017: $96.6 bn
  • 2018: $110.4 bn
  • 2019: $125.8 bn
  • 3-year CAGR: 11.4 pct
  • 2020: $143.0 bn (+13.7 pct annual growth)
  • 2021: $168.1 bn (+17.6 pct)
  • 2022 (E): $192.1 bn (+14.3 pct)
  • 2023 (E): $217.2 bn (+13.1 pct)
  • 3-year CAGR: +15.0 pct

Comment: Microsoft also got a good revenue bump during the pandemic (18 pct in 2021FY), but unlike Apple analysts see double-digit revenue growth persisting over the next 2 years. In fact, 2022FY and 2023FY revenue growth are expected to be higher than MSFT’s pre-pandemic sales growth run rate of 11.4 pct. For a company of Microsoft’s size, that is remarkable.

Google’s annual revenues 2016A – 2023E:

  • 2016: $90.3 billion
  • 2017: $110.9 bn
  • 2018: $136.8 bn
  • 2019: $161.9 bn
  • 3-year CAGR: +21.5 pct
  • 2020: $182.5 bn (+12.7 pct annual growth)
  • 2021: $250.7 bn (+37.4 pct)
  • 2022: $292.8 bn (+16.8 pct)
  • 3-year CAGR: +21.8 pct

Comment: Google is a bit of a mixed bag on the revenue front, because 2021 is turning out well (37 pct rev growth) but analysts only expect 17 percent sales growth next year. That is respectable, to be sure, but well below the 22 percent annualized revenue growth from 2016 – 2019. If pressed, we’d say the Street is too low on its 2022 sales numbers for Google, but perhaps the company has grown to the point where sustainable +20 pct revenue growth is no longer possible.

Amazon’s annual revenues 2016A – 2023E:

  • 2016: $136.0 billion
  • 2017: $177.9 bn
  • 2018: $232.9 bn
  • 2019: $280.5 bn
  • 3-year CAGR: +27.3 percent
  • 2020: $386.1 bn (+37.7 pct annual growth)
  • 2021: $476.1 bn (+23.3 pct)
  • 2022: $563.3 bn (+18.3 pct)
  • 3-year CAGR: +26.2 percent

Comment: much like Google, Amazon’s revenue growth is expected to be lumpy. Last year was very strong at +38 percent, and analysts have +23 percent penciled into their models for 2021 and +18 percent for 2022. Both are slower than the pre-pandemic annualized run rate of 27 percent.

Facebook’s annual revenues 2016 – 2023E:

  • 2016: $27.6 billion
  • 2017: $40.7 bn
  • 2018: $55.8 bn
  • 2019: $70.7 bn
  • 3-year CAGR: +36.8 percent
  • 2020: $86.0 bn (+21.6 pct annual growth)
  • 2021: $119.5 bn (+39.0 pct)
  • 2022: $143.0 bn (+19.7 pct)
  • 3-year CAGR: +26.5 percent

Comment: before the pandemic, Facebook was the fastest growing company of the 5 names we’re discussing today, and the same holds true for 2021. And, despite its high-profile problems of late, analysts still think it will be the fastest growing Big Tech name in 2022. Even with that, revenue growth next year (20 pct) is still expected to be well below its pre-pandemic run rate (37 pct).

Final thought: aside from MSFT, analysts are expecting Big Tech’s post-pandemic revenue growth to be slower than 2016 – 2019. At one level, that’s understandable: these companies have been through a remarkable growth spurt (and they were not small before that). At another level, however, we doubt any Big Tech management team thinks slowing growth is acceptable. As much as they may be under the regulatory spotlight just now, we can’t help but think they will find a way to keep their sales growth in line with historical levels. That may end up making them even more of a target in DC, true. We’re not sure they care, however …