As earnings season continues, many of the biggest names in tech are now reporting their quarterly updates. With Microsoft and Alphabet's reports in the rearview mirror, next on deck are Apple (NASDAQ: AAPL) and Facebook (NASDAQ: FB) -- both of which report their latest quarterly results after market close on Wednesday, Oct. 30.
Making these two companies' earnings reports particularly important, their stocks have soared this year. Shares of Apple and Facebook are up 54% and 45% year to date, respectively.
Ahead of these two hot tech stocks' earnings reports, here's a brief overview of some key items to watch.
Apple CEO Tim Cook. Image source: Apple.
Apple
It's tough to identify one or even two metrics that will be the most important to investors when Apple reports results for its fourth quarter of fiscal 2019. There are a number of important narratives investors will be watching closely -- so let's cover them all briefly.
- Revenue: Apple returned to revenue growth in its fiscal third quarter -- but barely. Revenue rose 1% year over year. The high-end of Apple's guidance range for fiscal fourth-quarter revenue calls for another slight year-over-year increase. Can Apple pull it off?
- Services: Apple's services segment is not only growing quickly but it's the company's second-largest segment. Given the company's recent increased emphasis on growing the segment, investors should look for an acceleration compared to its 13% year-over-year revenue growth rate in fiscal Q3.
- iPhone revenue: While Apple's iPhone segment isn't expected to return to growth just yet, investors should look for the segment's 12% year-over-year revenue decline in fiscal Q3 to moderate somewhat in fiscal Q4.
- Guidance: Apple's big holiday quarter typically accounts for about a third of the company's annual revenue. Will the tech giant's guidance for the period imply year-over-year growth? For revenue to grow over the holidays, Apple will have to guide for more than $84.3 billion of revenue in its first quarter of fiscal 2020.
At social network Facebook, two metrics are especially important: revenue growth and daily active user growth.
Facebook's revenue growth impressed investors in Q2. Its top line increased by 28% year over year -- an acceleration from 26% growth in Q1. This was surprising since management had guided for revenue growth to decelerate during the period.
Management once again guided for revenue growth to decelerate in Q3. Analysts, on average, expect Facebook's revenue to rise 26.5% to $17.37 billion during the period.
Of course, investors should check on the health of the company's user base -- the lifeblood of Facebook's business. The best metric for investors to get a good pulse on how engaged Facebook users are is its daily active user growth. Daily active users increased 8% year over year to 1.59 billion in Q2. Investors should look for more high single-digit year-over-year growth in this metric in Q3.
Stay tuned after market close on Wednesday to find out how well these companies performed in their most recent quarters.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, and Microsoft. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.
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