So far, it’s been a pretty underwhelming year for the overall stock market. The S&P 500, for instance, is up just 2% year to date. But some tech stocks have outperformed the market impressively during this time. Netflix (NASDAQ:NFLX), Facebook (NASDAQ:FB), and Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), for instance, have all easily beaten the broader market. Year to date, Netflix, Facebook, and Alphabet are up 104%, 10%, and 7%, respectively.
With performance like this, investors have high expectations for all three companies going into their upcoming earnings reports — all of which are due this month. Ahead of their quarterly updates, here’s a look at some of the key items investors will want to watch.
The one metric arguably most important to Netflix’s success is its streaming members. Growth in streaming members is what drives Netflix’s top line. And it’s what supports its aggressive reinvestment into original content production, third-party content acquisition, and marketing. In Netflix’s most recent quarter, the company added 7.4 million streaming members sequentially, crushing management’s guidance for 6.4 million net adds during the period.
Going into Netflix’s first quarter, management guided for 6.2 million net new members. Highlighting the company’s momentum, this would be the most members Netflix has ever added in its second quarter.
Other notable areas for investors to check on when Netflix’s second-quarter results go live include the company’s revenue growth, international subscribers, and operating margin.
For Facebook investors, it all boils down to growth. The social network has spoiled shareholders with uncanny growth rates for years — and the first quarter of 2018 was no exception. Revenue increased 49% year over year, and earnings per share (EPS) soared 63% year over year. On average, analysts expect Facebook’s second-quarter revenue and EPS to come in at $13.3 billion and $1.97, respectively. This implies year-over-year growth of 43% and 49%, suggesting analysts expect Facebook’s strong momentum to persist.
Since Facebook has habitually outperformed analyst expectations, the social network may have to deliver results above these consensus estimates in order to live up to investors’ expectations.
Investors should also watch Facebook’s operating expenses and user growth.
For Alphabet, investors should check in on what management calls its “three big areas.” These are its cloud, YouTube, and hardware — and they’re all growing very rapidly.
Of these three businesses, YouTube is almost certainly the biggest. Accounted for in Alphabet’s Google properties revenue, YouTube was one of the key drivers for the 26% year-over-year growth in this segment’s revenue during Q1, management said. In addition, YouTube channels with creators earning six figures on the platform increased 40% year over year, highlighting strong growth in the YouTube community.
Cloud and hardware are both accounted for in Alphabet’s Google other segment, which saw revenue increase from $3.2 billion in the year-ago quarter to $4.4 billion in the first quarter of 2018, representing 36% growth. Investors should look for these two important businesses to help drive a similar segment growth in Q2.
When Alphabet reports its second-quarter results, investors may also want to take a look at the company’s advertising revenue growth, momentum in the Android app store, and overall top- and bottom-line numbers.
Netflix, Facebook, and Alphabet will report their second-quarter results after market close on Jul. 16, 25, and 23, respectively.
Suzanne Frey, an executive at Alphabet, 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), Facebook, and Netflix. The Motley Fool has a disclosure policy.