Q2-2023 Earnings results: Part 1

Tuesday 15 August 2023

Portfolio updates

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With a big week of earnings under way, we have focussed this Weekly Wrap entirely on the results from our portfolio companies which have reported:

GE HealthCare, Microsoft, Alphabet, Meta and S&P Global

GE HealthCare

GE Healthcare released its second quarter earnings after spinning out from GE in January, reporting a 7% increase in revenue to $4.8 billion, reflecting strong global demand across the company’s business segments. Management raised full-year revenue guidance to 6-8% from 5-7% to reflect the strong performance so far this year. It also upgraded full-year adjusted earnings per share guidance to represent 9-14% growth versus 2022. Profitability will improve into the second half of the year as it pursues several operational and productivity initiatives to streamline processes post-spinoff. The company highlighted its AI-powered technologies which will drive future upselling into its large device install base.


Microsoft reported fourth quarter and full year 2023 results on Wednesday. Despite some glum commentary in the news media, revenue and earnings came in above both company guidance and market expectations and the outlook pointed to continued growth. Total revenue grew 8% to $56.2 billion and earnings per share increased 21% to $2.69. The company mentioned that it doesn’t expect to see a significant financial impact from it’s recently announced Microsoft 365 Copilot until the second half of FY24 as it becomes generally available later this year or early next year. This might have spooked some who invested in the AI hype, however, as we noted last week, we continue to believe the long-term addressable AI opportunity for Microsoft is large and underappreciated.


Alphabet posted a solid result driven by Search, YouTube and the Cloud. Total revenue grew 7.5% to $74.6 billion while earnings per share increased 20% to $1.45. Revenue growth for Search and YouTube was better than expected albeit still in the mid single digits. However, with the overall industry reporting mixed signals for ad revenues, the larger platforms are starting to show their advantages in terms of scale and technology, which ultimately translates to higher ROI for advertisers. Consequently, Google’s ad revenue growth is expected to accelerate back up to double digits in the second half of the year. In addition, the cloud business produced its second straight profitable quarter with revenue growth outpacing expense growth. Although there will be some lumpiness in cloud costs due to continued investments in infrastructure, we believe this profitability is sustainable, leading to an earnings upgrade.


Meta posted stronger-than-expected second-quarter results and provided guidance that also topped market expectations. Revenue was up 11% year-on-year to $32 billion while earnings increased 21% to $2.98 per share. The strong outperformance reflects stabilisation in advertising demand, the attractiveness of Meta’s platforms for both users and advertisers and signs of Meta’s “year of efficiency” paying off. Total daily active users across Meta’s “family of apps” (Facebook, Instagram, WhatsApp, Messenger) in June reached 3.07 billion. In addition, Reels is driving engagement and ramping monetisation as it currently generates more than 200 billion daily views on Facebook and Instagram at a $10 billion annual revenue run rate, up from just $3 billion a year ago. Meta continues to focus its investments on AI infrastructure, features and systems in the near term while the metaverse is poised to have a longer-term impact.

S&P Global

S&P Global reported second-quarter results overnight beating analyst expectations for revenue but slightly missing on earnings. Revenue grew 4% to $3.1 billion while adjusted earnings per share increased 11% to $3.12. The concern for analysts on the call was the margin contraction across several key segments. Management put this down to changes in incentive compensation and noted that their full-year and long-term margin targets remain unchanged. This puts S&P in the “second half club” where it must perform better-than-expected in the second half of the year to make up for worse-than-expected performance in the first half. While this is less than ideal, we believe S&P will navigate these short-term fluctuations. Moreover, we remain confident in the company’s long-term potential to drive double-digit earnings growth well into the future.

About the Author
Swell Investment Team

Swell Investment Team

Members of the investment team contributed to this article.