On Monday afternoon, Apple (NASDAQ: AAPL) sent out surprise invitations to an event. The event, which is scheduled to take place in New York City on Dec. 2, will honor the best apps from the year.

This marks a first for the company. Of course, it’s no surprise to see Apple holding an event to honor the best apps. After all, strong growth in Apple’s App Store has propelled its services segment higher in recent years, making the important segment second in size (measured by both revenue and gross profit) only to the tech giant’s iPhone business.

An app-centric Apple

“Join us for an Apple special event honoring our favorite apps and games of 2019,” read Apple’s invitations to press on Nov. 18. The invitations were titled “Loved by millions. Created by the best.”

Given that Apple typically shares its “Best of” apps from the App Store in a blog post sometime during the first few days of December, this Dec. 3 event is likely a continuation of the annual tradition — except with an actual event to go with it.

This comes just as the company updated its Worldwide Developers Conference (WWDC) app with a new name — Apple Developer — and announced the app would feature year-round news. “Starting today, the WWDC app is now the Apple Developer app and delivers in-depth information from Apple experts all year round,” Apple said in a post about the updated app. “Stay up to date with the latest developer news, informative videos, WWDC content, and more.”

With Apple’s services business growing rapidly and increasingly accounting for a larger share of the tech giant’s revenue and gross profit, it makes sense for the tech company to give the App Store more attention. The App Store, which saw all-time high quarterly revenue in fiscal Q4, was one of the main drivers of Apple’s 18% year-over-year growth in services revenue during the period. Further, subscriptions across the App Store are surging. Paid App Store subscriptions in fiscal Q4 amounted to 450 million, up from 330 million in the year-ago period.

Could Apple announce a new service of its own?

Apple has unsurprisingly been ramping up its own efforts in the App Store in a bid to better monetize its loyal customers. In 2019, Apple launched Apple News+, Apple TV+, and Apple Arcade — and CEO Tim Cook has said it’s working on other services. Further, the company is rumored to be readying a service that bundles together Apple Music, Apple News+, and Apple TV+.

The company could launch a new app of its own at its Dec. 3 event.

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On the surface, Apple‘s (NASDAQ: AAPL) fiscal 2019 results don’t look like the type of numbers that would spark optimism from investors. Total revenue during the period, which ended on Sept. 28, was $260 billion, down from $266 billion in fiscal 2018. Furthermore, earnings per share of $11.89 were about flat compared to the prior year. The iPhone was to blame for this performance, as the important segment saw its revenue decline from $165 billion in fiscal 2018 to $142 billion in fiscal 2019.

Yet the tech giant‘s shares have surged 63% year to date and have recently been hitting new all-time highs.

What gives?

With Apple’s fiscal 2019 behind it, here are four ways the tech giant impressed investors during the year.

1. A return to growth during the second half of the year

Perhaps one of Apple’s most notable recent accomplishments was returning to growth in the second half of fiscal 2019, even as iPhone revenue continued to fall by a double-digit percentage rate.

In Apple’s fiscal third quarter, the company returned to top-line growth, reporting a 1% year-over-year revenue increase. In fiscal Q4, revenue rose 2% year over year, even as iPhone revenue fell 9% year over year during the period. More importantly, Apple returned to earnings-per-share growth in fiscal Q4, growing the key profitability metric by 4% year over year.

Apple’s ability to grow its overall revenue and earnings per share even as its iPhone segment continues to face headwinds highlights how the tech company is becoming less dependent on the segment.

2. Services revenue growth is accelerating

Apple’s services revenue has consistently increased at double-digit year-over-year growth rates for years. But the important segment saw accelerated momentum in Apple’s fourth quarter of fiscal 2019. Services revenue increased 18% year over year in fiscal Q4, up from 13% growth in the prior quarter.

3. Services’ gross margin is improving

Given services’ strong growth recently, it’s no surprise that the segment has grown to represent a larger percentage of Apple’s total revenue. Services represented 18% of fiscal 2019 revenue, up from 15% of revenue in fiscal 2018. What’s more notable, however, was its growth as a percentage of gross profit. Services accounted for 30% of Apple’s gross profit in fiscal 2019, up from 24% of gross profit in fiscal 2018.

Services’ growing impact on Apple’s profitability is helped both by services outsize revenue growth and its expanding gross profit margin. In fiscal 2019, services gross profit margin was 64% — up from 61% in fiscal 2018.

With Apple’s more consistent and predictable services business playing a bigger role in the company’s operating results, the story for the stock is shifting. Apple is no longer viewed as a company almost entirely dependent on iPhone sales.

4. Wearables revenue is soaring

Finally, there’s Apple’s fast-growing wearables business. Its wearables products — Apple Watch, AirPods, and Beats earphones — have taken off. The nascent business is morphing into a meaningful pillar to Apple’s business. “Our wearables business showed explosive growth and generated more annual revenue than two-thirds of the companies in the Fortune 500,” said Apple CEO Tim Cook in the company’s fiscal fourth-quarter earnings call.

Apple’s “wearables, home, and accessories” segment — the segment that wearables falls under — saw revenue rise 41% year over year in fiscal 2019.

Going into fiscal 2020, Apple appears to be on better footing than it was at the beginning of fiscal 2019. The midpoint of Apple’s revenue guidance range for the first quarter of fiscal 2020 implies a 4% year-over-year increase, suggesting the tech giant’s revenue growth rate will accelerate once again.

The post 4 Reasons Apple Stock Won Over Investors in 2019 appeared first on The Motley Fool Canada.

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In the social network’s second quarter, the company surprised investors with an acceleration in its year-over-year revenue growth rate. The acceleration occurred despite management guiding for its growth rate to decelerate during the period. Going into Q3, management once again called for a deceleration in the growth rate. Yet top-line growth accelerated. Adding to this top-line surprise, Facebook’s bottom-line momentum was solid, too.

Here’s a closer look at the digital advertising giant’s third quarter performance.

Impressive revenue and earnings growth

Facebook’s revenue jumped 29% year over year to $17.7 billion. This growth rate marked an acceleration from 28% growth in Q2 and 26% growth in Q1. Analysts, on average, were expecting revenue of $17.4 billion, or 26.5% year-over-year growth.

The tech company‘s earnings per share of $2.12 were up 20% year over year. This key metric similarly beat analysts’ consensus estimate for $1.91.

Data source: Facebook third-quarter earnings release. Table by author.

Facebook’s management had said in its second-quarter earnings call that it expected revenue growth to decelerate sequentially as the year goes on. So it’s no surprise analysts were modeling for year-over-year growth below 27%. But a 28% year-over-year increase in Facebook’s advertising revenue and a 43% jump in its “payments and other fees” revenue helped the company deliver surprisingly strong growth.

In addition, the company’s year-over-year expense growth of 32% was low considering management was guiding for full-year expenses to rise 53% to 61% year over year. Combining Facebook’s higher-than-expected revenue growth and its lower-than-expected expense growth, it’s no surprise that the company’s 20% year-over-year increase in earnings per share exceeded expectations.

Robust user engagement

Just as notable as the company’s strong financial results was its user engagement. Facebook’s number of daily active users increased 9% year over year to 1.62 billion. That marked an acceleration from the company’s 8% growth in the metric in Q2.

The number of monthly active users increased 8%, maintaining the social network’s growth rate in the key metric in the prior quarter.

More importantly, Facebook said 2.2 billion unique users now use at least one of its social networks — Facebook, Instagram, WhatsApp, or Messenger — every day. That’s up from 2.1 billion in Q2. Furthermore, over 2.8 billion people use at least one of these services every month — up from 2.7 billion in Q2.

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But Apple’s strong fourth quarter results and management’s optimistic outlook for the company’s important holiday quarter not only show an acceleration in the company’s top-line growth, but they also paint a picture of a company with a revived growth story.

Apple’s fiscal fourth-quarter results

Revenue in the fourth quarter increased 2% year over year to $64.04 billion. While this is a small increase in percentage terms, the period’s total revenue was above management’s guidance range, which was $61 billion to $64 billion. Furthermore, the top line was also more than $1 billion ahead of analysts’ average forecast for fourth-quarter revenue of $63.0 billion.

Earnings per share of $3.03 also exceeded analysts’ consensus estimate of $2.84. In addition, the 4% year-over-year growth in EPS marked a return to bottom-line growth; in fiscal Q2, earnings per share were down 7% year over year.

Fueling the quarter was strong performance from iPad, services, and the wearables, home, and accessories segment. iPad revenue increased 17% year over year to $4.7 billion. Services, which is Apple’s second-largest segment, saw its revenue increase 18% year over year — an acceleration from 13% growth in fiscal Q3. This put services revenue at $12.5 billion.

Meanwhile, wearables, home, and accessories revenue soared 54% year over year — also an acceleration from 48% growth in fiscal Q3. Total wearables, home, and accessories revenue was $6.5 billion.

As expected, the iPhone business continued to face headwinds — namely a tough year-over-year comparison. Revenue was down 9% to $33.4 billion. But this year-over-year decline importantly moderated from a 12% decline in iPhone revenue in fiscal Q3, meaning the segment didn’t drag on overall business as much as it has in recent quarters.

Mac revenue declined 5% year over year to $7.0 billion.

Looking ahead

One of the most encouraging figures from Apple’s fiscal fourth-quarter updates were its guidance.

Management said it expects revenue in its first quarter of fiscal 2020 to be between $85.5 billion and $89.5 billion. Not only is the midpoint of this guidance range ($87.5 billion) ahead of analysts’ average estimate for fiscal first-quarter revenue of $86.9 billion, but it also implies a 4% year-over-year increase in revenue. In other words, Apple expects revenue growth to accelerate once again — good news for investors since Apple’s holiday quarter is its most important period.

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“We had an excellent quarter financially and operationally,” said PayPal CEO Dan Shulman in the company’s third-quarter update.

But there was more to like than these headline figures. Here are four other reasons investors are cheering PayPal’s third-quarter update.

1. Active accounts increased by 10 million

One key metric PayPal investors watch is the company’s growth in active customer accounts. PayPal added 9 million active accounts in Q2, bringing total active accounts to 286 million — up 17% year over year.

In Q3, PayPal added 9.8 million active accounts. This put total active accounts at 295 million. Strong active account growth this year has prompted management to revise its full-year outlook for the metric. Now PayPal expects to end the year with 304 million active accounts, above previous guidance for 300 million.

2. Total payment volume growth accelerated

Helping drive PayPal’s better-than-expected revenue growth was an acceleration in its total payment volume (TPV), or the total value of payment transactions processed through its payment technology. TPV increased 25% year over year to 3.1 billion. This was an acceleration from 24% TPV growth in Q2.

3. Venmo is firing on all cylinders

Venmo — PayPal’s peer-to-peer payment app — remains a key catalyst. Total Venmo payment volume rose 64% year over year. PayPal processed more than $27 billion in Venmo payments during the quarter.

“All of this is producing very strong monetization results,” said Schulman in the company’s third-quarter earnings call. “We ended Q3 with Venmo just shy of a $400 million annual revenue run rate.”

Total peer-to-peer payment volume, including transactions across both Venmo and its PayPal-branded apps, rose 39% year over year to $51 billion, accounting for 28% of total TPV.

4. Merchant services growth accelerated

Also playing an important role in the tech company‘s strong third-quarter performance was strong growth in its merchant services business. Merchant services volume increased 31% year over year on a constant-currency basis — an acceleration from 30% growth in Q2.

Management expects strong top-line growth to continue. PayPal guided for revenue to rise 16% to 17% year over year in Q4, or 17% to 18% in constant currency.

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Shares of monitoring and analytics platform Datadog (NASDAQ: DDOG) jumped on Thursday. The stock closed the trading day up 13%.

The stock’s gain comes as a Morgan Stanley analyst predicted the company is well set up heading into its third-quarter results next month.

So what

Datadog is one of the best-positioned companies in the infrastructure software market going into third-quarter updates, said Morgan Stanley analyst Sanjit Singh about the growth stock in a note to clients (via TheFly) on Thursday morning. He also said that Datadog has strong business momentum and could see accelerating year-over-year growth.

The analyst has an equal-weight rating on the stock and a $39 12-month price target.

Now what

On Nov. 12, Datadog will report its inaugural earnings report since going public in September. The market has high expectations for the company.

Datadog has garnered a $9.6 billion market capitalization despite having less than $300 million in revenue. But the company is growing at a wild pace. Revenue for the trailing-12-month period ending June 30 increased 82% year over year.

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What happened

Shares of social network Twitter (NYSE: TWTR) took a hit on Thursday, falling as much as 19.9%. As of 11:00 a.m. EDT, the stock was down about 19%.

The stock’s slide follows the company’s worse-than-expected third-quarter results. Adding to the disappointment, Twitter’s fourth-quarter revenue outlook was weaker than analysts were anticipating.

So what

Twitter reported revenue of $824 million, up 9% year over year. This was at the low end of management’s guidance range for revenue between $815 million and $875 million and below analysts’ average forecast for revenue of $874 million. This revenue underperformance weighed on profitability, with the growth stock‘s non-GAAP (generally accepted accounting principles) earnings per share coming in at $0.17, down from $0.21 in the year-ago quarter. Analysts, on average, were expecting $0.20.

Twitter’s lower-than-expected revenue growth reflected “revenue product issues and greater-than-expected advertising seasonality in July and August,” management said in the company’s third-quarter shareholder letter. The company said some glitches it is dealing with in its revenue products reduced year-over-year revenue growth by 3 percentage points or more — and some of these issues are expected to impact Q4 as well.

Now what

Looking to Q4, Twitter guided for revenue to be between $940 million and $1.01 billion — below analysts’ average forecast for revenue of $1.06 billion.

“While we are taking steps to remediate these issues, we expect them to continue to weigh on the overall performance of our advertising business in the near term,” said management.

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Key to Microsoft’s strong performance recently has been its momentum in the cloud. Its commercial cloud revenue has been soaring, contributing significantly to the company’s consolidated top- and bottom-line revenue growth.

Here are two key metrics investors will want to watch when Microsoft reports its fiscal first-quarter results on Oct. 23.

Total revenue growth

In Microsoft’s fourth quarter of fiscal 2019, the company’s revenue increased 12% year over year. While this was above what analysts were expecting, it did mark a deceleration compared to the company’s 14% revenue growth in fiscal Q3.

When Microsoft reports its fiscal first-quarter results, investors should look to see whether or not the company’s top-line growth will continue to decelerate. Based on management’s outlook for the quarter, it will. In the company’s fiscal fourth-quarter earnings call, CFO Amy Hood said the company expects fiscal first-quarter revenue between $31.7 billion and $32.4 billion. The midpoint of this guidance range implies 10.1% growth.

Management’s guidance, however, often proves to be conservative. Analysts, on average, expect Microsoft to report fiscal first-quarter revenue of $32.2 billion.

Notably, some deceleration would be natural. The company is up against a tougher comparison in its first quarter of fiscal 2020 than it was in its fourth quarter of fiscal 2019. Revenue in the first quarter of fiscal 2019 increased 19% year over year. That compares with 17% year-over-year growth in the fourth quarter of fiscal 2018.

Commercial cloud revenue growth

Microsoft’s commercial cloud revenue, or revenue from business-facing cloud-based offerings Office 365 commercial, Azure, and Dynamics 365, has been a huge boon to the company’s consolidated results recently.

Commercial cloud revenue increased 39% year over year in fiscal Q4 to $11 billion. Further, this segment’s gross margin is expanding rapidly, rising from 57% in fiscal 2018 to 63% in fiscal 2019. In the company’s fourth quarter of fiscal 2019, specifically, its commercial cloud gross margin was 65% — up from 59% in the fourth quarter of fiscal 2018.

With the segment growing much faster than Microsoft’s overall revenue, and given its expanding gross profit margin, commercial cloud will likely be a major driver of the software giant’s earnings growth in fiscal 2020. Investors, therefore, should look hope for more strong growth from the segment.

Microsoft reports its fiscal first-quarter results after market close on Oct. 23.

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Overall, the company has been doing everything right. Revenue has been coming in above expectations and the company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) has been soaring. But for now, high expectations have become the stock’s crutch.

With Square’s shares trading lower, investors will be looking to see if the company can finally impress investors with its latest quarterly results. The company reports its third-quarter earnings on November 6.

Ahead of the results, here’s an overview of two items that investors will want to watch.

Revenue growth

Quarterly revenue crossed $1 billion for the first time in Q2, coming in at $1.17 billion. This was up 44% year over year. But the top-line figure watched more closely by analysts and investors is the company’s adjusted revenue, or total net revenue less transaction-based costs, bitcoin costs, and the impact of deferred revenue adjustment related to purchase accounting. This revenue was up 46% year over year in Q2.

Square’s adjusted revenue growth rate has recently decelerated rapidly. In the fourth quarter of 2018, adjusted revenue increased 68% year over year. This growth rate then fell to 59% in Q1 and 46% in Q2.

But this deceleration may moderate in Q3. Management guided for adjusted revenue during the period to be between $590 million and $600 million.

The midpoint of this guidance range implies 38% growth. But actual revenue typically comes in above management’s guidance range. The high end of management’s guidance range, therefore, is a better indicator of what to expect. Third-quarter adjusted revenue of $600 million implies 39% growth.

Analysts, on average, are currently expecting Square’s third-quarter revenue to come in at $597.5 million.

Subscription and services-based revenue and gross profit

Square’s subscription and services-based revenue has been a key driver for the company, as it’s seeing outsized growth compared to its transaction-based and hardware revenue. Primary drivers in the segment include the Cash App, Square Capital, Caviar, and Instant Deposit.

Revenue from this segment rose 87% year over year to $251 million. More impressively, the segment’s gross profit was $191 million, up 102% year over year. Can this segment keep up its strong momentum in Q3?

Investors should also keep an eye out for any news on the company’s sale of Caviar, Square’s food-ordering platform. The company entered an agreement with DoorDash on Aug. 1 to sell Caviar in a deal valued at $410 million. The transaction is expected to close before the end of the year.

Square will report its third-quarter results after market close on Wednesday, Nov. 6.

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In less than two weeks, investors will get to see whether Twitter has been able to keep up this momentum. While the social network is expected to report another quarter of double-digit revenue growth, the company’s momentum should cool slightly as Twitter laps tough comparisons.

Here’s a look at the key metrics investors should watch when Twitter reports results on Oct. 24.

Revenue growth

Twitter’s second-quarter revenue rose 18% year over year in Q2, in line with the growth the company saw in its first quarter. The top-line performance was ahead of both management’s guidance and analysts’ expectations.

Twitter saw particular strength in the U.S. during the quarter, with U.S. revenue rising 24% year over year. U.S. advertising revenue, specifically, accelerated to a rate of 29% — up from 26% growth in the prior quarter. “Video ad formats continued to show strength, notably from our Video Website Card, In-Stream Video Ads, and First View ads,” management said in the company’s second-quarter shareholder letter.

For the company’s third quarter, management guided for revenue to be between $815 million and $875 million. The midpoint of this guidance range implies 11% year-over-year growth. On average, analysts currently expect Twitter’s revenue during the period to rise 15.3% to $874 million.

Daily active users

While Twitter is primarily reliant on advertisers for its revenue, active users are ultimately the company’s lifeblood. Without an engaged user base, advertisers would lose interest in Twitter’s platform.

Fortunately, Twitter has seen increased user engagement recently, with daily active users rising 14% year over year in the company’s second quarter. This is an acceleration from 11% growth in Q1 and 9% growth in the fourth quarter of 2018.

In the company’s second quarter, investors should look for growth in this key metric to be in the 9% to 14% range it has hovered at for the last several years.

Operating income

Finally, users should check on Twitter’s operating income. The company’s investments in the health of the conversation on its platform, advertising products, sales, and its overall platform has put some pressure on operating income recently. Twitter’s second-quarter operating income was $76 million, down from $80 million in the year-ago quarter.

Management expects investments will continue to weigh on profitability, as Twitter guided for operating income between $45 million and $80 million. This compares to operating income of $92 million in the third quarter of 2018.

The company is scheduled to report its third-quarter results before market open on Thursday, Oct. 24.

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