In this article, we will take a look at the 5 best Q3 earnings reports that crushed estimates. To see more such companies, go directly to 10 Best Q3 Earnings Reports That Crushed Estimates.
5. ServiceNow Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 93
ServiceNow Inc. (NYSE:NOW) ranks 5th in our list of the companies that crushed analyst estimates for Q3 earnings. Adjusted EPS in the quarter came in at $2.92, beating estimates by $0.37. Revenue came in at $2.29 billion, surpassing estimates by $20 million.
Here is what Baron Technology Fund has to say about ServiceNow, Inc. (NYSE:NOW) in its Q3 2023 investor letter:
“Despite near-term macro uncertainty, it’s important to frame that we find ourselves in the early innings of both the AI investment cycle and overall cloud penetration. We estimate cloud penetration to be between 25% and 30% versus the likely 70% to 75% level over time, if not even higher. AI deployments are literally just getting off the ground.Infrastructure and development platforms for securely storing and curating data, training and fine-tuning large-language and other AI models, and developing and delivering AI applications. Beneficiaries include Microsoft Azure and Amazon Web Services. Integration of generative AI capabilities, such as AI agents and copilots, directly into existing product offerings and customer workflows. Software vendors capitalizing on this opportunity includes ServiceNow, Inc.“
4. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 112
Last month, Advanced Micro Devices, Inc. (NASDAQ:AMD) posted strong Q3 results but its shares fell amid a downbeat guidance. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s adjusted EPS in the quarter came in at $0.70 beating estimates by $0.02. Revenue in the period came in at $5.8 billion, which was an increase of 4.1% on a YoY basis, beating estimates by $110 million. In the fourth quarter of 2023, Advanced Micro Devices, Inc. (NASDAQ:AMD) expects its revenue to come in at $6.1 billion, plus or minus $300 million, below the $6.4 billion estimates. This is mainly due to the weakness in the gaming segment.
Advanced Micro Devices, Inc. (NASDAQ:AMD) talked in detail about its AI plans and products in Q3 earnings call:
“Based on the rapid progress we are making with our AI road map execution and purchase commitments from cloud customers, we now expect Data Center GPU revenue to be approximately $400 million in the fourth quarter and exceed $2 billion in 2024 as revenue ramps throughout the year.
This growth would make MI300 the fastest product to ramp to $1 billion in sales in AMD history. I look forward to sharing more details on our progress at our December AI event. Turning to our Client segment. Revenue increased 42% year-over-year and 46% sequentially to $1.5 billion. Sales of our Ryzen 7000 processors featuring our industry-leading Ryzen AI on-chip accelerator, grew significantly in the quarter as inventory levels in the PC market normalized and demand began returning to seasonal patterns. Revenue for our latest-generation client CPUs powered by our Zen 4 core more than doubled sequentially as we saw strong demand for our Ryzen 7000 Series notebook and desktop processors that deliver both leadership energy efficiency and performance across a wide range of workloads.
In commercial, we launched our first Threadripper Pro workstation CPUs based on our Zen 4 Core that deliver unmatched performance for multi-threaded professional design, rendering and simulation applications. Dell, HPE and Lenovo announced an expanded set of workstations powered by new Threadripper Pro processors as we focus on growing this margin-accretive portion of our client business. Looking forward, we are executing on a multiyear Ryzen AI road map to deliver leadership compute capabilities built on top of Microsoft’s Windows software ecosystem to enable the new generation of AI PCs that will … [read the full earnings call transcript here]”
3. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 114
Netflix, Inc. (NASDAQ:NFLX) crushed EPS and revenue estimates for the third quarter when it disclosed its results in October. Netflix, Inc. (NASDAQ:NFLX)’s GAAP EPS in the quarter came in at $3.73, beating estimates by $0.23. Revenue in the period jumped about 7.7% year over year to $8.54 billion, meeting estimates. In the fourth quarter Netflix, Inc. (NASDAQ:NFLX) expects its revenue to come in at $8.69 billion, above the Street’s estimate of $8.54 billion. Netflix, Inc. (NASDAQ:NFLX)’s new content and its crackdown against password sharing is clearly working as the company saw an uptick in subscribers.
Polen Focus Growth Strategy made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2023 investor letter:
“Netflix, Inc. (NASDAQ:NFLX) shares sold off after their CFO Spence Neumann spoke at a conference. He emphasized more than usual that the company’s prior long-term margin guidance, which called for 300+ basis points of operating margin per year on average, is no longer the expectation. We were neither expecting this level of margin expansion (and we do not believe many other investors were either), nor has the company delivered this level of margin expansion over the past two years. It seems market participants took Neumann’s tone on margins as a negative indicator of the company’s earnings momentum.
We believe that Netflix has plenty of room to expand operating margins from year to year, the magnitude of which will depend largely on annual revenue growth. We view Netflix’s share price weakness simply as an unfortunate reaction to the way Neumann communicated his margin views during the conference.
According to our research, Netflix is the only profitable streaming company of any significance in the world. We continue to expect that paid password sharing and ad-supported subscriptions will allow Netflix to be meaningfully larger and more profitable over the next five years than it is now. Future margin expansion will be more modest than in the recent past. Still, we also expect revenue growth to accelerate from monetizing borrowed passwords and advertisers seeking to buy time in Netflix’s high-value content.”
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Alphabet Inc. (NASDAQ:GOOG) was one of the most significant companies that crushed analyst estimates for both EPS and revenue in Q3. Earnings per share in the September quarter for the search engine giant came in at $1.55 surpassing estimates by $0.10. Revenue in the quarter jumped 11.1% year over year to $76.79 billion, beating estimates by $980 million.
Net sales for YouTube ads in the third quarter jumped 12.4% year over year to $7.95 billion.
Weitz Investment Management Large Cap Equity Fund made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2023 investor letter:
“As for other quarterly contributors, Alphabet Inc. (NASDAQ:GOOG) and Meta Platforms, Inc., (META) added to their exceptional year-to-date returns. Meta Platforms and Alphabet were the true year-to-date standouts. After steep declines in 2022, both stocks rebounded sharply due to a combination of solid fundamentals, disciplined operational execution, and improved sentiment. Despite outsized gains and attention, we think both Alphabet and Meta remain undervalued.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 278
Amazon.com, Inc. (NASDAQ:AMZN) ranks 1st in our list of the companies that crushed Q3 estimates. Amazon.com, Inc. (NASDAQ:AMZN)’s EPS in the third quarter came in at $0.94, significantly above the Street’s consensus of $0.60.
Revenue in the quarter jumped about 12.6% year over year to $143.1 billion, beating estimates by $1.54 billion.
Here is what Polen Global Growth has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2023 investor letter:
“Amazon continues to showcase it’s place as one of the most competitively advantaged companies in the world. The company has made significant progress in managing costs and better leveraging existing capacity, driving a strong recovery in its profitability. We think there’s additional room for improvement.
AWS growth seems to be stabilizing even while management continues to work with clients to optimize their infrastructure spend. Roughly 90% of global IT spending remains on premise. We believe this will eventually flip, with most IT spending ultimately moving to the cloud over time. We think AWS will be a significant beneficiary of this transition.
Further, our investment case on company profitability driven by AWS and advertising continues to unfold, delivering nearly $8 billion in free cash flow over the trailing twelve months and a net margin of 5%. We expect both to move higher with the mix shift of more profitable businesses growing fastest continuing to take effect.
At Amazon’s current price, we believe the company is well positioned to deliver a mid-teens or higher total shareholder return for our clients over the next five plus years without a Herculean effort from the business. It simply needs to continue executing on current businesses and growing into the capacity it built during and immediately after the pandemic.”
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