The third quarter earnings season boosted investors’ hopes that the recession that we all were hearing about since long might not come after all, thanks to strong consumer spending and the resilient state of economy. Analysts were already expecting a strong third quarter earnings season. In an October report, the Wall Street Journal said that industry estimates suggested that on average the S&P 500 companies were expected to report earnings that were 1.3% higher than a year earlier. This was a huge improvement when compared to the second quarter of this year when earnings on average declined by 2.8%.
Another WSJ report earlier this month shared data from FactSet which said that the S&P 500 companies were on a path to report a 3.7% rise in earnings for the year’s third quarter. The report said that this was the first such increase since the third quarter of the last year.
An important trend to note here is that so far the companies that are beating earnings estimates are overwhelmingly from the consumer discretionary and communication services sectors. Companies like Airbnb, Inc. (NASDAQ:ABNB), McDonald's Corporation (NYSE:MCD) and Starbucks Corporation (NASDAQ:SBUX) have all been saying in their earnings calls that the consumer sentiment and spending remains strong.
Starbucks Corporation (NASDAQ:SBUX) management in its latest earnings call repeatedly said that the company continues to see a strong demand:
"Demand for Starbucks remains strong around the world. Here in the U.S., our largest market, we saw momentum sustain throughout the quarter. Revenue for the quarter was up a record 12%, underpinned by 8% comps. We had a remarkable fall launch that led to record-breaking average weekly sales. Our 90-day active Starbucks Rewards members reached a new record this quarter of nearly 33 million 90-day active members, and setting records in spend per member and total member spend.
Best Q3 Earnings Reports That Beat Estimates
Our Methodology
For this article we analyzed several earnings reports and picked 10 important companies which beat EPS and revenue estimates for the third quarter of 2023. We tried to pick important companies that are often market movers.
Palantir Technologies Inc. (NYSE:PLTR) absolutely shined with its Q3 earnings. Palantir Technologies Inc. (NYSE:PLTR)’s adjusted EPS in the quarter came in at $0.07 beating estimates by $0.01. Revenue in the period jumped about 16.8% year over year to $558 million, beating estimates by $2.08 million. For the fourth quarter Palantir Technologies Inc. (NYSE:PLTR) expects its revenue to come in the range of $599 million and $603 million, better than the consensus estimate of $599.26 million.
As of the end of the second quarter of 2023, 39 hedge funds tracked by Insider Monkey had stakes in Palantir Technologies Inc. (NYSE:PLTR). The biggest stakeholder of Palantir Technologies Inc. (NYSE:PLTR) was Catherine D. Wood’s ARK Investment Management which owns a $151 million stake in the company.
Palantir Technologies Inc. (NYSE:PLTR) talked in detailed about its Artificial Intelligence Platform (AIP) and its AI-related platforms in Q3 earnings call.
"We’re on track to conduct boot camps for more than 140 organizations by the end of November, nearly half of those are taking place this month alone, which is more than the number of U.S. commercial pilots we conducted all of last year.
Expedia Group Inc. (NASDAQ:EXPE) smashed Wall Street’s estimates for Q3 earnings and revenue as the company saw a boost in financials thanks to a global surge in travel demand. Expedia Group Inc. (NASDAQ:EXPE)’s adjusted EPS in the third quarter came in at $5.41 surpassing estimates by $0.41. Revenue in the quarter increased by 8.6% year over year to $3.93 billion, surpassing estimates by $70 million.
Expedia Group Inc. (NASDAQ:EXPE) also announced its board approved a new $5 billion share repurchase program.
Patient Capital Management made the following comment about Expedia Group, Inc. (NASDAQ:EXPE) in its Q3 2023 investor letter:
“At Expedia Group, Inc. (NASDAQ:EXPE), we believe the market is underappreciating the company’s transformation. Over the past few years, the company has prioritized its top three brands (expedia.com, hotels.com, vrbo.com), successfully implemented a single technology stack, and officially rolled out OneKey their combined loyalty program, across all brands. With strong free cash flow generation, the company continues to buy back their stock, creating a positive flywheel of shareholder return.”
Pinterest, Inc. (NYSE:PINS) shares jumped in October after the company posted strong Q3 results. Earnings per share in the quarter came in at $0.01 beating estimates by $0.04. Revenue jumped about 11.5% year over year to $763.2 million, beating estimates by $19.87 million.
In the third quarter Pinterest, Inc. (NYSE:PINS)’s global monthly users increased by 8% year over year to 482 million.
For the last quarter of 2023, Pinterest, Inc. (NYSE:PINS) expects its revenue growth to come in the range of 11-13%.
ClearBridge Multi Cap Growth Strategy made the following comment about Pinterest, Inc. (NYSE:PINS) in its Q2 2023 investor letter:
“The addition of Pinterest, Inc. (NYSE:PINS), a social media platform for visual discovery which allows users to find ideas and inspiration, also acts to diversify our traditional media exposure. We believe the company is poised to take share in the large and growing market for online advertising. Under the direction of new CEO Bill Ready, we see levers for improved user engagement and monetization. While relatively new to the company, we are encouraged by Ready’s track record in prior company roles as well as early signs of progress from his efforts. Pinterest is profitable on a non-GAAP basis today, but we also see opportunities for meaningful margin expansion as revenue scales.”
Intel Corporation (NASDAQ:INTC) investors are finally having a sigh of relief as the company begins to see positive effects of a turnaround in the PC market. Last month Intel Corporation (NASDAQ:INTC) posted Q3 results, surpassing both EPS and revenue estimates. Adjusted EPS in the quarter came in at $0.41, beating estimates by $0.19. Revenue in the quarter fell 7.7% year over year to $14.16 billion, beating estimates by $560 million.
For the fourth quarter Intel Corporation (NASDAQ:INTC) expects its revenue to come in the range of $14.6 billion to $15.6 billion versus the consensus estimate of $14.35 billion.
Canadian ecommerce technology platform company Shopify Inc. (NYSE:SHOP) ranks 6th in our list of the companies that recently crushed Q3 estimates for earnings. Adjusted EPS of Shopify Inc. (NYSE:SHOP) in the third quarter came in at $0.24 beating estimates by $0.10. Revenue in the quarter increased by 24.8% year over year to $1.71 billion, surpassing estimates by $40 million.
Gross Merchandise Volume, or GMV, increased by 22% in the period to total $56.2 billion.
Shopify Inc. (NYSE:SHOP)’s management talked in detail about Q4 guidance and future expectations during Q3 earnings call:
"Our expectations for the rest of the year are as follows, first on revenue. We expect revenue for the full year to grow to mid-20s percentage rate on a year-over-year basis, driven by fourth quarter revenue growth in the high-teens on a GAAP basis, which translates into a year-over-year growth rate in the low- to mid-20s, when excluding the 400 to 500 basis points impact from the sale of our logistics business.
Here is what Baron Global Advantage Fund has to say about Shopify Inc. (NYSE:SHOP) in its Q3 2023 investor letter:
“Shopify Inc. is a cloud-based software provider for multi-channel commerce. Shares gave back some of their strong performance from the first half of 2023, declining 15.5% on the back of rising concerns related to the health of the consumer and the expansion of TikTok and Temu into the U.S. While we are cognizant of these near-term risks, we believe that Shopify will continue to benefit from its position as the commerce operating system for its merchants. Rather than replacing Shopify, various selling channels, including TikTok, are managed within the platform, which should enable Shopify to maintain its competitive advantage over the long term. During the quarter, Shopify announced an agreement with Amazon that will allow merchants to offer Buy with Prime within the Shopify ecosystem, enabling Shopify to act as the payments provider for these transactions and alleviating a key concern. Lastly, the company also reported strong financial results, including 17% year-over-year gross merchandise volume growth, 31% revenue growth, and consensus-beating non-GAAP operating income that outpaced estimates by over $90 million. We remain shareholders due to Shopify’s strong competitive positioning, innovative culture, and long runway for growth, as it still holds less than a 2% share of the global commerce market.”
