Amazon, Apple, Google and Facebook crush second-quarter earnings

• The big four tech giants announced box office earnings on Thursday, just a day after testifying before Congress about anti-competitive behavior.
• Facebook, Amazon, Google, and Apple added an additional $ 230 billion in market value.
• Analysts caution that while there may be more difficult times for these companies, their business is far from reaching its peak.
• Visit the Business Insider home page for more stories.

Four of the world’s largest technology companies (Amazon, Apple, Google and Facebook) announced stronger-than-expected second-quarter earnings on Thursday, defying concerns about Wednesday’s antitrust hearings and an ongoing pandemic.

The solid results of the four companies, often classified as “Big Tech,” come a day after their CEOs testified before Congress, defending the size of their companies.

Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, Alphabet CEO Sundar Pichai, and Apple CEO Tim Cook participated in an ongoing investigation by the antitrust subcommittee of the House Judiciary of Representatives to determine if large technology companies are using their position to control the market unfairly.

It also comes at a time when the world is in the midst of a pandemic and the economic outbreak is visible in all sectors and the economy. On Thursday, the United States’ gross domestic product fell at an annualized rate of 33% in the second quarter, the Commerce Department said Thursday. It is the largest recorded decline dating back to the 1940s.

On Friday, the euro zone economy contracted at its fastest rate in history, losing 12.1% in the second quarter.

How big is Big Tech?

However, the pandemic appears to have helped Big Tech add another $ 230 billion of market value. With more people staying home during closing, there has been an increase in demand and use.

On Wednesday, Facebook founder Mark Zuckerberg hinted at the historic antitrust hearing that all other companies were hitting the social media giant.

“The most popular messaging service in the United States is iMessage,” said Zuckerberg in his initial comments, referring to Apple’s text messaging service. “The fastest growing app is TikTok. The most popular video app is YouTube. The fastest growing ad platform is Amazon. The largest ad platform is Google. And for every dollar spent on advertising in the United States , you spend less than 10 cents with us. “

However, on Thursday, Facebook earnings increased 11% yoy. It reported daily active users of almost 1.8 billion, 12% more than last year, and monthly active users of 2.7 billion, another 12% increase.

This contrast, a CEO of Big Tech minimizing its size one day and revealing impressive profits the next, was echoed by Amazon, Apple and Alphabet, Google’s parent company. In Congress, these companies portrayed themselves as brave success stories facing fierce competition. Their balance sheets tell a different story.

Amazon reported record quarterly earnings and a 40% increase in sales. In his opening address to Congress on Wednesday, Bezos had argued: “Every day, Amazon competes against large, established players like Target, Costco, Kroger and, of course, Walmart, a company more than twice the size of Amazon. ” This week, Bezos’ net worth has risen to $ 181 billion thanks to the rise in Amazon’s stock price.

Apple reported third-quarter revenue of $ 59.7 billion, more than $ 6 billion more than last year, and earnings of $ 11.25 billion despite closing many of its stores.

Alphabet was the only one of the four to see a decrease in revenue to $ 31.6 billion, a 2% decrease year-over-year as ad demand slowed, but it still exceeded Wall Street estimates.

Christopher Rossbach, CIO of J. Stern & Co., said in a research note that antitrust hearings may spell some tough times ahead, but these companies continue to grow. “More difficult times may come, and investors should be aware that, as we have seen at the Congressional Hearing this week, politicians are increasingly concerned about the reach of these companies. But that does not mean that the business has reached its peak, actually far from there.

At Amazon, Rossbach said: “We hope that more people will use e-commerce in the future as habits develop, while Amazon has many more areas of retail spending to expand. For example, this week, Amazon announced a new service to the UK The grocery sector that has seen online food delivery nearly doubled in the past four months during the pandemic.In the United States, with its large and loyal Amazon Prime member base, Amazon can capture even more share than the estimated 4% they currently have in the US. retail spending: we expect it to double in the next decade, “said Rossbach of J.Stern & Co.

Meanwhile, Martin Garner, COO of CIS Insight, said in a note that Facebook was isolated from the worst effects of COVID-19 because smaller companies needed to move quickly online to reinvent themselves during the blockade.

“Facebook experienced healthy growth in user numbers, and those who used any of Facebook’s family services in one month topped $ 3 billion for the first time in 2Q20. This extraordinary reach plus its strength in responsive advertising Direct marketing meant that Facebook was less successful in its advertising business than others. These also helped increase the number of active advertisers on the platform to 9 million. “

Apple has a similar story to tell. The iPhone maker surpassed analyst expectations with its share price crossing $ 400 a share for the first time on Thursday.

“COVID-19 has shown that Apple is a more diversified and resilient business than many credited them with. The unique dynamic of the pandemic saw the usual growth dynamic reverse itself with Mac and iPad flying high while iPhone and Watch slowed down. Meanwhile, services have declined, becoming the recurring revenue stream that offers remarkable consistency, “said Geoff Blaber, vice president of research for CCS Insight in a note.

Market performance

The stellar performance of the tech giants has propelled their shares higher in the previous market.

“The ‘gang of four’, Alphabet, Amazon, Apple and Facebook all achieved match-winning home runs by launching their second quarter earnings in after-hours trading. Of the four, only Alphabet suffered a drop in sales, and even that was less than expected. The other three showed impressive earnings and blew the forecast out of the water, “Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, wrote in an email to clients Thursday.

Jim Reid of Deutsche Bank in his morning note, ‘Early Morning Reid’, said the four tech companies account for about 16% of the S&P 500 and more than a third of the Nasdaq 100.

“Apple (+ 6% in the aftermarket) reported quarterly revenue above analyst estimates as demand for iPhones and laptops increased, causing revenue to rise 11% from a year earlier,” wrote.

“Facebook (+ 6% in the aftermarket) saw second-quarter sales outperforming even the most optimistic analyst estimate, with 11% revenue growth. Amazon (+ 5% in the aftermarket) outperformed even after substantially increasing costs during the pandemic. ” Second-quarter revenue increased 40% from the same quarter last year, offsetting more than $ 4 billion in incremental costs related to covid-1. Finally, Google’s parent company Alphabet saw a drop in revenue for the first time as companies cut ad spending during the pandemic. “