Four of the largest US tech companies announced a big quarter for Big Tech on Thursday, against the backdrop of a slowdown in the global economy and deep financial pain for many of its customers and business partners.
The graphical display of the business resilience of Apple, Amazon, Facebook, and Google came the day after CEOs of the same companies faced hostile questions from the U.S. Congress, where they were charged. Of using the power of their platforms to take hold and stifle competition.
However, if the growing concern in Washington explains regulatory problems for the companies, it was lost on Wall Street, which euphorically reacted to Thursday’s earnings news. Once the earnings were revealed, the combined market value of the four companies skyrocketed by about $ 230 billion in the aftermarket, raising them above $ 5 billion for the first time.
Its success sparked a surprising juxtaposition with a US economy that has shrunk by 9.5 percent compared to the previous three months.
“The day we found out that the US economy declined more than it ever has in history, these companies posted extraordinary growth,” said Roger McNamee, a longtime technology investor and one of the most vocal critics. francs from Silicon Valley Facebook.
“In the absence of some form of regulatory intervention, they will continue to displace an ever-growing part of the economy.”
Mark Zuckerberg, Facebook’s chief executive, used a profit call with Wall Street to target regulators who may be considering ways to limit his company’s advertising targeting practices to allay privacy fears.
He argued that the restrictions “would so reduce opportunities for small businesses that they would likely feel macro-level.” He added: “Is that really what policymakers want in the midst of the pandemic and recession?”
Apple saw its market capitalization jump more than $ 100 billion late on Thursday, after it turned what was expected to be a period of contraction in the second quarter into an impressive burst of growth. Despite being forced to close stores for many weeks due to the coronavirus pandemic, his income increased 11 percent, or about $ 6 billion.
Tim Cook, Apple’s chief executive, acknowledged that his company’s earnings “are in absolute relief during a time of real economic adversity for businesses large and small, and certainly for families.” He added that Apple was “focused on growing the cake” and creating opportunities for others.
Canalys research group estimated that iPhone phone sales grew 25 percent in the last quarter, which is even more remarkable as the broader smartphone market declined 14 percent. Samsung’s device shipments plunged 30 percent, ceding its sales crown to Huawei for the first time. But Huawei also experienced a 5 percent decrease. Of the top five vendors, only Apple’s sales grew.
The scale of the surprise was matched by Amazon. Many investors expected the e-commerce company’s earnings to be virtually wiped out in the quarter by the additional $ 4 billion costs it faced to continue operating during the health crisis. Instead, after-tax earnings doubled to $ 5.2 billion, while his income increased by 40 percent.
Conversely, their reliance on advertising left Facebook and Google less isolated from the broader economic turmoil. But they still did remarkably well in the context of a contraction in general advertising of more than 20 percent in many markets globally, said Brian Wieser, head of business intelligence at GroupM, part of WPP.
In addition to reflecting a general shift in advertising to digital channels, their resistance showed that larger platforms had performed better in the recession, he added.
Facebook’s revenue jumped 11 percent to $ 18.7 billion, a rebound much higher than the expected 3 percent growth. Zuckerberg also dismissed concerns about the advertising boycott of his services by more than 1,000 brands, including Verizon and Ford, and said critics still “mistakenly assume that our business depends on a few big advertisers.”
Only Alphabet, the father of Google, did not join the party, as it revealed the first decline in sales reported by the Internet group. However, even Alphabet exceeded expectations and its revenue fell just 2 percent, at a time when other advertising companies are contracting sharply.
The strong performance of major technology platforms showed that they had benefited disproportionately from this year’s surge in digital activity, as people around the world have been forced to work, learn and entertain themselves from home, according to industry observers. .
“The superior performance for both Amazon and Facebook is just amazing, particularly when you think about how bad things were in March,” said Youssef Squali, internet analyst at SunTrust Robinson Humphrey.
The companies had been well positioned for a change in online activity, but had also responded with “flexibility” after the fund fell from many of their markets in March, he added.
Several tech executives also pointed to the effect of government actions to isolate consumers from the worst of the economic crisis.
“Economic stimulus packages, not only here in the US but worldwide, have helped economic activity and the lifting of some of the restrictions in place at the beginning of the quarter,” said Luca Maestri, chief financial officer of Manzana.
In earnings calls with Wall Street on Thursday night, tech company executives barely faced questions about the potential costs of increased regulation, following criticism of the House antitrust subcommittee the day before.
When asked by an analyst, Sundar Pichai, Google’s chief executive, said: “If there are areas to adapt, we will. I think the scrutiny is here for a while and we are committed to working on it. ”
Additional reporting by Dave Lee
