A day after lawmakers questioned CEOs of the largest tech companies about their size and power, Amazon, Apple, Alphabet and Facebook reported surprisingly healthy quarterly financial results, defying one of the worst economic crises on record.
Although the companies felt a little pain from the slowdown in spending, they showed, as critics have argued, that they are operating on a different playing field from the rest of the economy.
Amazon sales increased 40 percent from a year earlier, and its profits doubled. Facebook’s earnings increased 98 percent. Despite the fact that the pandemic closed many of its stores, Apple increased sales of all its products in all parts of the world and recorded profits of $ 11.25 billion. Advertising revenue fell for Alphabet, the group’s laggard, but it was still better than Wall Street had expected.
“The forts continue to strengthen,” said Dan Ives, managing director of equity research at Wedbush Securities. “As many companies are falling by the wayside, tech stalwarts continue to gain strength and power in this environment.”
The financial performance of technology companies was a striking contrast to the overall health of the United States economy. The Commerce Department said Thursday that the country’s gross domestic product fell 9.5 percent in the second quarter of the year as consumers cut spending. It was the largest drop on record.
Combined, the companies reported $ 28.6 billion in quarterly net profit, underscoring how regulatory scrutiny continues to be more background noise and distraction for them rather than an imminent threat to their businesses.
On Wednesday, an antitrust panel in Congress asked company leaders: Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Alphabet’s Sundar Pichai, about their market power and business practices.
It was part of a broader investigation by regulators and legislators into the dominance of tech giants, with open investigations by the Department of Justice, the Federal Trade Commission and state attorneys general.
The show by CEOs of the four companies, valued at nearly $ 5 trillion by combined market capitalization, that appeared before a House subcommittee was historic. But antitrust investigations often take years, especially if regulators are looking for more drastic measures, such as the breakup of companies.
The pandemic has reinforced the advantages of large technology companies. As consumers stay home, demand from Amazon’s shopping site increased, as companies turn to their cloud computing products to keep their services up and running. Apple said the switch to working and learning from home had led more people to splurge on Apple devices and use its services.
“Our products and services are highly relevant to the lives of our customers and, in some cases, even more so during the pandemic than ever before,” Luca Maestri, Apple’s chief financial officer, said in an interview. However, he noted that Apple could have made several billion dollars more if it hadn’t been for the pandemic.
Facebook and Google continue to be important to marketers and are resisting the advertising slowdown better than their rivals. Facebook ignored a slowdown in spending, hailing record levels of engagement with its products.
Alphabet said Google’s search ad revenue fell 10 percent, lowering the company’s overall revenue for the first time in the company’s history, but that was still better than its rivals. Last week, Microsoft reported an 18 percent drop in search advertising revenue.
Since the beginning of March, the companies’ share prices have increased by an average of 35 percent, compared to a 10 percent increase in the S. & P. 500
Amazon
Powered by a pandemic-induced surge in online shopping, Amazon had quarterly sales of $ 88.9 billion, 40 percent more than the year before. Profit doubled, to $ 5.2 billion, despite the company investing in warehouse expansion and other ways to increase capacity.
“Simply put, Covid-19, in our opinion, has injected Amazon with a growth hormone,” wrote Tom Forte, an analyst at investment bank DA Davidson & Company, in a recent note to investors.
In April, Mr. Bezos told investors not to expect operating profit, and perhaps even a loss, as the company planned to spend around $ 4 billion on coronavirus-related expenses, such as temporary pay increases, decreases in warehouse efficiency due to social distancing and $ 300 million to test their workforce for the virus.
But even those costs didn’t compare to the huge increase in demand, with an increase in online retail sales of 48 percent.
In a call to reporters, Amazon declined to say whether it would award its warehouse workers bonuses or virus-related increases in the current quarter, but added that pandemic-related expenses would drop to $ 2 billion in the quarter.
Sales in Amazon’s lucrative cloud computing business, whose clients include large corporations and small startups, grew 29 percent to $ 10.8 billion, below analyst expectations, although it was more profitable than what they expected.
Second-quarter Facebook revenue increased 11 percent from a year earlier to $ 18.7 billion, while earnings increased 98 percent to $ 5.2 billion. The results were well above analyst estimates of $ 17.3 billion in revenue with a profit of $ 3.9 billion, according to data provided by FactSet.
Despite growing scrutiny from regulators, questions about their role in election subversion and how people use the platform to spread misinformation, neither users nor advertisers have shown a penchant for stopping using Facebook.
More than three billion people now regularly visit Facebook or one of its app families, as the services have outpaced much of the developed world. And about 2.47 billion people use one or more of Facebook’s apps every day.
The company said its number of monthly active users increased 12 percent from a year earlier, adding that it was seeing record levels of engagement and usage this year due to requests for shelter-in-place worldwide.
In late June, a grassroots campaign, Stop Hate for Profit, brought together many of the top advertisers on Facebook to cut their spending due to problems with hate speech on the site.
Facebook warned investors on Thursday that the consequences of the advertising boycott were noticed in July and warned that a further economic crisis from the pandemic could eventually harm Facebook’s bottom line.
Apple
Despite the global economic slowdown, people continued to buy Apple devices en masse and paid the tech giant billions of dollars more for apps and services on those devices.
Apple said its sales increased 11 percent to $ 59.7 billion and its earnings increased 12 percent to $ 11.25 billion. Both figures easily exceeded analyst expectations, as Wall Street forecast declines in both areas.
Sales were particularly strong for iPads and Mac computers, as the public was increasingly forced to work and socialize virtually. Revenue also rose in its internet services business, which includes Apple’s cut in sales from the App Store, the subject of antitrust investigations in the United States and Europe.
Even the iPhone, which remains the company’s biggest seller, saw a slight increase in sales for the second time in the past seven quarters.
Apple also announced a stock split on Thursday that would quadruple its number of shares, allowing people to buy a share in the company for a quarter of the current share price, which closed at $ 384.76 on Thursday.
Alphabet
Google’s parent company Alphabet reported its first decline in quarterly revenue, hit by a slowdown in advertiser spending. The company posted revenue of $ 38.3 billion and a profit of $ 6.96 billion, significantly more than Wall Street analysts had predicted.
Ruth Porat, chief financial officer at Alphabet, said advertising revenue “gradually improved” as the quarter progressed. The decline was largely due to declining ad sales displayed alongside Google’s search results, but the company’s efforts to diversify its business paid off as ad revenue grew. YouTube and its cloud computing business.
When asked in a call with financial analysts about the hearing in Congress, Pichai said the company would have to learn to live with the investigations.
“The scrutiny is going to be here for a while and we are committed to working on it,” he said.
