Four of America’s largest technology companies on Thursday announced the explosion of the quarter for Big Tech amid a slowing global economy and deep financial pain for many of its customers and business partners.
A graphical representation of the resilience of Apple, Amazon, Facebook and Google came a day after top executives faced hostile interrogation by the US Congress, accusing them of using the power of their platforms to gain a foothold and stifle competition. .
If growing concerns in Washington are causing regulatory problems for companies, however, it is lost on Wall Street, which reacted euphorically to news of Thursday̵7;s earnings. The combined market value of the four companies increased by approximately $ 230 billion. After non-market trading, when profits were identified by raising them above 5 tons of dollars.
Their success has caused a staggering surplus with the US economy, which has shrunk by 9.5 percent from the previous three months.
“Once we find that the US economy has shrunk more than ever before, these companies have seen tremendous growth,” said Roger McNami, a longtime technology investor and one of Facebook’s most popular critics in Silicon Valley.
“In the absence of any regulatory intervention, they will continue to displace more and more of the economy.”
Mark Zuckerberg, Facebook’s chief executive, used the earnings call on Wall Street to target regulators who may be considering ways to limit their company’s advertising targeting practices to reduce privacy concerns.
The restrictions, he said, “will reduce opportunities for small businesses so much that they are likely to be felt at the macroeconomic level.” He added: “Is this really what politicians in a pandemic and recession want?”
Apple recorded a market capitalization jump of more than $ 100 billion on Thursday, after turning the expected period of contraction in the second quarter into a staggering surge in growth. Despite being forced to close its stores for weeks due to a coronavirus pandemic, its revenue rose 11 percent, or about $ 6 billion.
Tim Cook, Apple’s chief executive, acknowledged that his company’s profits “are in great relief during the real economic turmoil for businesses large and small, and certainly for families.” He added that Apple is “focused on growing a pie” and creating opportunities for others.
Research group Canalys estimates that sales of iPhones rose 25 percent last quarter, all the more so as the broader smartphone market fell 14 percent. Samsung’s phone purchases fell 30 percent, handing over its sales crown to Huawei for the first time. But Huawei also saw a 5 percent decline. Of the top five vendors, only Apple’s sales grew.
The scale of the surprise corresponded to the Amazon. Many investors expected the e-commerce company’s profits not to be destroyed in the quarter due to the additional $ 4 billion it faces to continue operating during the health crisis. In contrast, after-tax revenue doubled to $ 5.2 billion, while its revenue increased by 40 percent.
On the contrary, their dependence on advertising has left Facebook and Google less protected from wider economic shocks. But they’re still doing extremely well amid more than 20 percent of overall advertising in many markets around the world, said Brian Wieser, head of WPP’s GroupM business intelligence.
In addition to reflecting the overall shift in advertising to digital channels, their resilience has shown that the largest platforms have done best in the downturn, he added.
Facebook’s revenue jumped 11 percent to $ 18.7 billion, much more than the expected 3 percent growth. Mr Zuckerberg has also allayed concerns about an advertising boycott of more than 1,000 brands, including Verizon and Ford, saying critics still “mistakenly believe that our business depends on a few big advertisers.”
Only Alphabet, Google’s parent company, was unable to join the party because it saw the first drop in sales ever reported by the Internet group. However, even Alphabet lived up to expectations, and its revenue fell by only 2 percent, at a time when other advertising companies are falling sharply.
Evaluations of leading technology platforms have shown that they have benefited disproportionately from this year’s growth in digital activity, as people around the world are forced to work, study and have fun from home, industry observers say.
“The performance for both Amazon and Facebook is incredible, especially when you think how bad it was in March,” said Youssef Squali, SunTrust’s Internet analyst Robinson Humphrey.
Companies were well positioned to shift online activity, but also responded with “flexibility” after the bottom of many markets fell in March, he added.
Several technology leaders also pointed to the effect of government action to isolate consumers from the worst economic crisis.
“Economic stimulus packages not only in the United States but around the world have helped economic activity and the lifting of some restrictions that were in place at the beginning of the quarter,” said Luca Maestri, Apple’s chief financial officer.
During calls to earnings on Wall Street late Thursday, the heads of technology companies were faced with almost any question about the possible costs of tightening regulation after the criticism they faced before the House Antitrust Subcommittee the day before.
Faced with one of the analyst’s questions, Sundar Pichai, Google’s chief executive, said: “If there are any areas for adaptation, we will. I think the oversight process has been here for some time, and we are working to work on it.”
Additional reporting by Dave Lee