Amazon, Apple and Facebook earn record profits during pandemic

Laveta Brigham

Silicon Valley giants Apple, Amazon and Facebook enjoyed a dramatic boom during the worst months of the coronavirus pandemic, posting rises in quarterly profits last night that will add fuel to claims they are becoming too dominant. Shares in the companies jumped in after-hours trading last night as they revealed […]

Silicon Valley giants Apple, Amazon and Facebook enjoyed a dramatic boom during the worst months of the coronavirus pandemic, posting rises in quarterly profits last night that will add fuel to claims they are becoming too dominant.

Shares in the companies jumped in after-hours trading last night as they revealed that rises in online shopping and internet use during lockdown meant soaring revenues in the three months to the end of June, despite wider economic pain.

Google’s parent company Alphabet reported a 2pc drop in revenues, its first ever sales decline, amid a slump in travel spending, but the better than expected results sent shares up in late trading.

The results were in stark contrast to dire US figures that revealed a 32.9pc annualised contraction in the world’s biggest economy during the same period, sending Wall Street down earlier in the day.

Amazon revealed that sales in the quarter had increased 40pc to $89bn. Profits doubled to $5.2bn despite its chief executive Jeff Bezos previously warning that they would be wiped out by heavy spending in response to the pandemic.

The company spent $4bn on Covid-19 measures in what Mr Bezos called a “highly unusual quarter”, and said online grocery sales were triple the levels it saw last year.

Facebook’s revenues increased 10pc year-on-year, and monthly users swelled by 12pc to a record high of 2.7bn. However, it warned that it expected user numbers to be “flat or slightly down” over the next three months “as shelter-in-place restrictions continue to ease”.

Apple revealed that profits had climbed 12pc to $11.2bn in the quarter despite production bottlenecks and the majority of its stores being closed.

Every one of the tech giant’s businesses – iPhone, iPad, Macs, digital services and accessories such as the Apple Watch and AirPods – grew sales on the same period last year.

Speaking to journalists after the results dropped, Amazon’s chief financial officer Brian Olsavsky said Amazon’s huge profit was a result of better-than-expected sales, capacity and efficiency improvements and a demand for different products from the first quarter.

In the first quarter, he said, “everyone was looking for masks, everyone was looking for masks, everyone was looking for gloves, everyone was buying groceries online” and  “that mix is not super profitable.”

In the second quarter, however, the company saw a more typical mix in demand for products and was able to ship more than it had expected in April.

08:55 PM

Analysts react to Alphabet

On Google, eMarketer principal analyst Nicole Perrin says: “Google advertising revenues were down for the quarter, but all three parts of Google’s advertising business outperformed our expectations, including a substantial beat for search revenues (down 10pc) compared to our expectations of a 17pc decline.

We expected April to be the bottom of the digital ad market, with a return to growth in May and June, and these results suggest that acceleration was stronger than expected.”

Tom Johnson, analyst at WPP Mindshare says: “The first decline in ad revenues for Google. The story of the pandemic is in there – weaker search advertising revenues as people reduced expenditure alongside growing YouTube revenues as more people spent more time on the platform.

“Its cloud revenues are dwarfed by Amazon but may have benefited from the increased home working, rapid development of online shops by small business struggling to cope and also from home schoolers.”

08:49 PM

Apple’s big bite

Apple has joined Facebook and Amazon in a blow-out set of results, revealing that profits had climbed 12pc to $11.2bn in the quarter despite production bottlenecks and the majority of its stores being closed.

Every one of the tech giant’s businesses – iPhone, iPad, Macs, digital services and accessories such as the Apple Watch and AirPods – grew sales on the same period last year.

The iPhone remained the star attraction, accounting for $26.4bn of Apple’s $59.7bn in quarterly sales. Underscoring the company’s astonishing recent share price rise, Apple said it would split its stock in four to make it “more accessible to a broader base of investors”.

Shares have risen from $213 a year ago to $385 today, and rose another 5pc in after-hours trading.

Chief executive Tim Cook said: ““In uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relentless innovation.”

08:28 PM

Alphabet revenues fall

Alphabet has reported a 2pc drop in revenue for the first time, as advertising budgets were slashed during the pandemic.

Its revenues dropped to $32.7bn (£24.7bn), compared to the same period last year. It is the first time revenue has fallen for Google as a publicly traded company. 

“Our effort to build a more helpful Google for everyone brings countless opportunities to help users, partners, and enterprise customers every day,” said Pichai. 

“From improvements in core information products such as Search, Maps, and the Google Assistant, to new breakthroughs in AI and our growing Cloud and Hardware offerings, I’m incredibly excited by the momentum across Google’s businesses and the innovation that is fueling our growth.”

This is a concern for Google as it is now an outlier among its FAANG peers – the only company to have fared badly during a time when more people are spending time online. 

But finance chief Ruth Porat asserted that the figures showed “strong growth” compared to 2018 and because it fared Wall Street’s doomy estimates, shares are up. 

08:13 PM

Amazon profits up in ‘highly unusual quarter’

Amazon says its profit increased to $5.2 (£3.8bn) billion in the second quarter. 

Sales increased 40pc to $88.9 billion in the second quarter, compared with $63.4 billion in second quarter 2019.

Amazon surpasses all expectations with these numbers. As expected, the company spent $4bn (£3.06bn) on Covid-19 measures, but the big surprise is that it still made profits of $5.2bn, in what chief executive Jeff Bezos calls a “highly unusual quarter”.

The company paid out $500 million to front-line employees and partners and increased grocery delivery capacity by over 160pc. It said online grocery sales were triple the levels it saw last year.

Bezos was keen to point out that third-party sales again grew faster than Amazon’s private label brands, a hangover from yesterday’s hearing one imagines. 

08:08 PM

‘Zuck blows the doors off’

It’s a sterling showing from Facebook, smashing Wall Street’s expectations for revenue and user growth. Overall revenue was $18.7bn, up 10pc from the same time the previous year, while monthly active users swelled by 12pc to 2.7bn.

The company’s beloved “family” figures, which attempt to count all of its monthly users across Facebook, Instagram and WhatsApp, likewise grew by 14pc to 3.1bn – approaching half of Earth’s population.

On the other hand, Facebook warned that it expected user numbers to be “flat or slightly down” over the next three months “as shelter-in-place restrictions continue to ease”.

07:56 PM

What to expect from Apple

Apple will be the latest company to report its earnings, normally publishing its results at around 9.30pm. James Titcomb will be perusing the figures, and here’s what he thinks we might see:

“Apple has been forced to shut stores during the pandemic, and saw production slowdowns in its early weeks in China, but iPhone sales are believed to have held up, while sales of apps have boomed during the crisis.

“The three months to the end of June are typically a quiet quarter for Apple, as most consumers wait until new iPhones are released in September.

“Investors are likely to scour this evening’s results for any sign that its typically reliable release cycle could be delayed due to the virus.”

07:51 PM

What to expect from Alphabet

Google parent Alphabet, now 22 years old, has become something of a middle-ager among the so-called FAANG (Facebook, Amazon, Apple and Google) and its well-oiled advertising machine is already showing signs of slowing down. 

Advertising revenue from small and medium businesses is one of the biggest earners for Alphabet, which also owns YouTube, Pixel and Nest, its line of phones and home speakers and X, a secretive entity for high risk ideas like self driving cars and renewable energy sources. 

Last results showed a significant slowdown in overall (not just advertising) revenue, and investors will be keen to see if they drop for the first time.

Investors are also looking for signs that Google Cloud, which rivals Amazon’s AWS, is fending off competition and whether YouTube, its video site, can prove itself as bona fide streaming site that might have a chance at derailing Netflix. 

07:44 PM

What to expect from Amazon

Olivia Rudgard will be covering Amazon’s results this evening. Here’s what she thinks might happen. 

“Amazon has been one of the major beneficiaries of the Covid-19 pandemic, and there are high expectations for its results.

“Shares in the company are up more than 60pc this year, and its first-quarter earnings showed a 26pc surge in revenue.

“After a big spike in grocery shopping at the start of the year due to coronavirus lockdowns, the company could also have benefited from a second spurt in interest in homewares and furniture as customers spend more time at home. 

“Don’t expect huge profits though. In the first quarter profits were down 29pc year-on-year because the essential items that made up the bulk of sales were sold at or close to cost.

“Struggling to maintain its reputation for super-fast deliveries and under fire for the treatment of its warehouse workers, Amazon pledged to reinvest the entirety of its projected $4bn (£3.06bn) second-quarter operating profit in measures to tackle the impact of Covid-19.”

07:38 PM

What to expect from Facebook

My colleague Laurence Dodds will be closely following Facebook tonight. Here’s what he expects to see.

“For Facebook, one question rises above the others: has the advertising boycott again actually hurt its revenue?

“Although protests against its hate speech policies officially began in July, some companies were pulling their money out in June. 

“But most analysts believe there will be little impact because so much of Facebook’s revenue comes from smaller companies who, in the post-Covid scramble to stay afloat, have few other viable choices for marketing campaigns.

“Otherwise, this will be the first real test of Facebook’s health during the pandemic. Probably its revenue has done well, as lockdown kept millions of people trapped indoors and scrolling through their feeds. 

Profits, however, may be down, and its reliance on small businesses may prove a double-edged sword – since they have been the biggest losers from the virus.”

07:32 PM

A big day in Big Tech

It is a bumper day for results in the Big Tech world, and we can expect to hear from some of the big names like Facebook, Amazon and Google parent Alphabet just after 9pm.

Just in case you weren’t already convinced quite how valuable today’s big names are, check out this chart which compares their value to some nation’s GDP.

 

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