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Big Tech delivers strong profits amid pandemic, political scrutiny

  • Glenn Chapman and Rob Lever

    Agence France-Presse

San Fransisco/Washington   /   Fri, October 30, 2020   /   09:36 am
Big Tech delivers strong profits amid pandemic, political scrutiny A 3D printed Google logo in illustration taken on April 12, 2020. (REUTERS/Dado Ruvic)

Big Tech powerhouses Thursday delivered robust earnings reports for the latest quarter, leveraging the needs of pandemic-hit consumers amid heightened scrutiny of their economic power.

Profits were up for Facebook, Amazon and Google-parent Alphabet, while Apple saw a modest dip in earnings on weakness in iPhone sales.

The results – showing a combined profit of US$38 billion for the four companies – highlighted the massive economic power of the tech firms which have been able to ride out the global coronavirus pandemic better than most businesses.

But critics say they are too big and too powerful.

United States authorities have filed an antitrust complaint against Google and are reportedly considering action against Facebook. 

Meanwhile, lawmakers have sharpened attacks on social media firms for how they handle political content and "hate speech."

Amazon's third-quarter profits tripled from a year ago to $6.3 billion on strong retail sales during the pandemic and growth in cloud computing. Revenues jumped 37 percent to $96 billion for the technology and retail colossus.

Shares in Amazon, which saw gains in both retail and its cloud computing, dipped around one percent in after-hours trading following the results amid a weaker-than-expected holiday quarter outlook.

"There is no doubt that Amazon's latest results show it continues to be a winner from disruption caused by the pandemic," said Neil Saunders of the research firm GlobalData.

But Saunders said growth was slower than in recent quarters as rivals ramped up competition and that "Amazon's share of wallet dropped back a little."

Online advertising rebounds

Facebook's profit jumped 29 percent to $7.8 billion in the quarter as the social network saw a rebound in the online ad market despite an ad boycott over how it handles abusive content.

Revenue climbed to $21.2 billion as Facebook continued to benefit from people relying on the internet to stay connected amid the pandemic.

"Facebook has rebounded nicely from both the early-pandemic advertiser pullout, when marketers pulled ads across all media to redo messaging or conserve funds, and from the July ad boycott," said eMarketer analyst Debra Aho Williamson:

"Despite its challenges with election turmoil and content moderation, it remains a go-to for advertisers seeking to engage a broad base of consumers."

Google-parent Alphabet said its profit climbed to $11.2 billion in the latest quarter, also lifted by a rebound in digital advertising.

Money made from cloud computing offerings and from its Google Play shop for smartphones powered by its Android software also helped fuel the 42 percent jump in revenue to $46.2 billion in the quarter, the company said.

"None of the political machinations made any difference at all," said analyst Patrick Moorhead of Moor Insights and Strategy. "We had a Facebook boycott and a lot of regulatory scrutiny about Google. Digital advertising is back."

Blockbuster revenue in the quarter was led by an increase in ad spending at Google's search engine and video streaming platform YouTube, according to chief financial officer Ruth Porat.

Apple, the richest member of the quartet with a market value near $2 trillion, offered the most disappointing results of the group.

Apple profit dipped 7 percent to $12.7 billion, the Silicon Valley-based colossus said in an earning release.

The tech giant's total revenue edged up from last year's level to $64.7 billion in the fiscal fourth quarter, but revenue from iPhone sales – the major income driver for Apple – slid some 20 percent from a year ago, unsettling investors.

The company's share price nosedived more than four percent in after-hours trading.

"iPhone is the cash cow and the driver of pretty much every add-on service Apple has out there," said Moorhead.