A day after their CEO’s spent five-and-a-half-hour-long testifying at a congressional hearing on anticompetitive practices, four of the largest tech companies in the world grew even larger after each reported strong earnings in the second quarter.
Yesterday alone, Apple, Amazon, Alphabet (Google’s parent company) and Facebook added about $200 billion to their cumulative market cap after they announced earnings. This shows just how dominant each business is. Combined the companies are now valued at more than $5 trillion.
Apple reported more than $11 billion in earnings despite shutting down most of their retail stores during the pandemic. On the earnings call the tech company reported strong demand for the smaller, lower-cost iPhone 11. It also reported a surge in sales for the iPad and Mac products.
“Mac and iPad, these are productivity tools that people are using to stay engaged with their work or stay engaged with their schoolwork,” Apple Chief Executive Tim Cook said during the call. “And we believe we’re going to have a strong back-to-school season sitting here today, it certainly looks like that.”
The company also surprised analysts during the call by announcing a 4-for-1 stock split. Investors who currently have shares will receive three additional shares for every one they own. The share price is also adjusted down to roughly 25% of the current price, helping to make shares more affordable.
Tens of millions of Americans stuck at home during the shelter-at-home restrictions. With this, Amazon was perhaps the biggest winner and reported a record net income last quarter. On the earnings call, Chief Financial Officer Brian Olsavsky said that online grocery sales had tripled in the quarter and video streaming had doubled from a year ago. The company also saw an increase in its cloud computing business.
Alphabet reported earnings and net income in line with expectations. However, it announced the tech company’s first-ever drop in revenue for display ads on Google.
“The macroeconomic environment costs by the pandemic created headwinds for our business,” Alphabet CEO Sundar Pichai said on the call, but said that indications in the third quarter are a stabilization in users and expectations are for revenue to return as well. “This was true across most of our advertising verticals and geographies. Of course, the economic climate remains fragile.”
Facebook, though, had the biggest after-hours jump in its stock price after it beat Wall Street expectations by topping $5 billion in quarterly profit. Also, Facebook said that its traffic grew during the pandemic, with more people at home online, but that the average price per ad declined due to the economic fallout of COVID-19.
“Facebook has been a lifeline of economic activity,” said Chief Financial Officer David Wehner on the earnings call. Also, the company announced $5 billion in quarterly profit.
It said that with more people at home all day due to the pandemic site traffic grew, but like Alphabet, saw a decrease in the average price per ad due to the economic fallout of COVID-19.