Big Tech companies reported mixed quarterly earnings on Thursday, a day after their top executives faced a tough congressional grilling over their market power and alleged monopolistic practices.
Alphabet, Google’s holding company, reported its first-ever drop in quarterly revenue compared to the prior year. Although it was only a 2% decline, it was a telling sign of a downturn in the digital ad market while also serving as a reminder that the economy is struggling even more than it did more than a decade ago during the Great Recession.
Google’s previous low point came during the second quarter of 2009 when its revenue edged up by just 3%. Alphabet’s profit for its most recent quarter plunged 30% to nearly $7 billion.
Revenue from Google’s core search business declined nearly 10%, though Chief Financial Officer Ruth Porat said there were signs of improvement at the end of the quarter as internet users searched for more commercial products and advertisers began spending more on the platform. Still, she said, it’s “premature to gauge the durability” of those trends because of ongoing economic uncertainty around the world.
Facebook, which also makes most of its money from digital ads, recorded an 11% increase in revenue from the prior year, the social networking company’s slowest growth since going public eight years ago. The company’s profit nearly doubled to $5.2 billion from the same time last year, although it would have fallen if not for $3 billion in tax and legal expense items a year ago, much of that related to a a major antitrust settlement with the Federal Trade Commission.
The social network said it expected revenue to grow about 10% in the current quarter, similar to the second quarter, and while that’s more than analysts expect, it’s factoring in issues including economic uncertainty, less time spent on its apps as the world reopens from the pandemic in many places, the impact of a July ad boycott targeting hate speech and regulations affecting its business like California’s new privacy law.
Apple delivered surprisingly strong results with rising revenue and profit, defying analysts’ lowered expectations. The iPhone maker’s revenue rose 11% to nearly $60 billion while profit rose 12% to $11.3 billion.
The pandemic initially walloped Apple twice: First by temporarily shutting down iPhone production while the coronavirus ravaged China, then by hitting household incomes, making its high-end gadgets less affordable. It softened the blow with the mid-April release of a budget iPhone selling for almost $400, helping the company boost its sales of its biggest moneymaker by 2% from last year.
More people shopped on Amazon during the pandemic, sending its profit and revenue to record highs, despite rising costs. Its profit doubled to $5.2 billion from last year and its revenue soared 40% to $88.9 billion.
Amazon said it spent more than $4 billion on COVID-19 related costs, such as worker bonuses and disinfecting its massive warehouses where orders are packed and shipped. And it expects to spend another $2 billion on pandemic-related costs during the third quarter.
Shares of all four companies rose in after-hours trading, reflecting financial performance exceeding analyst expectations.