By Sebastian Herrera
Amazon.com Inc. delivered soaring quarterly sales and profit,
leading a pack of tech giants on Thursday that reported thriving
business during the throes of the coronavirus pandemic and
highlighting the industry's central place in business and society
at a time of growing concern over its clout.
The success of Amazon, Apple Inc. and Facebook Inc. in the face
of a pandemic that has caused unprecedented economic disruption and
millions of job losses shows how tech giants have become even more
indispensable at a time when people are living and working more
online. The companies showed strength in businesses ranging from
gadgets and online retail to cloud computing and digital
advertising.
Amazon reported record revenue and profit even as it spent $4
billion between April and June to stabilize its supply chain and
improve worker safety. The Seattle e-commerce pioneer now employs
more than 1 million workers, the second-largest in the U.S. Amazon
reported $88.9 billion in sales as a flood of customers grew to
rely more than ever on online shopping. Profits doubled to a record
$5.2 billion, far exceeding analyst expectations.
Apple proved to be another example of the technology industry's
strength in the pandemic, reporting a better-than-expected 11%
increase in quarterly sales due to strong demand for apps,
work-from-home devices and a new, low-price iPhone.
Facebook showed the resilience of its social-media business
despite a continuing procession of controversies. Sales rose 11% to
$18.7 billion due to increased engagement from users -- though
growth slowed and the company warned about persistent risks from
the economy and an advertiser boycott.
Google parent Alphabet Inc. was the outlier Thursday, reporting
a decline in quarterly revenue compared with a year earlier for the
first time in company history. Still, the company's sales beat
analyst expectations, and its profit, though down 30%, was still
nearly $7 billion.
Shares in all four companies, already among the best performers
for large corporations across the stock market this year, rose
after hours, with Amazon, Apple and Facebook all gaining more than
5%. Alphabet edged up almost 1%. Collectively, those stock moves
would add more than $200 billion to their market value if they hold
up in trading Friday. Apple alone gained about $100 billion,
roughly equal to the market value of Citigroup Inc. and exceeding
that of Starbucks Corp.
The extraordinary display of business resilience amid the
sharpest economic contraction in history put a spotlight on Big
Tech's unstinting rise only a day after the chief executives of the
same four companies were grilled by members of the House Judiciary
Committee investigating antitrust concerns. Lawmakers' questions
over more than five hours of testimony reflected bipartisan
disquiet with the leverage those companies have gained over a range
of business and social activity.
The breakout success of the companies came as a surprise even
for investors who had expected them to do well, showing how
entrenched technology has become in daily life at a time when
people world-wide have stayed home from work and school as a result
of the pandemic.
"The internet is the connective glue in Apple devices, Facebook
ads, the Amazon shipments," said Jefferies analyst Brent Thill.
"Ultimately, we think there is a more permanent tailwind behind
these big tech companies."
Amazon had struggled in March and April as the economic shutdown
took hold across the country, spending more than $4 billion on
coronavirus-related costs. Amazon hired hundreds of thousands of
workers, boosted pay and took dozens of steps to ensure warehouse
safety after facing early criticism from some employees.
The e-commerce giant has seen its shares surge by more than 60%
this year, more than double the increase for other tech giants such
as Apple and triple that of retailers that have largely kept stores
open such as Home Depot Inc., according to FactSet.
"We don't know when we will recover out of this Covid crisis,
but one thing that is certain is that these [shopping] trends are
taking hold, and that's why more and more people are hiding in
Amazon," said Hari Srinivasan, a portfolio manager at Neuberger
Berman Group LLC, which owns roughly $1.8 billion worth of Amazon
shares.
In a media call Thursday, Chief Financial Officer Brian Olsavsky
said that Amazon's profit was helped by sales of more profitable
items on its website and that the company was able to ship a
greater amount of products than it had anticipated. He said the
company expects to spend roughly $2 billion in coronavirus-related
costs during the third quarter.
Amazon's earnings came a day after Chief Executive Jeff Bezos
made his first appearance before Congress as part of a federal
inquiry into the market power of the nation's largest technology
companies.
Along with other tech leaders, Mr. Bezos faced criticism from
lawmakers, including several who asked about revelations in a Wall
Street Journal article that Amazon employees have used data from
sellers to form its private-label products. Mr. Bezos said a
company investigation into the Journal article is continuing.
Even as investors might have brushed off the risks of antitrust
scrutiny for the companies, powering a huge increase in their
value, business challenges remain for all four corporations.
The most acute difficulties might come for Facebook and Google
in advertising. Facebook's revenue-growth rate fell and the company
warned that growth will be muted as a result of the economic
fallout from the pandemic, an advertiser boycott and reduced
efficacy of ad targeting.
The global pandemic dealt a rare losing hand to Google's
digital-advertising operation, pushing quarterly revenue down
compared with a year earlier for the first time in company
history.
Executives stressed that advertising had steadily improved
throughout the quarter but acknowledged that challenges remain. "We
do believe it's premature to say we are out of the woods," said
Chief Financial Officer Ruth Porat.
Apple delayed the fall release of its flagship iPhone by a few
weeks, the company said, pushing it into October from late
September. Although the company's $399 iPhone SE encouraged
customers with older devices to upgrade, other customers continue
to wait for the fall release of the first 5G models, analysts
say.
Tripp Mickle, Rob Copeland, Jeff Horwitz and Euirim Choi
contributed to this article.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com
(END) Dow Jones Newswires
July 30, 2020 19:24 ET (23:24 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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