Amazon.com Inc. (AMZN) 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. (AAPL) and Facebook Inc. (FB) 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. (GOOG) 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 more than $6 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. (C) and exceeding that of Starbucks Corp (SBUX).
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. (HD), 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.
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