Strong results but murky outlook for tech giants

Five technology giants reported strong earnings but mixed outlooks on Thursday, a sign of varying fortunes as they work to rebound from a pandemic-related economic slowdown earlier this year.

While all five – Amazon, Google parent Alphabet, Facebook, Apple and Twitter – exceeded analyst expectations, gloomy forecasts and other uncertainties led to share-price declines for all but Alphabet in after-market trading.

On Wednesday, the CEOs of Facebook, Google and Twitter testified before the Senate Commerce Committee, rebuffing accusations of anti-conservative bias and promising to aggressively defend their platforms from being used to sow chaos in next week’s election.

APPLE

Apple didn’t get its usual late-September surge in sales from its latest iPhone models, but still managed to eke out a slight increase in revenue during the July-September quarter, although profits fell.

Production problems lingering from factory shutdowns during the onset of the pandemic led to the iPhone delay, although analysts expect it will bounce back with a huge quarter during the October-December quarter that includes the holiday shopping season.

Apple’s revenue rose to US$64.7 billion. Analysts surveyed by FactSet had braced for a dip to US$63.6 billion. Profit, meanwhile, dropped 7 per cent from the year-ago quarter to US$12.7 billion. But earnings per share amounted to 73 cents, above the average estimate of 70 cents among analysts polled by FactSet.

Apple’s stock dropped nearly 5 per cent in extended trading. Investors apparently were jarred by unexpectedly drops in revenue from both the iPhone and sales in China. Revenue from China plunged 29 per cent compared to last year, raising fears that Apple may be getting hit by a backlash to the Trump administration’s trade wars with that nation. iPhone sales fell 21 per cent from last year to US$26.4 billion, well below analysts’ already lowered expectations.

Apple CEO Tim Cook teased that Apple may roll out another new product later in 2020.

ALPHABET

Google’s corporate parent Alphabet returned to robust financial growth during the summer. In the previous quarter, it suffered its first-ever quarterly decline in revenue amid the economic slowdown stemming from the COVID-19 pandemic.

The company’s revenue for the July-September period rose 14 per cent from the same time last year to US$46.2 billion. Its profit soared 59 per cent to US$11.2 billion, or US$16.40 per share. Both figures easily surpassed analyst estimates, lifting Alphabet’s stock price by more than 7 per cent in Thursday’s extended trading after the numbers came out.

The rebound, as usual, was propelled by the ad spending that has established Google as one of the world’s most proficient moneymaking machines. But the US Justice Department could throw a monkey wrench into Google’s financial gears with a recent lawsuit that accuses the company of abusing its search dominance to boost its profits and stifle competition.

FACEBOOK

Facebook’s already-massive profit and revenue continued to grow along with its worldwide user base, but looking ahead to 2021 the company predicted a “significant amount of uncertainty”.

Facebook earned US$7.85 billion, or US$2.71 per share, in the July-September period, well above the US$2.18 that analysts expected and up 29 per cent from a year earlier. Revenue grew 22 per cent to US$21.22 billion, higher than the US$19.8 billion analysts were predicting.

“Facebook has rebounded nicely from both the early-pandemic advertiser pullout” as well as a July advertiser boycott, eMarketer analyst Debra Aho Williamson said. While the company remains a major destination for advertisers, Williamson expects more advertisers to take a sceptical look at their “reliance on Facebook” in the coming year.

The social media giant’s average monthly user base was 2.74 billion as of September 30, up 12 per cent from a year earlier.

AMAZON

Amazon continued to benefit from shopping trends during the pandemic, reporting record profit and revenue during the third quarter. The company reported net income of US$6.3 billion in the three months ending September 30, nearly tripling from the previous-year period.

Earnings per share came to US$12.37, about US$5 more than Wall Street analysts expected. Revenue soared 37 per cent to US$96.1 billion, also beating expectations. Shares nevertheless fell 1.3 per cent in after-market trading.

The online shopping giant is also expecting a big end to the year as the holiday shopping season picks up. Amazon said on Thursday that it expects fourth-quarter sales to rise between 28 per cent and 38 per cent from a year ago to between US$112 billion and US$121 billion.

The last three months of the year are always Amazon’s biggest, due to the holidays. But this year, Amazon also held its Prime Day sales event during the quarter for the first time after postponing it from July to October due to the pandemic. Prime Day has become one of the company’s busiest shopping events of the year.

“We’re seeing more customers than ever shopping early for their holiday gifts,” said Amazon CEO and founder Jeff Bezos in a written statement. “Which is just one of the signs that this is going to be an unprecedented holiday season.”

TWITTER

Twitter posted much stronger than expected third-quarter results thanks to surging advertiser demand. But while its user base continued to grow, Wall Street grumbled and shares plunged after hours.

The San Francisco company earned US$28.66 million, or 4 cents per share, in the July-September period. That’s down 22 per cent from a year earlier, due to higher expenses in part related to COVID-19. Excluding one-time items, earnings were 19 cents per share. Revenue grew 14 per cent to US$936.2 million from US$823.7 million.

Twitter had 187 million daily users, on average, in the third quarter. That’s up 29 per cent from a year earlier, thanks to people signing up to follow U.S. politics and current events worldwide, but below analysts’ expectations of 195.6 million. The company no longer discloses monthly user figures.

Analysts were expecting a loss of 10 cents per share, adjusted earnings of 6 cents per share and revenue of US$777.3 million, according to a poll by FactSet.

The company predicted uncertainty going forward, due in part to the upcoming United States election, and said it is “hard to predict how advertiser behaviour could change.”

Twitter’s stock fell 11.6 per cent in after-hours trading on Thursday, having earlier closed up by 8.1 per cent.

– AP