Early futures trading shows Nasdaq will open tonight on Wall Street up more than 2% as the big four tech giants, Apple, Amazon, Alphabet (Google) and Facebook reported solid or spectacularly good June quarter results.
The reports provided an apt contrast on a day when the first estimate of US June quarter GDP showed a record annual fall of 32.9% and a record quarter on a quarter slide of 9.5%, and first-time jobless claims rose for a second week in a row and more than 30 million people remained unemployed or on government support programs.
Together the quartet reported combined quarterly sales of more than $US200 billion in the three months to June and a combined profit of almost $US29 billion.
The reports came a day after the heads of the four were all grilled online by members of the US Congress worried about the influence of the big four and some of their business practices.
The strong quarterly reports were the most effective reply to the questioning, much of which was misdirected and ignored the problems inherent in having four companies with market values of a trillion dollars or more.
Looking at how the four went, Apple leads by virtue of its much better than expected performance – a time that many analysts though the iPhone giant would struggle.
Apple Inc. brushed off the COVID-19 crisis to report record results Thursday, and the company said it plans to split its stock in an attempt to make it “more accessible to a broader base of investors.”
Apple shares gained 5.2% in after-hours trading, pushing shares higher than $US400, a level the stock has never seen in regular trading. the shares ended a smidge under $US405, driven by the news of a four for one split next month that is sure to drive investor demand.
The company posted fiscal third-quarter net income of $US11.25 billion, up from $US10.04 billion, or $2.18 a share, in the June quarter of 2019 (The third quarter for the September balancing company)
Apple’s revenue for the quarter rose 12% to $US59.7 billion from $US53.81 billion, much higher than the market consensus of $52.24 billion.
Apple reported $US26.42 billion in revenue from its iPhone segment, compared with $US26.99 billion a year ago and the $US22.2 billion that analysts had forecast.
This is the first quarter to include sales of the iPhone SE, Apple’s lower-cost smartphone that launched in August. International sales accounted for 60% of the company’s revenue in the period.
But in the post-results briefing Apple did reveal that the new iPhone would be delayed for “a few weeks.”
This means there will be no impact on the new phone in the current 4th quarter of Apple. It will all be in the first quarter that takes in the Thanksgiving/Christmas sales crush.
Apple didn’t provide a financial forecast for the current quarter in its release but said that its board of directors has approved a four-for-one stock split.
Apple shareholders of record as of the close of business on August 24. Trading begins on a split-adjusted basis on August 31.
Warren Buffett will be happy as the company’s largest single shareholder.
If Apple stood out for the stock split, Amazon came a very close second with a stunning set of numbers.
Amazon reported a second-quarter profit of $US5.2 billion, nearly doubling the June 2019 figure. That was a new quarterly record for earnings as sales surged 40% in the quarter.
Amazon reported sales of $US88.9 billion, up from $US63.4 billion from the same quarter in 2019, and well ahead of Amazon’s prediction of $US75 billion to $US81 billion.
Amazon said its core its e-commerce business grew sales by 47.8% from last year in the second quarter to revenue of $US45.9 billion from $US31.05 billion. The market had expected $US39.89 billion.
In North America, net sales online and at physical Amazon stores such as its Whole Foods Markets chains surged to $US55.44 billion from $US38.65 billion a year ago, while sales overseas jumped to $US22.67 billion from $US16.37 billion.
Amazon Web Services, the company’s cloud-computing arm, saw revenue jump to $US10.8 billion from $US8.38 billion, while analysts on average were expecting $US11 billion.
As usual, AWS was the biggest profit driver for Amazon, delivering an operating profit of $US3.36 billion of Amazon’s reported overall operating income of $US5.84 billion.
Facebook shares also rose in the after-hours session Thursday after topping all market forecasts in its June quarter figures.
Facebook shares surged more than 7% in after-hours trading after it revealed net income of $US5.18 billion compared with net income of $2.62 billion in the same quarter of 2019.
That $US5.18 billion in net profit is almost as much as Amazon earned.
The nearly doubling in profit came on a more modest 11% rise in revenue to $US18.69 billion from $US16.89 billion a year ago.
Analysts surveyed by FactSet had expected sales of $US17.34 billion.
Monthly active users, the best indicator of Facebook’s growth and advertising appeal, improved 8.8% to 2.7 billion from the 2.41 billion reported a year ago.
The boycott by some advertisers had no impact on Facebook.
Google parent Alphabet met market expectations despite a dip in advertising for a second straight quarter and a fall in overall revenues.
Its figures were the least impressive of the four for that slide in ad revenues (from its search products) which, after all is still the company’s reason for being in business
The company reported net income of $US6.96 billion down from $US9.95 billion in the June quarter of 2019.
Revenue after removing traffic-acquisition costs fell to $US31.6 billion from $US31.7 billion from a year ago.
Analysts surveyed by FactSet had forecast net revenues of $US30.66 billion.
Ad revenues fell $US2.5 billion from June 2019 which was the big news from the results.
Analysts wonder if Facebook is now eating Alphabet/Google’s most important revenue source.
Some $US29.9 billion of Google’s total quarterly revenue of $US38.3 billion came from advertising in the quarter, underlining its dependence on what is now a struggling market.
Sales from Google Cloud and YouTube continued to grow – YouTube ad revenue increased 6%, to $US3.8 billion from $US3.6 billion a year ago, while Google Cloud sales jumped 43%, to $US3 billion from $US2.1 billion.
To provide some contrast to these very strong results (even Alphabet), earlier in the day Ford revealed its June quarter sales had halved.
Ford said revenue fell 50% to $US19.4 billion from $US38.9 billion a year ago.
The carmaker reported a profit of $US1.1 billion, but that was only after a $US3.5 billion gain on an asset sale.