The global giants of Internet technology announced their financial performance in the previous quarter this week. Overall, its performance cannot be considered weak, although the reaction of the stock swaps was not the most optimistic this time around.
Many are concerned about the extent to which the economy will be stifled in many places by the rise of the pandemic and the increasingly tight restrictions associated with it.
When billions of technology leaders are measured, the picture is quite impressive. Amazon.com, for example, had revenue of $ 96.15 billion in the previous quarter, a new record for the company. It is also almost 40% more than in the same period last year. Overall, these data clearly show that many in the world continued to make active purchases during the pandemic. The company’s quarterly earnings reached $ 6.3 billion, three times more than in the same period last year.
Apple, on the other hand, had revenue of $ 64.7 billion and a profit of $ 12.7 billion in the previous quarter. In this case, the turnover was slightly higher (7 billion) than a year ago, but the profit was US $ 1 billion or 7.3% lower.
Other companies have also revealed their results. Facebook’s quarter-on-quarter revenue fell 22%, to $ 21.2 billion, and its profit was about 30%, to $ 7.8 billion. Meanwhile, Alphabet (Google’s parent company) reported revenue growth of 14% over the previous year, to $ 46.2 billion, and profits of up to 60%, to $ 11.4 billion.
In fact, one can try to say that, despite the Covid-19 saga, these companies are doing very well if they are already able to demonstrate billions of dollars in profits on those occasions and, in many cases, even quite rapid growth in their main financial indicators. The Internet advertising market has recovered more quickly after Covid-19’s sudden rise. E-commerce and cloud services are also growing. To sum up, with the fury of the pandemic, much continues to happen in the digital space.
Amazon 70% increase
This time, however, most investors chose to focus on the bad. Stock markets like to “live in the future” and tech giants are also actively associating this with a great deal of uncertainty. For example, Apple refused to make any predictions about its future performance, and Facebook’s administration also highlighted the uncertainty. Market participants also expected even more optimistic forecasts for the company’s fourth quarter revenue from Amazon.com. In particular, Amazon.com said its quarterly revenue could be in the range of $ 112 billion to $ 121 billion (an increase of almost 30% year on year), which was clearly not enough for market participants. In addition, the stock market has recently started to deteriorate as such.
In general, some caution is understandable, as the stock prices of these high-tech companies have risen very quickly recently, and expecting this growth even more against the backdrop of a somewhat precarious global economy requires some courage. As a result, such actions can be considered expensive, even in a scenario of billions in profits and forecasts. Amazon.com’s stock price has fallen 71% since the beginning of the year! The stock price of Apple increased 54%, Facebook – 34% and “Alphabet” – 16%. However, the past few years show that the cost of these shares is not really an obstacle to their future growth.
Others find it more difficult to stay on the road
Sales for the four technology companies grew 18% to $ 228 billion in the previous quarter, an average increase of 4% compared to Wall Street analysts. In turn, the total profit of these companies after tax decreased by 31% and reached almost 40 billion dollars.
This increase comes at a time when the profits of companies included in the total US Standard & Poor’s 500 stock index are expected to drop 17% and turnover 2%. Without these averages for fast-growing technology companies, the performance of other US listed companies would be even worse. In fact, it can be said that the pandemic has exacerbated marked divergences also in the corporate world. Good luck to companies that have managed to become more digital or even lead the way. The traditional part of the economy, on the other hand, is weaker.
The digitalization of commerce, which is accompanied by the ailments of the traditional purchasing industry, has already taken the term “Amazonian effect”. The essence of this is due to the fact that until now traditional players have had a hard time changing and competing with highly recognized technology companies, which are very profitable, with great ambitions and capable of collecting to interpret a wide range of data. There are also fears that the big tech companies are moving confidently towards monopolies or duopolies, where the winner or two / three winners in any industry where they see the prospects are taking over very quickly on a global scale and the rest is left to fight for crumbs.
It is no wonder that the world’s most influential monopoly regulators have become active recently (for example, they sued Google for abuse of a dominant position in the United States), concerned that these companies already have too much power.
“The recovery of these companies has been much faster than expected. “Online” gets tons of market share from “Offline”, “representatives of the Financial Times, for example, of the financial Truist. In fact, the already large technology companies are assuming a still disproportionate share of the economy during a pandemic. France Télécom argues that this is also the reason why the management of these companies, after announcing their results, tried to be formally more pessimistic than it was to not stand out even more. Basically, some whales in the pool in the context of a herring herd, it’s hard not to notice. “It will be difficult to stop such an unstoppable force. We don’t know how big and powerful they are [esošie tehnoloģiju giganti] will eventually become ”, France Télécom representatives in the Firsthand Capital Management range.
When it gets too big
These companies account for nearly a fifth of the total capitalization of the 500 largest publicly traded companies in the United States. As the capitalization of these companies increases, as the share price increases, so does their impact on the size of the market in general, since most market indices are calculated taking into account the capitalization of companies – the Larger companies have more influence on the calculation of the respective index. It also means that all investors who have invested, for example, in exchange-traded funds that follow the general behavior of the North American stock market are increasingly intensified by events in the technology sector. In essence, the hope is to choose a balanced investment, although in reality its value is increasingly determined by what happens to individual technology titles and Internet companies.
It is often said that the most valuable technology companies have become little or very dominant. In other words, only a few gigantic representatives in this area, who demonstrate a growing desire to experiment with more and more sectors of the economy, have a huge impact on trends in the financial and business markets. The same is difficult for Amazon to include in a specific section of a business classification.