The CEOs of Apple, Alphabet, Amazon and Facebook bent over backward on Wednesday to downplay their market leadership positions in over five and a half hours of testimony before Congress. Facebook CEO Mark Zuckerberg noted that he wasn’t playing catch-up in several categories, from messaging to video. Apple CEO Tim Cook described the “street fight” competitive environment of the smartphone market. Amazon’s Jeff Bezos said his company is still a small player in overall retail, while Alphabet CEO Sundar Pichai said Google continues to face competitive threats.
If you just listened to these four men, you’d almost feel sorry for them.
But then they all proceeded the very next day to post profits that Scrooge McDuck would be jealous of.
Amazon and Facebook both saw their profits double — with Amazon’s results coming after spending $4 billion on COVID-19-related safety measures for its employees, while Apple saw a slight increase in iPhone sales despite many of its stores being closed and much of the world locked down. Google was the only company to post a revenue and sales decline (but don’t feel too bad, since the results were better than Wall Street expected).
The stark contrast between the rhetoric heard before the House Judiciary’s Antitrust Subcommittee and today’s big earnings and revenue gains undermines any effort by the executives to garner sympathy as lawmakers look for ways to limit the immense power these companies wield. The timing, with earnings coming out less than 24 hours after the hearing ended, makes for a more dramatic comparison because it’s so fresh in our minds.
That these companies continue to post billions of dollars in profit amid a pandemic and recession that’s eliminated tens of millions of jobs in the US alone underscores how much more dependent we are on Big Tech during this crisis, whether it’s to stay in touch with our friends and family through Facebook, buy diapers and food through Amazon, and watch entertainment and use online services from Google and on devices from Apple.
“The reason is the world is changing,” said Michael Obuchowski, chief investment officer of Merlin Asset Management, who owns shares in all four companies. “It is becoming more digital — it has been for a while, but the pandemic broke the back of the non-tech world.”
The dollars flowing to the Big Four also adds ammunition to lawmakers looking to curtail the power of these companies. Based on second quarter numbers alone, it’s clear Congress will take action.
“These companies as they exist today have monopoly power,” US Rep. David Cicilline, the Democrat chairman of the antitrust subcommittee, said in his closing remarks yesterday. “Some need to be broken up. All need to be properly regulated and held accountable.”
Here’s a quick look at the results.
- Amazon posted an all-time record profit of $5.2 billion, or $10.30 a share, blowing away expectations of $1.46 a share, while sales rose 40% to $88.9 billion.
- Facebook also saw its profit double to $5.18 billion, or $1.80 a share, well above analyst expectations of $1.39 a share. Monthly active users rose 12% to 2.7 billion.
- Apple saw profit rise 12% to $11.25 billion, or $2.58 a share, surpassing the average analyst estimate of $2.04. Revenue rose 10% to $59.69 billion, buoyed by a 1% increase in iPhone sales (helped by the low-cost iPhone SE) despite a global lockdown.
- Alphabet, the parent of Google, posted a profit of roughly $7 billion, or $10.13 a share, which was down on the year, but still above the $8.21 a share expected by Wall Street.
The results are impressive in a normal environment, but they look absolutely jaw-dropping given the current environment.
“The numbers certainly make it harder for people to see these companies as weak in any way,” said Carolina Milanesi, an analyst at Creative Strategies.
The company’s leaders are aware of the contradiction, and on Thursday were careful to strike a balance between touting impressive numbers while being sensitive to the situation. Amazon’s press release was loaded with ways the e-commerce giant contributed to the community and its employees, including investing more than $9 billion into the economy.
Apple’s Cook addressed the issue head on, while Zuckerberg stuck to his talking points from Wednesday.
“We’re conscious that these results stand in stark relief during a time of real economic adversity,” Cook said on his earnings conference call. “We do not have a zero sum approach to prosperity. We’re focused on growing the pie and making sure our success isn’t just our success. Everything we make, build or do is committed to creating opportunities for others.”
“As I said yesterday, the tech industry is an American success story,” Zuckerberg said on the call. “Products we build have changed the world for the better and improve people’s lives.”
Zuckerberg also argued that efforts to go after internet companies that rely on online advertising would hurt small businesses that rely on Facebook’s products.
“Is that really what policymakers want in the middle of a pandemic and recession?” Zuckerberg said. “The right path I believe is regulation that keeps people’s data safe while allowing the benefits of this kind of personalized and relevant advertising.”
The companies, however, all stressed the uncertainty of the environment. More than 150,000 American have died from the coronavirus and the US Congress is still debating a stimulus package aimed at giving more relief to unemployed workers and businesses.
“We’re working to help people, businesses and communities in these uncertain times,” Alphabet’s Pichai said in a statement.
The times are indeed uncertain, but the shift to working remotely and our reliance on technology makes it clear they’ll be just fine, no matter how they underplay things.
“They are on the right side of the largest economic dislocation ever,” Obuchowski said. “They’re squarely on the digital side of it.”
-Queenie Wong contributed to this story