While the U.S. economy was shrinking 9.5 percent in the second quarter of 2020, three of the country’s four largest tech companies had a blowout Q2, even as their customers and business partners were enduring deep financial pain from covid-19.
It didn’t hurt that big tech spent more than $20 million on lobbying in the first half of 2020, including on coronavirus legislation.
“Big Tech has been the stalwart on Wall Street this year. Amazon and Apple are up 71 percent and 44 percent, respectively, in 2020,” CNBC reported.
Industry observers say the strong performance by top tech firms shows they benefited disproportionately from the covid-driven rise in digital activity as people around the world are forced to work, learn and entertain themselves from home.
On Wednesday, CEOs of Amazon, Apple, Alphabet and Facebook testified remotely before Congress during antitrust hearings on a six-hour video conference.
Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Apple’s Tim Cook and Google’s Sundar Pichai were asked — and couldn’t always answer — questions about monopoly, stifling competition, seeking dominance, protectionism and denying service to rivals, Financial Times reported.
The CEOs came off as modern robber barons of 21st century corporate America, strengthing the argument for those who believe U.S antitrust law needs urgent change, according to FT.
“Your company harvests and monetizes our data, and then your company uses that data to spy on competitors and to copy, acquire and kill rivals,” Rep. Pramila Jayapal told Zuckerberg during the hearings.
That was Wednesday.
On Thursday, looming regulatory threats to big tech were “lost on Wall Street, which reacted euphorically to Thursday (Q2) earnings news,” FT reported. “The combined market value of the four companies rose by about $178 billion in trading on Friday, lifting them above $5 trillion for the first time.”
Apple shares led the gains with a more than 10-percent increase. Facebook added 8 percent and Amazon climbed 3.7 percent. Only Alphabet, parent of Google, had its first-ever decline in quarterly revenue, falling 5 percent over caution among advertisers, FT reported.
“The day we found out the U.S. economy declined more than it ever has in history, these companies recorded extraordinary growth,” said Roger McNamee, a longtime tech investor and one of Silicon Valley’s most outspoken critics of Facebook. “In the absence of some sort of regulatory intervention, they will continue to displace a larger and larger share of the economy.”
Of the top five iPhone vendors, only Apple sales grew. iPhone sales grew 25 percent in Q2 while the smartphone market as a whole declined 14 percent. Samsung’s handset shipments fell 30 percent. Huawei also saw a 5 percent decline. Apple also announced a 4-for-1 stock split.
Amazon revenue increased by 40 percent. Many investors had expected its profits to be wiped out due to the extra $4 billion it cost to stay operational during the covid health crisis. Instead, after-tax profits doubled to $5.2 billion.
Amazon hired 100,000 more warehouse and delivery workers in March, giving $2-per-hour raises during the surge in covid buying related to covid-19.
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Some Amazon workers staged walk-outs to protest unsafe working conditions, insufficient protection against infection and lack of transparency after management neglected to inform staff when the first positive covid-19 case was confirmed.
Facebook’s revenue jumped in the second quarter by 11 percent to $18.7 billion, a far bigger spike than the expected 3 percent growth. Zuckerberg confirmed that the advertising boycott by more than 1,000 brands including Verizon and Ford can’t touch it. Critics still “wrongly assume that our business is dependent on a few large advertisers,” Zuckerberg said.
Only Alphabet, Google’s parent, reported a decline in sales — its first ever — but still exceeded expectations with a revenue drop of 2 percent at a time when other advertising businesses are hurting.