What you need to know about Big Tech’s earnings bonanza

30 Oct 2020

Image: © mrbigphoto/Stock.adobe.com

Some of the biggest names in tech published quarterly earnings last night, with many seeing record results.

Billions of dollars in accumulated earnings were announced last night (29 October), with many tech companies publishing their quarterly earnings, including Apple, Facebook, Alphabet and Amazon.

One of the noticeable trends is that Big Tech has continued to prosper during Covid-19, with many reporting record quarters.

Apple reports a record-setting fourth quarter

Apple’s full fiscal year for 2020 ended on 26 September and the final quarter saw the iPhone-maker set a new revenue record of $64.7bn. Records were also seen in the company’s Mac and services divisions, with $9bn and almost $14.6bn in net sales, respectively.

More than half (59pc) of Apple’s Q4 2020 revenue came from international sales and CFO Luca Maestri said the company returned nearly $22bn to shareholders during the quarter.

“Despite the ongoing impacts of Covid-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone line-up, has been tremendously positive,” said CEO Tim Cook, referring to the recent launch of the iPhone 12 range.

Delays caused by the pandemic meant the new flagship device launched in October, outside of Apple’s 2020 fiscal year, resulting in the steepest quarterly drop in iPhone sales in two years, down 20.7pc to $26.4bn.

Facebook sees 22pc revenue surge in Q3

In the three months up to the end of September, Facebook earned $21.47bn, almost all from its advertising business. This was up 22pc from $17.65bn in the same time last year, and marked a record quarter for the company.

Facebook expects things to only get better in Q4, with “strong advertiser demand” expected in the run-up to the holiday season. However, it added that it is going into 2021 with a “significant amount of uncertainty”. Facebook cited fears about how changes in online commerce trends as a result of the pandemic could limit ad growth.

It also raised concerns about Apple’s decision to limit ad tracking on iOS 14, which was announced in June, that Facebook claimed could see revenue for publishers on its Audience Network drop by 50pc.

Pandemic spending online sees Amazon profits soar

While bricks-and-mortar retail has been hit significantly hard by the pandemic, Amazon’s quarterly profits have tripled in Q3 2020. The e-commerce giant posted sales of $96.1bn, up 37pc on the same quarter last year. Meanwhile net income totalled $6.3bn, up from $2.1bn last year.

Somewhat unsurprisingly, Amazon is expecting a bumper holiday season with revenue guidance for the fourth quarter set at between $112bn and $121bn, or to grow between 28pc and 38pc compared with Q4 2019. Over the course of last quarter, Amazon said it created 250,000 jobs and has created approximately 100,000 in the first month of Q4.

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

Alphabet exceeds expectations with gains in advertising and cloud

Alphabet’s third quarter of the year ended on 30 September. Though the company was expected to rebound from its first ever decline in Q2 2020, its growth in this quarter exceeded even optimistic expectations. An increase in advertising spend on search and YouTube (with revenue up 6pc and 32pc, respectively) helped the company’s total revenue grow 14pc year-on-year to $46.2bn.

Compared to 2019 figures, hiring at Google in this quarter was down 30pc, an expected slowdown caused by caution during the pandemic. However, staff numbers at Alphabet are still steadily rising overall, with more than 132,000 people employed by the company worldwide at the end of Q3.

Most of these new hires went to Google’s cloud computing division – an investment that paid off as Google Cloud saw a significant jump in revenue, up 45pc to $3.4bn.

Twitter beats Q3 expectations, but sees slow user growth

Twitter’s stock market performance has taken a hit in Q3, despite the company performing better than expected. The social media giant earned revenue of $936m for the quarter, an increase of 14pc compared to the same period last year.

However, in that time it only added 1m monetisable daily active users to reach a total of 187m, compared with the 195m that analysts expected. Costs and expenses in Q3 also increased 13pc year-on-year to $880m, resulting in an operating income of $56m and a 6pc operating margin.

Twitter said that in Q2, brands slowed or paused spend in reaction to US civil unrest, but that it picked up again in Q3. This, it said, makes it hard to predict what impact the upcoming US presidential election will have.

“We have no reason to believe that September’s revenue trends can’t continue, or even improve, outside of the election-related window,” it said. Twitter stocks fell by up to 16pc in after-hours trading versus a gain of 8pc during regular trading yesterday (29 October).

Spotify user growth sparks streaming recovery

Spotify’s third quarter recorded 29pc active user growth year-on-year, with 320m people now streaming on the platform monthly. Paid subscribers saw similar growth, up 27pc to 144m.

“Some of our more mature regions exhibited accelerating user growth, our advertising business returned to growth, and new market launches in Russia and 12 surrounding markets unlocked significant pent-up demand, adding a helpful accelerant to our results,” the company said.

Total revenue for Spotify reached almost €2bn, a 14pc bump on last year’s figures. The company also reported a recovery in global consumption hours, with hours listened rising above pre-Covid levels and a record-low churn rate at under 4pc.

Shopify sees gains from retail’s digital transformation

Canadian e-commerce company Shopify also announced strong financial results for its third quarter ending 30 September.

“The accelerated shift to digital commerce triggered by Covid-19 is continuing as more consumers shop online and entrepreneurs step up to meet demand,” said company president Harley Finkelstein.

The e-commerce platform’s total revenue for the quarter almost doubled year-on-year to reach $767.4m. This was led by 48pc growth in subscription solutions to $245.3m, thanks to a surge in new merchant sign-ups. Of all eligible merchants in the US and Canada, more than half (51pc) used Shopify Shipping in Q3 2020, up from 45pc the year before.

Nokia will ‘invest whatever it takes to win in 5G’

In his first quarterly earnings report as CEO of Nokia, Pekka Lundmark said the company is expecting potentially tougher times ahead in Q4 and beyond. Despite seeing a 33pc year-on-year increase in operating profit to €350m in the third quarter, net sales declined by 7pc to €5.29bn.

By the end of the 2020 fiscal year, Nokia expects that it will see profits of between €0.20 and €0.30 per share. However, Lundmark said that the progress made by Nokia in Q3 is “not enough” and that its performance in 2021 is set to be challenging as “more change is needed”.

After losing a major US contract to supply Verizon with 5G infrastructure earlier this year, Lundmark said that Nokia will “invest whatever it takes to win in 5G”.

Activision Blizzard plans hiring spree following strong results

California-headquartered video-game maker Activision Blizzard beat analysts’ expectations with revenue of $1.95bn in its third quarter. This 38pc growth on the same quarter last year has been attributed to an uptick in gaming during the pandemic.

Titles such as Call of Duty: Modern Warfare and Warzone saw more than three times as many monthly active users as the prior titles in the previous year and the company once again saw substantial annual growth in premium game sales.

In an interview following the earnings report, CEO Bobby Kotick said the company now plans to grow its global employee base of 10,000 by a further 2,000 to meet growing production demands.

With additional reporting by Elaine Burke

Colm Gorey was a senior journalist with Silicon Republic