Big Tech has been trying to make itself look a little smaller in the face of an onslaught of criticism from lawmakers and regulators, so consensus-busting earnings from Alphabet, Amazon, Apple and Facebook last night shouldn’t have helped.
The combined sales of the four big tech companies leapt 18 per cent year on year in the latest quarter, to $227bn, 4 per cent higher than expected, while their after-tax profits jumped by 31 per cent, to $39bn.
However, three of the four are smaller in value today, as investors responded to worries they expressed about their outlooks. Amazon, Apple and Facebook shares are all down more than 5 per cent, while Google’s stock is trading more than 4 per cent higher.
Google’s advertising business staged a much stronger rebound from its coronavirus slump than expected in the latest quarter. While Alphabet chief Sundar Pichai sought to play down the scale of the outperformance, suggesting that it was only growing in line with the broader internet economy, ad revenues were up 10 per cent after falling 8 per cent in the previous quarter.
Amazon’s own ad business is growing faster than the company as a whole, says Lex, at 51 per cent in Q3, but the ecommerce giant put a damper on things by warning that keeping up with demand during the Christmas period will be “tight”.
Apple’s iPhone 12 models shipped four weeks into the December quarter and the company disappointed analysts and investors by not offering a forecast for these three months that include the holiday season.
Facebook saw strong advertising numbers in its September quarter as revenues rose 22 per cent to $21.5bn, above analysts’ expectations of $19.8bn. However, active user numbers in the US and Canada fell quarter on quarter, and it said it expected the trend to continue in the final quarter of the year.
Apple apart, the big trend from these earnings is the digital advertising recovery highlighted by Alphabet, Amazon and Facebook.
Morgan Stanley analysts see a decisive shift created by Covid: “Advertisers’ eagerness to spend/experiment on digital advertising has inflected . . . and the platforms with leading reach and ad offerings are set to capitalise and drive that shift into ’21 and beyond.”
The Internet of (Five) Things
1. Apple warns on App Store in annual report
Apple has for the first time warned investors that it faces a “material” financial risk from the regulatory pressure on its App Store, a sum that could potentially run into billions of dollars. The iPhone maker’s latest annual report, published on Friday, acknowledges the heat felt by Big Tech from lawmakers.
2. Twitter down 20 per cent on user growth
Twitter’s shares have lost a fifth of their value so far today after the social media company’s user growth fell short of expectations in the third quarter and it warned of further delays to the introduction of a long-awaited new advertising system. Its results contrasted with a strong performance from rivals Snap and Pinterest.
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3. Biden blocked in Facebook flub
Facebook has mistakenly blocked thousands of Joe Biden ads from appearing on its platform with just days to go until the US presidential election, according to the Democratic challenger’s campaign, as the company struggles to implement its latest policy to combat misinformation.
4. All hail the humble QR code
The name Masahiro Hara does not appear with Steve Jobs and Bill Gates on lists of great innovators of the communications age, but perhaps it should, writes John Gapper. For the Japanese engineer’s humble, unassuming invention in 1994, the Quick Response code, has finally found its moment. The QR code enabled Ant to pioneer mobile payments in China through its Alipay super app and smartphones and Covid-19 are now making it ubiquitous.
5. Uber at the crossroads
Dara Khosrowshahi is more diplomat than disrupter: the car-booking app’s chief executive has spent the past few months lobbying on behalf of his company and the gig economy it helped create, which face challenges from labour organisations and politicians over worker treatment. Dave Lee has interviewed him for FT Magazine. We also have a profile of the youngest chief executive on Germany’s blue-chip Dax index, SAP’s Christian Klein.
Tech tools — Alexa-powered kid’s kitchen
My kids would have loved KidKraft’s Alexa 2-in-1 Kitchen & Market when they were growing up. Many of the items in this toy kitchen contain RFID chips, so they can be detected by the readers placed throughout the kitchen, reports Engadget. So when a child fills a pot of water and sets it to boil, they will hear the liquid bubbling. Add an Alexa-enabled speaker and it guides children through making imaginary recipes, while telling them corny jokes. It’s available in the US on Amazon at $300, in time for Christmas.