Mon | Sep 27, 2021

Big tech profits soar

Published:Thursday | July 29, 2021 | 12:10 AM
Customers view the new 24-inch iMac desktop computers in an Apple store in New York on May 21.
Customers view the new 24-inch iMac desktop computers in an Apple store in New York on May 21.

Three tech companies that have amassed unparalleled influence while reshaping the way we live released strong earnings results in a flurry late Tuesday.

Although Apple, Microsoft and Google owner Alphabet Inc make their money in different ways, the results for the April-June period served as another reminder of the clout they wield and why government regulators are growing increasingly concerned about whether they have become too powerful.

The massive profits pouring into each company also illustrated why they have a combined market value of US$6.4 trillion — more than double their collective value when the COVID-19 pandemic started 16 months ago.

Apple’s first iPhone model capable of connecting to ultra-fast 5G wireless networks continued to power major increases in quarterly revenue and profits for tech’s most valuable company.

With iPhone sales posting double-digit growth over the previous year for the third consecutive quarter, Apple’s profit and revenue for the April-June period easily exceeded analyst estimates. The Cupertino, California company earned US$21.7 billion, or US$1.30 per share, nearly doubling profits earned during the same period last year. Revenue surged 36 per cent to US$81.4 billion.

As usual, the iPhone accounted for nearly half of Apple’s revenue. The iPhone 12, released last autumn, is shaping up to be Apple’s most popular model in several years, largely because it’s the first to work on the 5G networks that are still being built around the world. Apple’s iPhone sales totalled nearly US$40 billion in the latest quarter, up 50 per cent from a year ago.

Apple’s services division, the focal point of a high-profile trial revolving around the commissions it collects from iPhone apps, saw revenue climb 33 per cent from last year to US$17.5 billion. A potentially game-changing decision from the trial completed in May is expected later this summer.

Among Apple’s other upcoming challenges is whether shortages of computer chips and other key parts will force the company to delay its next iPhone this year, as it did last year.

Google’s earnings improved markedly over the year-ago period, when the pandemic was starting to bite consumer spending and its partner, advertising. Now that vaccines have allowed people to shed the shackles of the pandemic and splurge again, a big chunk of that pent-up demand has spurred advertisers to spend more too, with a big chunk going to Google and its corporate parent Alphabet Inc.

Powered by Google, Alphabet earned US$18.53 billion, or US$27.26 per share, during the quarter, a nearly threefold increase from last year’s earnings of US$6.96 billion, or US$10.13 per share. Total revenue surged 62 per cent from last year to US$61.88 billion. Revenue, after subtracting TAC, or traffic acquisition costs, was US$50.95 billion.

The April-June quarter looks particularly strong since the 2020 downturn forced Google to report its first decline in quarterly ad revenue from the previous year.

Analysts were expecting Alphabet to earn US$19.24 per share on revenue of US$56.2 billion, and US$46.2 billion after subtracting TAC.

Microsoft on Tuesday reported fiscal fourth-quarter profit of US$16.5 billion, up 47 per cent from the same period last year. Net income of US$2.17 per share beat Wall Street expectations. The software maker also topped forecasts by posting revenue of US$46.2 billion in the quarter that ended on June 30, a 21 per cent increase over the same time last year.

Analysts were expecting Microsoft to earn US$1.91 per share for the April-June quarter on revenue of US$44.1 billion. Microsoft profits have soared throughout the pandemic, thanks to ongoing demand for its software and cloud computing services for remote work and study.

Growth in sales of Microsoft’s cloud services, which compete with Amazon and other companies, and its Office productivity tools for handling work documents and email, both outpaced overall revenue growth. The company’s historical pillar — personal computing — grew just 9 per cent in the quarter. Microsoft recently unveiled the next generation of its Windows software, called Windows 11, its first major update in six years. It will be available later this year.