By Dana Mattioli
Tech giants including Amazon.com Inc. and Google reported strong
quarterly sales and profits that showed how pandemic-era demand for
their digital services and gadgets is driving them to new heights
even in the midst of a debate about their market power.
The financial results announced Thursday, which also included
record revenue at Facebook Inc., illustrated again how increased
remote working and living has elevated use of everything from
online retail and social media to cloud computing services and
digital advertising -- accelerating shifts in consumer and business
behavior that are expected to continue beyond the Covid-19
Amazon, which had delivered record sales in the second quarter
of the year, topped that level in the three months through
September, with revenue soaring 37% to a record $96.2 billion.
Profit nearly tripled to $6.3 billion, propelled by strong online
sales as well as digital advertising and growth in its lucrative
cloud computing arm.
"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," Amazon Chief Executive Jeff
Google parent Alphabet Inc., one of the few big tech companies
to have a lackluster performance in the second quarter of this
year, said digital advertising revenue rose nearly 10% from a year
earlier to $37.1 billion in the July-through-September period. That
marked a turnaround from the prior quarter, when Alphabet recorded
the first drop in the category in company history.
The industry's overall move from strength to strength, though,
risks feeding the criticism of government officials, lawmakers and
others who argue that they already have too much clout.
A day earlier, the chief executives of Facebook, Twitter and
Alphabet were questioned in a nearly four-hour hearing by the
Republican-controlled Senate Commerce Committee, focusing on the
power of their platforms over public discourse. A week earlier, the
U.S. Department of Justice filed an antitrust suit against Google
alleging it operates an unfair monopoly in its flagship search
business -- the first charges to emerge from multiple
investigations of the tech giants' competitive practices.
And earlier in the month, a Democratic-led House panel issued a
report arguing that Amazon, Google, Facebook and Apple have
leveraged their dominance to stifle competition and innovation. It
said Congress should consider forcing the tech companies to
separate their online platforms from other business lines.
The latest quarter's numbers weren't all rosy. Twitter Inc.
disappointed investors with unexpectedly slow growth in its user
base, even though it also topped estimates for sales and
Apple Inc., the world's most valuable company, said sales rose
1% and profit slipped in the three months through September after
it delayed the launch of its new flagship iPhone because of the
pandemic -- though Apple reported strong sales of laptops, iPads
Together, the five biggest tech companies by value -- Apple,
Amazon, Alphabet, Facebook and Microsoft Corp., which reported
Tuesday -- took in 18% more revenue in the latest quarter than a
Alphabet shares, which rose 3.1% in regular hours Thursday,
jumped almost 7% after hours, as investors cheered its results.
Amazon shares, up 1.5% ahead of the results Thursday, retreated
around 1.6% in after-hours trading, even though sales and profit
both beat analysts' estimates. Before the late-afternoon report,
the stock was up more than 70% this year, giving the company a
market value of around $1.6 trillion.
The scale of online shopping during the pandemic at times has
strained Amazon, driving up staffing and costs to get goods to
customers. The company said it would add 100,000 seasonal workers
in the U.S. and Canada heading into the Thanksgiving and Christmas
holidays ahead of an expected increase in online orders.
The company said it had 1.13 million employees at the end of the
quarter, up from 876,800 at the end of June.
Amazon achieved its lofty sales figures without its annual Prime
Day shopping event, typically held in July, which helps it enroll
new Prime subscriptions. This year, the event was delayed until
October as Amazon worked through the summer's jump in orders.
Even so, customers have flocked to the Prime program, with
renewal rates also rising, Chief Financial Officer Brian Olsavsky
said on an analysts call. They are using more of the features the
membership offers, including shopping and video, he said, adding
the engagement level "we think that will have lasting value."
In a less positive sign of how the pandemic is changing shopping
patterns, Amazon said its physical stores segment, which includes
Whole Foods, saw a 10% decrease in sales from the year-earlier
Amazon Web Services, the company's cloud-computing operation and
its main profit center, posted $11.6 billion in sales in the
quarter ended September 30, rising 29% from a year earlier.
Operating income for AWS, which rents computing power to companies
and the government, rose 56% to $3.5 billion. Cloud services have
been in hot demand during the work-from-home era as companies
accelerate their adoption of the kind of digital tools.
Amazon's burgeoning advertising business also grew sharply, with
sales up 51% from a year earlier to $5.4 billion in the quarter.
The unit sells advertising space in the form of sponsored products
in search and display ads.
The company Thursday forecast $112 billion to $121 billion in
sales in the current quarter, bolstered by the delayed Prime Day
event. That outlook comes with uncertainty, Mr. Olsavsky said. On
top of the usual fourth-quarter vagaries around weather and holiday
spending plans, this year also has a U.S. presidential election.
"We saw some disruption in 2016," Mr. Olsavsky said.
Sebastian Herrera contributed to this article.
Write to Dana Mattioli at email@example.com
(END) Dow Jones Newswires
October 29, 2020 20:30 ET (00:30 GMT)
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