Google leads as tech profits hit new highs
Three of the world’s biggest companies — Google parent Alphabet, Amazon and Microsoft — reported booming quarterly growth, extending their reach in industries from advertising to retail to business software as they drive the economy’s transformation.
Alphabet said profits spiked 33 per cent in the third quarter as users clicked on more ads on smartphones, atop search results and before YouTube videos.
Amazon, meanwhile, said its revenue grew by 34 per cent and profits inched up, shrugging off concerns that heavy investments in new warehouses and hiring workers would push it to a loss. And Microsoft reported a 12 per cent revenue increase, capitalising on a shift to cloud computing.
The technology industry’s banner day underscored the dominance of a handful of companies in the internet age.
Alphabet reported a 40 per cent increase in non-advertising revenue to $US3.41 billion, showing the strength of its relatively new cloud-computing business, which sells computing power to other companies over the internet.
And pharmaceutical stocks fell Thursday after the St Louis Post-Dispatch reported that Amazon had obtained licenses from several state pharmaceutical boards. The licenses are for Amazon to sell some medical wholesale equipment, sources said.
“The strong keep getting stronger,” said Colin Sebastian, a Robert W Baird & Co analyst who covers Amazon, Google and Twitter. “The bigger drivers of their operations — secular growth trends in e-commerce and digital advertising — are still very strong.”
Shares in three tech giants jumped after the results were announced. Alphabet and Amazon’s stocks both surged past the $US1000 mark and approached all-time highs.
But their rising fortunes are also drawing new scrutiny and questions about whether they have grown too powerful.
Politicians have proposed new transparency rules for digital political ads after Google, Facebook and Twitter said Russian actors ran ads on their sites around the 2016 election.
The platforms face wider criticism of their roles in spreading misinformation and hateful messages on the internet.
Advertisers, too, are wary of the increasing power of a few digital-ad businesses, amid allegations of ad fraud and shoddy metrics, and brands’ ads running next to unsavoury YouTube videos.
On Thursday, Twitter said it mistakenly overstated its number of users for the past three years.
Yet their businesses continue to flourish, in part because of one fundamental trend: surging internet usage worldwide.
“Are you going to use the internet less next year?” said Macquarie Capital analyst Ben Schachter. “These are already some of the largest companies in the world, and they are continuing to expand.”
Even Twitter, which has struggled for years, narrowed its quarterly loss to $US21.1m, from $US103m a year prior, and forecast that next quarter it could earn its first profit since going public in 2013.
Amazon’s quarterly revenue hit a new record in the third quarter at $US43.74bn, as it expanded into more corners of consumer spending. The third quarter for the first time included Amazon’s $US13.5bn acquisition of Whole Foods Market, which closed in late August.
The jump in revenue is but one measure of Amazon’s scale. Marketing-research firm eMarketer estimates Amazon will command some 43.5 per cent of e-commerce sales this year, compared with 38.1 per cent last year.
Alphabet said its quarterly profit grew to $US6.73bn on revenue of $US27.77bn. The company’s core business of selling ads in search results and on YouTube grew at its fastest rate in a year, 22.6 per cent.
“The core search business is just super-strong,” said JMP Securities analyst Ron Josey. Google’s search ads “continue to be a must buy for advertisers”.
Microsoft’s revenue surged on the strength of its emerging business of selling web-based, on-demand computing services. In the fiscal first quarter, the two biggest pieces of Microsoft’s cloud-computing operations — its Azure infrastructure services and Office 365 online-productivity business saw revenues soar 90 per cent and 42 per cent, respectively.
Overall, Microsoft’s profits increased 16 per cent to $US6.58bn. Revenue reached $US24.54bn.
“The secular shift from offline to online is continuing to gain steam and gather momentum,” Mr Josey said. “You’re seeing that every single quarter, and I don’t know what gets in its way.”
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