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Facebook CEO Mark Zuckerberg.

Tech giants Apple, Amazon, Alphabet (Google) and Facebook have stunned Wall Street by managing to boost June quarter revenues to a record US$200 billion (roughly A$280 billion) and profits to a combined record of almost US$29 billion (A$40 billion).

The four companies appeared largely immune to the rapid economic slowdown in the United States and other countries, prospering amid the COVID-19 doom. The results come a day after US Congress grilled each company’s CEO, and amid Australia’s attempts to rein in the power of Google and Facebook.

The quarterly results show that the companies (alongside Microsoft) are seemingly impervious to economic reality, government persuasion or regulation, and free of those pesky shareholders — especially big name hedge funds and activists.

By way of contrast, America’s second largest carmaker Ford reported a 50% slump in quarterly sales to just over US$19 billion as buyers retreated in the face of COVID-19.

No such retreat for the big tech companies, even though Apple stores, one of its main selling channels, were closed in many markets during the quarter.

In fact, Apple’s shares jumped more than 5% to a new record on news of better-than-expected earnings, but also a four-for-one stock split next month that will make its shares (currently over US$400 each) more accessible. Apple is now valued over US$1.7 trillion and on the way to US$2 trillion. Its market value already exceeds Australia’s annual GDP.

Amazon’s results were just as stunning, perhaps more, as it incurred hundreds of billions of dollars in extra costs in the March and June quarters on extra staff, services and new infrastructure in the face of the COVID-19 pandemic and other changes.

It reported second-quarter profit of US$5.2 billion, nearly doubling the June, 2019 figure. That was a new quarterly record for earnings as sales surged 40% in the quarter.

Amazon reported sales of US$88.9 billion — up from US$63.4 billion from the same quarter in 2019 — and well ahead of Amazon’s prediction of US$75 billion to US$81 billion. 

Facebook’s performance was even more stunning in a way, given it has been subject to a much-publicised advertiser boycott. Revenues rose 11% to hit US$18.69 billion. The profit of US$5.18 billion was almost double the US$2.62 billion in the June quarter of 2019 and within US$700 million of the figure for Amazon.

Alphabet (Google’s parent) was the poor performer. Its result was dominated by the US$2.5 billion drop in ad revenues over the year as overall revenue fell to US$31.67 billion from US$31.7 billion a year ago. Earnings fell to US$6.96 billion from US$9.95 billion in the June quarter of 2019.

Seeing that ad revenue dominates Alphabet’s income (US$29.9 billion of Google’s total quarterly revenue of $US38.3 billion came from advertising), analysts are wondering whether Facebook is starting to eat Alphabet.

After all, Alphabet started eating legacy media’s revenues, and then along came Facebook. It’s a war between what are essentially corporate sovereign states, though not a shot will be fired in anger. The end result could be something no regulator wants — a fat, government-resistant Facebook.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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