The Q3 performance reports of big tech companies show they keep defying the pandemic to record growth beyond expectations.
On Friday after the bell, Google’s parent company, Alphabet announced it generated revenues of $46.2 billion and per-share profit of $16.40 off the back of net income of $112.2 billion.
“We had a strong quarter, consistent with the broader online environment. It’s also a testament to the deep investments we’ve in AI and other technologies, to deliver services that people turn for help, in moments big and small,” said Sundar Pichai, Alphabet and Google CEO.
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The earnings have exceeded analysts’ expectations. Analysts had expected Alphabet to earn $11.21 per share, from revenues of $42.88 billion according to Yahoo Finance. And there were other estimates, targeting $11.37 in per-share income off revenue of $42.84 billion.
The company’s shares instantly rose around 8.5% after its earnings beat.
Breaking it down.
YouTube revenue rose to $5.0 billion, from $3.8 billion in Q3 2019, defying analysts’ projection of $4.52 billion for Q3 2020.
Google Cloud added $3.44 billion revenue to its $2.4 billion in the Q3 of 2019. The Google Cloud collection of cloud computing, productivity software, and other enterprise services generated $3.0 billion in the second quarter of this year. Analysts’ projection had been that Google Cloud would generate $3.31 billion in total revenue during this quarter.
Alphabet’s skunkworks division and other bets struggled in their revenue generation, bringing in only $178 million. The collection of efforts from these companies lost $1.1 billion in Q3.
TechCrunch reported that the loss was higher than the year-ago operating deficit of $941 million for other bets, which implies that financial issues remain. It noted that Alphabet doesn’t intend for Other Bets to generate positive net income. But to see it torch north of $1 billion in operating profit is still somewhat surprising.
While Google revenue made up 99.66% of the company’s total revenues for the Q3, Alphabet generated net cash from operations of $17.0 billion in the reference quarter, resulting in free cash flow of $116.6 billion.
“Total revenues of $46.2 billion in the third quarter reflect broad based growth led by an increase in advertiser spend in Search and YouTube as well as continued strength in Google Cloud and Play. We remain focused on making the right investments to support long term sustainable values,” said Ruth Porat, CFO of Alphabet and Google.
For other members of the big tech, the story was the same for the same quarter apart from Facebook.
Apple earnings also exceeded analysts’ expectations, but Facebook recorded a slight decline in its daily and monthly active users in the US and Canada.
Apple posted $64.7 billion compared to the $63.7 billion Wall Street predicted, and $0.73 earnings per share compared to projected $0.70. The iPhone maker reported all-time-high revenue in Services and Mac, but was down 20% year-over-year on iPhone sales.
Facebook’s net profit rose 29% year-over-year to $7.8 billion despite the drop in the number of users. The social media giant reported a slight decline in its daily and monthly active users in the US and Canada. However, net profit rose 29% year-over-year to $7.8 billion despite rising costs, partly because of a one-time tax benefit that reduced the $800 billion company’s effective tax rate to 4% for Q3.
Amazon’s profit, boosted by pandemic sales surge, tripled its earnings to 37%. The e-commerce giant’s revenue hit $96.15 billion, beating analysts’ expectations. Its net income increased to $6.3 billion in the Q3, beating the $2.1 billion net income of 2019. Amazon’s Cloud Services, Amazon Web Services, reported net sales of $11.6 billion for the quarter, a 29% year-over-year increase.
The tech industry has continued to show resilience in the face of most devastating economic turmoil in recent time.