Big Tech Earnings Soar as Nasdaq Endures Worst Day Since May

28 Jul 2021 · 3rd Party Analysis

Big Tech Earnings Soar as Nasdaq Endures Worst Day Since May

WRITTEN BY ThorFX

In Summary

  • Apple, Microsoft, and Alphabet posted a combined profit of nearly $57bn for the last quarter
  • Nasdaq experiences a 1.2% decline, its worst daily result since mid-May

Wall Street experienced another wild trading day as investors tried to navigate volatility caused by growing uncertainties over a regulatory clampdown by Chinese authorities. US stocks on Tuesday slid from fresh records and snapped their five-day winning stretch after China’s government announced it was taking strong antitrust measures against some of its largest technology companies.

Fears spread over equities on Wall Street with the Nasdaq Composite taking the biggest hit. The tech-heavy index suffered its worst day in nearly three months just before the biggest US tech companies reported their financial results for the quarter ended June.

The Nasdaq Composite on Tuesday slipped 180.14 points, or 1.21%, to close 14,660.58. The other two major stock gauges also ended in the red. The Dow Jones Industrial Average declined 0.24%, while the broad-based S&P500 tumbled 0.47%.

Minutes after the closing bell, Apple, Microsoft, and Google-parent Alphabet revealed their profits have surged even when economies around the world started to emerge from the pandemic lockdowns.

The Big Tech group, which was among the most resilient performers during the coronavirus lockdowns last year, showed it can also exceed expectations when consumers are flocking to social venues and spending on goods and services that were previously unavailable.

The three technology behemoths brought in combined profits of $56.8bn for the last quarter, almost double what they announced the same quarter last year.

Digital Demand Sustains Strong Pace For Tech

Digital demand remained strong across the board, from individuals spending on new phones to businesses advertising their services on the Internet. Sales of Apple’s iPhone jumped 50% year-over-year, while Google’s advertising revenue spiked 69% on an annual basis.

Microsoft’s cloud platform Azure posted a 50% growth, signaling strong expansion to its most important new business. Satya Nadella, CEO of Microsoft, said he viewed the consistent demand for digital products as a sustained surge, rather than a short-lived spike in a post-pandemic world.

“Five percent of world GDP is tech spending, it’s projected to double — the doubling is going to happen at an accelerated rate,” Mr. Nadella said. At a glance, Apple earned $21.7bn in the spring quarter while revenue rose 36% from the year-ago quarter to $81.4bn. The company is expected to deliver its best fiscal year ever with profit forecasted to arrive at $86bn for the 12 months until September.

“This quarter saw a growing sense of optimism from consumers in the United States and around the world, driving renewed hope for a better future and for all that innovation can make possible,” Apple chief executive Tim Cook said. “But as the last 18 months have demonstrated many times before, progress made is not progress guaranteed,” he added. Google’s Alphabet more than doubled its profit for the last quarter to $18.5bn. The figure was boosted by increased spending by businesses for online ads on Google’s network. Demand for streaming video also bolstered the company’s digital advertising business. Second-quarter revenue for Alphabet landed at $61.88bn. Microsoft posted record quarterly sales after revenue rose 21% to $46bn. Net income, driven by a boom in the use of its cloud-computing business, was $16.5bn.

Despite the better-than-expected numbers, shares of the three companies traded mixed in overnight trading. Apple shares declined more than 2% in after-hours trading pressured by Tim Cook’s warning that the rate of growth could not be sustained. Microsoft shares traded flat after the report. Alphabet stock was lifted over 3% after the regular session.

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