Big Tech Companies Report Big Profits


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“It’s certainly been a busy week, and I’m glad to be here,” Sundar Pichai told investors, as he presented Alphabet’s latest earnings. The day after he and his counterparts at Amazon, Apple and Facebook faced a five-hour congressional grilling, the tech giants all unveiled better-than-expected profits — much, much better than expected.

Combined, Alphabet, Amazon, Apple and Facebook earned more than $28 billion. In after-hours trading, the companies added $250 billion to their market caps, according to Bloomberg, pushing the total value of the firms above $5 trillion, or about a fifth of the entire S&P 500.

Talk about good timing. Focusing on the bumper haul was a relief for the executives, who were on the defensive in front of lawmakers. It was also probably better to unveil such gaudy numbers after answering pointed questions about their outsize power and the potential for abuse of their dominant positions. The earnings awkwardly followed a series of grim economic statistics released earlier in the day — more on that below — showing a steep drop in U.S. economic output and millions of workers struggling to find jobs.

Alphabet reported its first-ever decline in quarterly revenue, hurt by a slowdown in advertising, but its $7 billion profit comfortably beat analyst forecasts. Mr. Pichai was the most forthcoming with investors about the regulatory scrutiny that Big Tech faces. “We realize, at our scale, that’s appropriate,” he said.

Amazon had warned investors to expect profits to be wiped out by $4 billion in coronavirus-related costs. Although the firm spent as much as promised, sales grew so fast that it turned a $5 billion profit for the second quarter, double the result of the year before. Its second-quarter sales of $89 billion were $8 billion more than analysts expected.

Facebook reported that profits doubled, to $5 billion, as its monthly active users rose by 12 percent, to 2.7 billion. A boycott by big advertisers could hurt its bottom line, the company warned, but it said that sales so far are holding up in the current quarter.

Apple said that its profit rose by 12 percent, to more than $11 billion. Its service business performed particularly well, including sales from the App Store, a particular focus of antitrust interest. The congressional committee investigating the tech giants released a trove of internal emails this week, including some from the Apple co-founder Steve Jobs dating to the early 2010s about how to prevent Apple users from buying e-books via Amazon’s apps.

To finish, a quiz: What do the annual G.D.P. of Qatar, market cap of Cisco Systems and Apple’s second-quarter cash balance all have in common? They’re all around $195 billion.

President Trump stokes outrage by suggesting a delay to the election. On Twitter, he questioned whether the elections on Nov. 3 should proceed as planned, drawing condemnation even from allies in Congress. Here’s why he has no power to make that happen.

Vaccine makers race to build supply lines. Drug companies face pressure not just to test their coronavirus vaccines quickly, but also to produce them in huge quantities. Separately, Gilead said it hopes to produce enough remdesivir, its Covid-19 treatment, to meet global demand by October.

Corporate America can’t quit buybacks. While share repurchases are expected to drop this year, S&P 500 companies are still buying back shares in the second quarter, in some cases more than in the first, The Financial Times reports.

Basketball is back. The N.B.A. resumed its season yesterday from its bubble at Walt Disney World with a pair of nail-biters. (And all the players, coaches and referees took a knee during the national anthems.) The question now is whether the league’s quarantined approach will spare it the problems bedeviling Major League Baseball, as more games were postponed after team employees tested positive for the coronavirus.

SpaceX faces its next test. The two astronauts who traveled to the International Space Station on the company’s rocket are scheduled to return to Earth this weekend. (Assuming Tropical Storm Isaias doesn’t force a postponement.) Elon Musk has said that the Crew Dragon’s re-entry into the atmosphere is his biggest concern. You can watch the journey live via NASA.

The pandemic has disrupted life as we knew it, and the Trump administration has upended American policies along with it. The Times foreign affairs columnist Tom Friedman joined us for a DealBook Debrief call with readers to make sense of it all. (Here’s the recording, if you missed it.) Some highlights:

• “I think he’s out for regime change.”

President Trump has broken countless norms of political life, both at home and abroad, in ways that Tom said worried him greatly. One area of particular concern is China policy, where Mr. Trump’s hard-line approach is both too headstrong and counterproductive. Of Beijing’s leaders, Tom said, “they know as long as Trump is president, he can never galvanize the global coalition” against them.

• “We are going to see innovation on steroids.”

Not all of the upheaval of recent months has been bad. While acknowledging the toll of the pandemic on lives and livelihoods, Tom said that changes brought about in response to the coronavirus have set us up for “one of the most massive, amazing, creative and destructive periods of human history.” Innovative thinking, aided by advanced and cheap technology, could bring major changes to how we live and work.

• “It’s flatter than ever.”

Has the pandemic wiped out the idea of globalization? Tom — whose book “The World Is Flat” examined the increasing interconnectedness of the 21st century — doesn’t think so. “It’s flatter than ever because when it comes to globalization, I am a technological determinist,” he said, pointing to the ubiquity of smartphones. “Technology is not just interconnecting the world,” he added. “It’s actually making the world interdependent.”

One thing that the pandemic has imposed on many businesses is friction. From sourcing supplies to serving customers, everything has become harder, for public health-related reasons. Perhaps, then, it’s not the best time to publish a book titled “Frictionless: Why the Future of Everything Will Be Fast, Fluid, and Made Just for You.”

The co-authors, Christiane Lemieux and Duff McDonald, are undeterred. Ms. Lemieux is a designer, entrepreneur and former creative director of Wayfair; Mr. McDonald is familiar to DealBook readers as the author of books about Jamie Dimon, McKinsey and Harvard Business School. So what can a book with case studies about “companies that thrive in the world of frictionless commerce” reveal about the friction-filled time we now live in? We asked, and they answered:

When Covid-19 hit, the concept of frictionlessness was battled-tested in the biggest possible way. Everyone was at home. Could that website handle the increased traffic? Was it able to adjust to a disrupted supply chain? Could it communicate with customers worried about getting crucial items like toilet paper or food? The companies that have been up to the task already understood the centrality of the concept before this national nightmare began.

Why? Because those companies were ready for Covid-19, even if no one could have predicted it. They were already in the flow, making all the right and thoughtful moves. They were institutionalizing the concept of community. They were building diverse — and dispersed — workforces. They made respect for each other a condition of employment, not an afterthought.

Deals

• Saudi Arabia’s sovereign wealth fund withdrew a $400 million takeover bid for the English soccer club Newcastle United. (NYT)

• Affirm, the e-commerce lender, has reportedly hired Goldman Sachs to lead work on an I.P.O. that could value it at up to $10 billion. (WSJ)

• Europe’s markets are having a moment, after years of being shunned by investors. (NYT)

Politics and policy

• The death of Herman Cain, the former pizza chain C.E.O. and Republican presidential candidate, from complications of Covid-19 has set off speculation about whether more Republicans will drop their opposition to face masks. (NYT)

Tech

• A Singaporean’s use of LinkedIn to try to recruit targets for Beijing intelligence highlights China’s increasingly sophisticated online espionage efforts. (FT)



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