Amazon, Microsoft results dispel growth concerns
Solid sales and forecasts helping to calm worries for large tech companies
SEATTLE— Big technology stocks took a beating over the past several weeks on concerns that the industry’s growth surge was under threat.
But results this week from Amazon.com Inc., Facebook Inc., Microsoft Corp. and Intel Corp. — among the most valuable companies in the world — went a long way toward proving the naysayers wrong. Solid sales and profit growth and bullish forecasts reminded the market how reliant the global economy remains on the tech sector, for everything from retail and advertising sales to software and computing power accessed via the internet, and the companies’ stocks gained as fears that had built up for weeks began to dissipate.
There were many reasons to be skittish. A looming trade dispute with China put tech companies — which depend on supplies and users from around the world — at risk. After a privacy lapse at Facebook involving political-consulting firm Cambridge Analytica, investors were beginning to rethink whether consumers would be willing to keep trading their personal data for free access to social-media platforms.
Regulatory scrutiny of internet companies’ business models reached a fever pitch. Then a series of tweets from U.S. President Donald Trump singled out Amazon for making the postal service its “delivery boy.” And Alphabet Inc.’s Google added to the fears Monday with a big spike in spending.
“The regulatory concerns from the Trump Amazon rumble to the Facebook Cambridge debacle has just been a major black cloud over the tech space,” said Daniel Ives, an analyst at GBH Insights. “The earnings results were the shot in the arm the bulls needed. It’s restored confidence.”
Microsoft and Amazon soared to record highs Friday, while Intel jumped to the highest in more than 17 years. Amazon transcended the noise around Trump’s tweets, reporting higher first-quarter profit on Thursday and forecasting more of the same in the current period. The company’s cloud-computing division and its advertising business — both more profitable than selling things online — posted brisk growth and gave investors reason to believe that profitability will keep improving.
Facebook’s stock had tumbled 25 per cent since mid-March after a data-privacy scandal stirred up a public trust crisis and landed CEO Mark Zuckerberg at the centre of a U.S. Congressional inquiry. Yet the company’s earnings report showed its business growing steadily.
Revenue jumped 49 per cent for a near-record quarter, and the company added daily and monthly users. The impact from the privacy controversy isn’t visible yet, as it happened toward the end of the first quarter. Still, Wall Street celebrated, sending the shares up 9.1 per cent Thursday.
“Despite remarkably negative headlines, users have not fled from online services,” said Ben Schachter, an analyst at Macquarie Securities.
“If these types of headlines don’t cause mass defections, I don’t see much that will.”
“The earnings results were the shot in the arm the bulls needed. It’s restored confidence.” DANIEL IVES ANALYST, GBH INSIGHTS