Big five reap pandemic dividend
World’s top five digital firms rack up massive earnings in lockdown
Quarterly earnings reported by the world’s five biggest technology firms this week revealed a massive boost for cloud computing and social media as a result of pandemic-enforced lockdowns and remote working.
Microsoft set the tone on Tuesday when it reported an increase in revenue of 12% over the same quarter last year, to $37.2bn (R606bn).
But lurking in that increase was a massive 48% rise in its Azure cloud business, following 47% growth in the previous quarter.
Both reporting periods can be characterised as pandemic quarters, and highlight the massive cloud dividend from the crisis.
Amazon, the world’s biggest cloud business thanks to its Amazon Web Services (AWS) division, was an even bigger beneficiary.
On Thursday it reported a 37% overall revenue increase, to $96bn, with AWS growing income by 56%.
Amazon reaped the double dividend of leading the world in both cloud and online retail — which dwarfed the barely noticeable 10% drop in sales from its relatively small physical store division.
These results represent a key moment in understanding how and why businesses thrived during one of history’s great crises, and whether their stratospheric share price performance was justified.
Amazon and Microsoft combined are worth more than $3-trillion, with market capitalisation up about 50% and 25%, respectively, from their pre-pandemic highs.
Their massive revenue growth during this period underlines the extent to which the enterprise world and consumers turned to digital services to survive the crisis.
Their primary markets are in North America and Western Europe, but their services were critical to business continuity across Africa too.
The recent “Cloud in Africa 2020” study, conducted by World Wide Worx with the support of Dell technologies, Intel, F5 and Digicloud Africa, shows that 91% of enterprises across Africa’s eight major markets were able to use the cloud for disaster recovery during the crisis, and 82% used it to enable remote working.
Microsoft’s results in particular were a dramatic indication of the use of digital tools for business continuity: its Teams collaboration platform grew from 32-million daily active users at the beginning of March to 115million by the end of September.
Amazon, on the other hand, revealed that digital transformation does not necessarily go hand in hand with job losses: its headcount grew by 50% year on year, to an astonishing 1.125-million employees.
The consumer sector did not fare as healthily, with Apple’s fourth-quarter net income falling 7%, and revenue flat at $64.7bn.
However, this was in the context of the release of the new iPhone 12 series being delayed by several months, and not making a contribution to the quarter.
Despite its share price dropping 5% in the immediate wake of the results, Apple retained its $2-trillion market capitalisation.
A better barometer of the consumer market is the revenue of the world’s two digital advertising giants, Facebook and Alphabet, the owner of Google.
Alphabet ad revenue climbed a relatively modest 9% to $37.1bn, prompting a share price bump of 7%, almost a reversal of Apple’s performance on the night.
The reason? It reversed two quarters of year-on-year decline in ad revenue, suggesting it had found the formula to overcome pandemic-fuelled resistance from consumer advertisers.
Facebook third-quarter results, also reported on Thursday, revealed that the social media giant weathered the storms of advertising boycotts and regulatory scrutiny: revenue leapt 22% to $21.47bn.
Monthly active users were up 12% to 2.74billion — for the first time passing a third of the world’s population.
Equally significantly, like Amazon, Facebook reported a dramatically increased headcount — up 32% over the same quarter last year, to 56,653 employees.
The five tech giants together now have a market capitalisation of close to $7-trillion, almost exceeding the rest of the technology market combined.
However, smaller businesses also provided pointers to the new realities of the digital era. Games publisher Activision Blizzard’s third quarter, reported on Wednesday, showed revenue up 38% year on year, to $1.95bn.
It said it would have to increase its team of 10,000 developers to 12,000 to meet production demand.
The creator of globally popular games like Call of Duty, Overwatch, and the mobile game Candy Crush, it is a barometer of the impact of gaming during the pandemic.
Music streaming service Spotify reported 14% higher revenue, to €1.97bn (R37.5bn), in its third-quarter results on Thursday.
More significantly, total monthly active users were up 29% over the previous year, to 320-million. The majority of these are adsupported, but premium subscribers increased 27% to 144-million.
Social media underdog Twitter handily beat analysts’ expectations of $777m in revenue, reporting a 15% bump to $936m.
This reversed the previous quarter’s 19% revenue drop, confirming the robust health of social media during the second pandemic quarter.
The phenomenon was global: its 20% fall in international ad revenue reported for the previous quarter turned into a 20% increase.
This confirmed that, across the world, digital has been the business cure for the Covid-19 pandemic.
These results represent a key moment in understanding how businesses thrived during the crisis