While the rest of the U.S. economy was falling off a cliff, Big Tech saw its business soar.
The big picture: Thursday morning, government economists reported a 30% drop in GDP for the second quarter — the largest decline, by far, since the numbers have been reported.
- Thursday afternoon, Apple, Facebook, Amazon and Google — whose CEOs had spent Wednesday answering questions from Congress about their market dominance — reported better than expected financial results, despite the pandemic's ravages.
By the numbers: Apple saw iPhone and Apple Watch sales take a bit of a hit due to store closures, but stronger Mac and iPad sales helped the company crush expectations. Apple didn't give specific financial guidance for next quarter, but CEO Tim Cook said the company sees "a strong back-to-school season." However, Apple also confirmed this year's iPhones will ship a few weeks later than in the past.
- Amazon smashed through analysts' predictions as customers shifted more of their spending online. The company turned a giant $5.2 billion profit, despite $4 billion in coronavirus-related costs. Revenue came in at nearly $88.9 billion, versus the $81.2 billion average forecast from analysts.
- Facebook topped estimates despite both the impact of the pandemic as well as an advertiser boycott. Engagement numbers were also strong as people spent more time at home. However, Axios' Sara Fischer notes, Facebook's 11% year-over-year ad growth was its slowest quarterly expansion since the social network went public in 2012.
- Google's parent company Alphabet saw its first-ever revenue decline, but results were generally better than anticipated. Much of Google's ad business is tied to industries like travel and hospitality, which have been devastated by the pandemic. CFO Ruth Porat said the company saw strong growth in Google Cloud and other revenues, and while she is "cautiously encouraged" by a small uptick in ad revenue, Google isn't out of the woods yet.
Yes, but: These giants' fortunes aren't divorced from the broader economy.
- If the recession intensifies or turns into a long-term downturn, people will have less money to spend on, say, iPhones, and suffering businesses won't have budgets to buy ads on Facebook and Google.
Between the lines: While there was much for investors to cheer, critics may see the profits as a further sign of the companies' stranglehold on their respective markets — reinforcing the lines of attack laid out in Wednesday's House Judiciary Committee hearing.
Our thought bubble: Before the coronavirus, we handed our personal and professional lives over to Silicon Valley giants willingly. Now, as we work, shop, study and socialize via the technology they've built, it can feel like we don't have any choice.
- That's bound to ratchet up the scrutiny on the companies that Rep. David Cicilline Wednesday called the "emperors of the online economy."
- Today's fat profits could be denounced tomorrow as crisis profiteering.
What's next: Beyond the financial results, executives sounded a further cautious note on any return to corporate offices.
- Cook said Apple has pushed most of its return plans to next year.
- Facebook CEO Mark Zuckerberg said there "is no end in sight" to work-from-home.
- Google has already announced it won't return to its offices until July 2021.
Go deeper: Big Tech's power, in 4 numbers