During the Great Depression more than a decade ago, major tech companies encountered a tough patch like everyone else. They are now undoubtedly winners of the pandemic economy.
The combined annual revenue of Amazon, Apple, Alphabet, Microsoft and Facebook is about $ 1.2 trillion, according to earnings reported this week, 25% higher than the figure right when the pandemic started. boom in 2020. In less than a week, those five giants made more revenue than McDonald’s in a year.
The US economy is in recession since 2020, when it first declined since the financial crisis. But for the tech giants, a pandemic is just a blip. It’s a great time to be a giant of American technology – as long as you ignore screaming politicians, daily headlines about killing freedom of speech or tax evasion, jute from competitors and workers, and too many legal investigations and lawsuits.
America’s tech superpowers don’t make a lot of dollars despite the deadly coronavirus and its pervasive effects on the global economy. They grew even stronger because of of the pandemic. It is both sensible and a bit silly.
Last year’s stellar success also raises annoying questions for tech company bosses, the public, and elected officials who have outraged the industry: Is what is good for Big Tech good for America? Or are the tech superstars winning while the rest of us are losing?
Americans have more money in their pockets thanks to government stimulus checks and pandemic savings, and the tech giants are getting a sizable share. Their aggregate revenue is equivalent to about 5% of the gross domestic product of the United States.
The Big Tech pandemic has an easy-to-understand root cause: We need its services.
People focus on Facebook’s apps for staying in touch and entertaining, and businesses that want to pay Facebook and Google, which Alphabet owns, to help them find struggling customers at home. People prefer to buy diapers and outdoor seats from Amazon rather than the risk of shopping in stores. Companies use Microsoft software as their businesses and workforce become virtual. Apple laptops and iPads become lifesavers for office workers and students.
Before the pandemic, America’s technological superpowers influenced the way we communicate, work, play, and shop. Now they are practically unavoidable. Investors have bought shares in Big Tech on a bet that these companies are almost invincible.
Thomas Philippon, a professor of finance at New York University, said: “They are on track and have been at the best of a decade, and the pandemic is unique. “For them, it’s a perfect positive storm.”
The times are not good for these companies in the recent difficult economic times. During the recession between 2007 and 2009, Microsoft’s sales fell slightly, and its share price fell 60% between the fall of 2008 and March 2009, a low for US stocks. . Google and Amazon both lost up to two thirds of their market value.
One indication of just how different this time is: Amazon’s revenue is growing much faster in 2021 than in 2009, when the company’s current size is one fifth. First quarter sales were up 44% from a year earlier, and Amazon’s pre-tax profit – never exactly high – more than doubled to $ 8.9 billion. Businesses are addicted to Amazon’s cloud computing services, where sales have grown 32% and shoppers can’t live without Amazon’s delivery service. Investors love Amazon as well. The company’s stock market value has nearly doubled since the start of 2020 to $ 1.8 trillion.
To the other tech giants, it’s as if their brief pandemic never happened. Advertising sales typically increase and decrease with economy. But as other types of ad spend fell as the US economy contracted last year, ad sales increased for Google and Facebook. Growth was even better for them in the first three months of this year.
A year ago, analysts feared that Apple would be paralyzed as the pandemic swept over China, the company’s most important hub of manufacturing and consumer markets. The fear didn’t last long. In the first three months of 2021, Apple’s iPhone sales grew at the fastest pace since 2012. Sales in mainland China, Taiwan, and Hong Kong nearly doubled from a year ago. there.
The tech giants are not the only companies gathered in the dark times. The big US banks also fell into crisis. So let’s get some younger tech companies, such as Snap and Zoom, pandemic’s most beloved video conferencing app makers. The crisis forced all types of businesses to go digitally fast in ways that could help them thrive. Restaurants have invested in online sales and delivery, and doctors have completely focused on tele-care.
But the dictionary doesn’t have enough superlative words to describe what’s going on with the five biggest tech companies. It is really a bit awkward. It’s rocket fuel for critics, including some regulators and lawmakers in Europe and the United States, who say tech giants squeeze newcomers and drive people off. worse.
Big Tech firms say they face stiff competition leading to better products and lower prices, but their bank statements may suggest the opposite. Facebook’s margins are now higher than they were before the pandemic.
Some of their successes are explained by the peculiarities of the pandemic economy. Some people and sectors are doing very well, while other families are lining up at food banks and while companies like airlines are begging for cash. Unlike the stock market congested during the Great Depression, stock indices in the United States have reached new highs.
Tech superstars have also taken advantage of this point. Alphabet and Facebook have used the pandemic to cut less important places, such as advertising costs and travel and entertainment budgets. And the tech giants have generally increased spending in areas extending their advantage.
Alphabet is currently spending more money on big projects, like building computer complexes, than Exxon Mobil spends on extracting oil and gas from the ground. Amazon’s workforce has expanded to more than 470,000 people since the end of 2019. That deepens the ditch separating tech superstars from everyone else.
Big Tech is emerging from a lean, medium, and ready pandemic for an American economy expected to revive by 2021. Meanwhile, there are still many long lines at food banks. Some American workers who lost their jobs last year may never get it back. Housing advocates worry that millions will be evicted from their homes. And being Big Tech is an invitation that will make people hate you – but you have a lot of money.