By Laura Stevens, Tripp Mickle and Jack Nicas
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 2, 2018).
Three of the biggest tech companies reported record quarterly
financial results on Thursday as they extended their dominance over
swaths of the global economy.
Apple Inc., Alphabet Inc. and Amazon.com Inc. -- with a combined
market value of more than $2 trillion -- all boosted growth by
broadening their reach into new areas.
Apple's revenue rose 13% to $88.29 billion, fueled by its move
to increase smartphone prices behind its new flagship iPhone X,
released in November at $1,000. The company, whose profits topped
$20 billion for the first time, is also increasingly benefiting
from its services business, including App Store sales and music and
payments services.
Google parent Alphabet recorded its 32nd consecutive quarter of
revenue growth of 20% or more, continuing a dominant run as it
handles more than 90% of internet searches and owns the world's
most influential video site. Google is building in other areas,
including cloud computing, a business that Google Chief Executive
Sundar Pichai said brings in $1 billion a quarter.
Meanwhile, Amazon -- long known for prioritizing growth over
earnings -- delivered a profit exceeding $1 billion for the first
time as its revenue jumped 38% to $60.5 billion.
More than the other two companies, Amazon has spread beyond its
core market. The online-retail giant has built the largest
cloud-computing business, created a major Hollywood studio and,
more recently, become a big bricks-and-mortar retailer with the
acquisition of Whole Foods, which accounted for roughly 7% of its
sales.
Two of the other largest tech companies by market value --
Microsoft Corp. and Facebook Inc. -- reported record sales a day
earlier. Revenue at Microsoft rose 12% to $28.92 billion as its
cloud-computing division continued to grow, while Facebook's
revenue jumped 47% to $12.97 billion.
Those companies are the five most valuable in the U.S. by market
capitalization, the first time a single industry has occupied that
position in several decades, according to S&P Capital Inc.
As the tech giants expand their clout across a widening band of
commerce, they have increasingly drawn scrutiny from lawmakers and
consumers over a range of issues, from their dominance of certain
markets, to how they use their vast troves of consumer data, to the
impact their products have on society.
The extraordinary runup in their share prices has helped fuel
popular awareness of the companies' power, says Youssef Squali, an
analyst with SunTrust Robinson Humphrey.
"It's a combination of the fact that these have become such huge
behemoths that they bear responsibility to society, and on the
other hand you have all this lack of control of personal data," Mr.
Squali said.
Facebook is contending with claims that its massive social
network has had harmful effects on mental health and is used to
disseminate hate speech, violent live videos and fabricated news
articles. Lawmakers have scrutinized Facebook and other
social-media firms, saying they failed to take more steps to keep
Russian-backed actors from sowing division during the U.S.
presidential election.
Facebook says it is addressing the issues in a number of ways,
including employing more people who handle safety and security
issues and ranking publisher posts based on user evaluations of
trustworthiness.
Apple is facing criticism from prominent investors over the way
smartphones affect children, as well as federal probes over its
disclosure that it issued software updates that slowed performance
on iPhones with older batteries. Apple apologized and said it would
never do anything to harm its customers.
Google drew a $2.71 billion fine from European regulators, who
said the search giant favored its comparison-shopping service over
rivals. Google's YouTube, meanwhile, is grappling with a backlash
from marketers over the placement of their ads in front of
undesirable videos, including YouTube's curated lineup of
"preferred" content.
Google Chief Executive Sundar Pichai said on a call with
analysts that new controls to review top videos on YouTube and set
new limits on which content can run ads will make the site a safe
place for advertisers. There have been concerns, he said, but
"we're working really hard to address them and respond
strongly."
A major shift for the tech industry came with the election of
President Donald Trump, who had been critical of the industry in
part due to what he said was a lack of U.S. job creation and
investments overseas. Tech CEOs a little over a year ago met with
the then-president elect. Shortly thereafter, plans for a tech
council to advise the president dissolved.
Most recently, Mr. Trump called out Amazon, tweeting that the
U.S. Postal Service should charge the online retail giant and other
companies more to deliver packages.
The mood extends to Capitol Hill. Sen. Mark Warner (D., Va.) and
Sen. Amy Klobuchar (D., Minn.) are working on legislation that
would make political advertising with companies like Facebook,
Twitter and Google more transparent. Meanwhile, U.S. Senators Jerry
Moran (R., Kan.) and Richard Blumenthal (D., Conn.) this week wrote
the Federal Trade Commission to ask it to investigate companies
that sell fake social-media accounts, mentioning Twitter and
YouTube specifically.
At the annual World Economic Forum last month, the world's
largest technology companies defended themselves against complaints
about everything from perceived anticompetitive behavior to threats
from artificial intelligence. Some critics questioned the
companies' potential elimination of jobs through advanced
technology, while others pointed to their control of large amounts
of personal data.
Salesforce.com Inc. CEO Marc Benioff, at the Davos, Switzerland,
forum, called some tech companies' behavior "nefarious," comparing
the companies to the cigarette industry and calling for more
government regulation. Martin Sorrell, CEO of advertising giant WPP
PLC, compared the firms to Standard Oil, a U.S. oil giant that was
broken up after regulators determined it was a monopoly.
In response to a question about Amazon's size, the company's
retail chief, Jeff Wilke, said in an interview late last year with
The Wall Street Journal that its businesses are very diverse and
horizontally large. "We have incredible competition," he added.
Trip Miller, founder and managing partner at Gullane Capital
LLC, which owns shares in Amazon, Apple and Alphabet, said
management at the companies was strong, and they appear to have
good opportunities for continued growth.
"While we do understand some of the concerns around data and
them potentially having so much information on our lives, I think
it's just a byproduct of the world we live in," he said.
Apple's results offered hope that it can sustain its solid
performance even amid stagnating global demand for smartphones.
Analysts and investors have worried the company is too dependent on
the iPhone, which accounts for about two-thirds of its revenue, as
customers hold onto their phones longer and therefore buy fewer new
ones.
Sales of the iPhone X in the quarter lifted the average selling
price for iPhones by nearly 15%, Apple said. The 1.3 billion
iPhones and other Apple devices now in active use helped its
services business report an 18% jump in revenue. Results also were
buoyed by strong growth in the division that includes its
smartwatch and AirPods wireless earbuds.
Alphabet's profit jumped 28% to $6.84 billion, excluding a giant
$9.9 billion charge related to the new U.S. tax law which turned
its bottom line into the red. While the ad business makes up nearly
all of its profit, Alphabet is investing in a dozen businesses such
as self-driving cars and cybersecurity in hopes they will drive
future revenue.
Amazon's core retail business was the main producer of its
revenue growth in the quarter, as holiday shoppers went online. It
also benefited from the company's $13.5 billion acquisition of
Whole Foods, which generated more than $4 billion in revenue.
Amazon is known for reinvesting heavily in its business, and has
said in recent quarters it is in an investment phase focusing on
international expansion and building out its video content, among
other initiatives.
Contributing its profitability in the fourth quarter was a tax
benefit of $789 million, part of the tax overhaul. Still, Amazon's
cloud-computing division put in a strong performance, as did its
growing advertising business. And the company also worked on
efficiency at its warehouses.
Write to Laura Stevens at laura.stevens@wsj.com, Tripp Mickle at
Tripp.Mickle@wsj.com and Jack Nicas at jack.nicas@wsj.com
(END) Dow Jones Newswires
February 02, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Apr 2023 to Apr 2024