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“This is just the beginning”: Covid’s push to digital boosts Big Tech’s profits | Technology Sector

Big Tech is on track. Every minute of the first three months of 2021, Apple, Google owners Alphabet, Amazon, Facebook, Microsoft Together, they sold about $ 2.5 million worth of products and services. Profit before income taxes for the period was $ 88 billion, with more than $ 1 billion per business day.

rear A year of transition to work and leisure online Throughout the global economy, the financial results released this week by most of the tech celebrities in the United States should have been strong. But even more bullish Wall Street analysts are amazed at the speed of quarterly funding and will be making even bigger profits in the coming years.

Apple surprised investors Strong growth of the entire businessFrom iPhone buyers to new model snap-ups with faster 5G mobile networks to the normally quiet business of selling wearables such as headphones and watches.

Online advertising is booming. Facebook said demand is very high Compared to when the pandemic began, the average price charged for ads increased by 30% year-on-year. Alphabet revenue increased by a third Every year thanks to Google’s advertising business.

Supported by the rapid growth of cloud services, Alphabet has provided enterprises with access to data centers. This is a business supported by a pandemic shift to working from home. Amazon’s cloud business added $ 1 billion in profits compared to the previous year. Profit surge in core online retail business..

Microsoft CEO Satya Nadella said the move to digital technology was “accelerating” and its profits surged 31% year-on-year. “That’s just the beginning,” he added.

Strong results weren’t limited to the biggest names in technology. Analysts also point to the strong performance of small tech companies such as chip designer AMD and social networks Snap and Pinterest.

Big tech companies hit record highs due to rising stock prices ( Apple, Has the comfort of being the most valuable company in history). This benefit reflects investors’ broad consensus on Nadella’s treatise that promoting a digital pandemic will benefit Big Tech.

Corporate superiority is unprecedented in modern times. Daniel Ives, an analyst at Wedbush Securities, praised Apple’s record numbers, but argued that the stake would win another one-third and could reach a valuation of $ 3 trillion within 12 months. .. (Apple only reached $ 1 trillion in 2018 and $ 2 trillion in August.)

Balance sheet size means that it can be comparable to a country in some indicators. Among them, Apple and Microsoft spent $ 50 billion on research and development for fiscal year 2018. According to the latest National Bureau of Statistics, this represents £ 37.1bn of R & D spending on the UK economy as a whole that year. data..

Still, there seems to be a great deal of R & D that one organization can carry out. One of the special aspects of last week was the scale of share buybacks. Apple’s $ 90 billion shareholder return It’s enough on its own to buy almost all of the FTSE 100’s envisioned giants individually.

Alphabet has reduced some of its spending on well-known “Moonshot” programs, such as Loon’s efforts to beam the Internet through high-altitude balloons, but still pushes the boundaries of what computers can do. We are investing in the technology we are looking for. Do. At the same time, it determined that $ 50 billion was still lying down to buy back the shares.

Publicis Sapient consultant David Donovan argued that there was much more to come. His work on technology upgrades at financial companies is convinced that other sectors are still far from adopting digital technology, putting the economy at the “top of a major transformation”.

Google owner Alphabet has cut some of its spending on the well-known “Moonshot” program. Photo: Andrei Stanescu / Alamy Stock Photo

Donovan has added a transition to a recurring revenue model by companies such as: Amazon And Apple will add another moat to keep out its rivals. Over 200 million Amazon Customers pay for the privilege of purchasing products through Prime Services. Apple’s services business generated $ 16.9 billion in revenue in the first quarter and is expected to grow further.

Not everything goes smoothly. Martin Garner, chief operating officer of market analysis firm CCS Insight, emphasized heightened regulatory pressures, including a warning from the European Commission on Friday. Apple Music violates EU competition law..

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Leading tech companies face another important challenge. Whether it’s an early target, such as advertising, cloud services, or in-vehicle services, there is a big crossover in the business model. Apple’s fight against Facebook over privacy management The most impressive case of open arm wrestling.

However, independent analyst Alex DeGroote said that even with slow pre-pandemic growth, the barriers to entry are so great that it is difficult to see how they will be eliminated. Last year’s market panic and subsequent rises in recovery technology stocks are almost always present, suggesting that permanent change is taking place.

“The investment case has moved from defense to growth in a year,” said de Groote. “The digital revolution is still going on and these businesses are built into our lives.”

“This is just the beginning”: Covid’s push to digital boosts Big Tech’s profits | Technology Sector

Source link “This is just the beginning”: Covid’s push to digital boosts Big Tech’s profits | Technology Sector

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