Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Tech heavyweights slip despite stellar results
Three of the world’s largest technology companies crushed quarterly forecasts as Apple, Alphabet and Microsoft continue to reap rewards from the perfect positive storm created for big tech by the pandemic.
But share prices failed to keep pace with the record revenue and profit after a strong run in to the tech quarterly reporting season, illustrating the adage that it is better to travel than to arrive.
Stock prices of all three companies nudged lower directly after posting earnings for the three months to 30 June with losses running between 1% and 2.5%. With the weakness perhaps reflecting market scepticism over their ability to sustain such stellar returns.
Apple reported a $21.7 billion profit for the three-month period to 30 June, its best fiscal third quarter in its 45-year history, boosted by strong sales of the iPhone 12 and growth in its services business.
Alphabet, Google’s parent company, posted second-quarter revenue of $61.8 billion, a 62% jump on the same period a year earlier, and a profit of over $18.5 billion, more than doubling its profits for the same period last year. The company’s advertising revenues rose 69% from last year.
Microsoft also beat expectations, reporting revenues of over $46 billion for the quarter, a 21% increase compared to the same quarter last year.
The results come after Tesla reported a record profit on 26 July in one of the busiest ever weeks for quarterly US earnings results. Big tech earnings continued with Facebook on 28 July and Amazon on 29 July.
Apple, Alphabet and Microsoft are worth a combined $6.5 trillion and, combined with Amazon, represent around 20% of the entire weight of the S&P 500.
The tepid reaction for big tech, and global equities generally, came as investors continue to worry about the intensifying crackdown on technology companies by Chinese authorities.
China has recently clamped down on several tech firms for anti-monopoly actions, including a $2.8 billion fine levied on Alibaba in April. Last year, fintech group Ant Financial had its stock market listing blocked by the regulators until it complied with new capital requirements and make other changes.
Chinese stocks listed in the US had their worst slump since 2008 amid concern over Beijing’s actions.
Outside of China, many of the world’s largest technology companies are facing their own pressures as regulators mull arming themselves with new powers aimed at capping the market dominance of Amazon, Apple, Facebook, Alphabet and others.