The pandemic-driven shift to remote work has boosted consumer appetite for cloud-based computing, helping companies including Microsoft, Amazon.com Inc's cloud unit and Alphabet Inc's Google Cloud. [Image: Shutterstock]
Big tech companies Apple, Microsoft and Alphabet – Google’s parent company reported quarterly results that beat analyst expectations.
Apple gained as consumers bought premium versions of its 5G iPhones and signed up for the company's subscription services.
Driven by better-than-expected iPhone sales, total revenue hit $81.43 billion, which was above analyst expectations of $73.30 billion, according to IBES data from Refinitiv. Earnings were $1.30 per share, above estimates of $1.01 per share, according to Refinitiv.
Apple's strongest sales growth came from China where, Chief Executive Tim Cook told Reuters, customers are buying accessories such as the Apple Watch to pair with their iPhones. China sales grew 58% to $14.76 billion in the fiscal third quarter ended June 26.
"It wasn't just iPhone. We set a new quarterly record for Mac, for wearables, home and accessories, and for services" in China, Cook told Reuters in an interview. "It was our strongest geography."
Meanwhile, Google parent Alphabet Inc reported record quarterly revenue and profit powered by a surge in advertising spending amid more consumers shopping online and beat analyst estimates on both metrics. Shares of Alphabet rose 5% in extended trading.
The digital ad market is booming, with consumers shifting to shopping largely online due to the pandemic, leading companies to rely on data gathered from customers' orders and online activity to launch new products and know their market better.
Alphabet said revenue from Google advertising rose nearly 70% to $50.44 billion.
Ad revenue for the company's streaming video platform YouTube jumped 83.7% from the year-ago quarter to $7 billion, as advertisers continued to used the site to reach viewers at home during the coronavirus pandemic.
Total revenue of the internet's biggest supplier of search and video ads rose 61.6% to $61.88 billion, well above Wall Street estimates of $56.16 billion, according to IBES data from Refinitiv.
Net income during the quarter was $18.5 billion, surpassing the previous record of $17.9 billion in the first quarter.
Apple’s adjusted earnings per share of $1.30 exceeded an average analyst estimate of $1.01, resulting in a quarterly profit of $21.7 billion for the three months ended in June, Bloomberg said in a report.
Similarly, Alphabet’s earnings per share of $27.26 were ahead of the $19.35 consensus, while generating a net income of $18.5 billion for its second quarter, it added.
On the other hand, Microsoft Corp posted its most profitable quarter on Tuesday, beating Wall Street expectations for revenue and earnings, as PC sales declines stemming from a global chip shortage were more than made up for by a boom in cloud services.
Overall revenue rose 21 percent to $46.2 billion, beating analysts' consensus by about $2 billion, according to IBES data from Refinitiv.
The pandemic-driven shift to remote work has boosted consumer appetite for cloud-based computing, helping companies including Microsoft, Amazon.com Inc's cloud unit and Alphabet Inc's Google Cloud.
Microsoft's "guidance was off-the-charts strong and it shows the cloud growth story in Redmond is hitting its next gear," said Daniel Ives of Wedbush Securities.
Revenue in Microsoft's "Intelligent Cloud" segment rose 30 percent to $17.4 billion, with growth in Azure revenues handily surpassing the 43.1 percent jump projected by analysts, according to consensus data from Visible Alpha.
Microsoft's market capitalization stands at nearly $2.2 trillion, after climbing nearly 30% so far this year, compared with 18% for the overall S&P 500 Index, according to Refinitiv Eikon data based on Monday's closing price.
It has surpassed the price-to-earnings ratios of tech titans Apple Inc and Google, fueling concerns among some analysts that it may be overvalued.
"Microsoft's stock has made a big run since the beginning of the pandemic, and is trading at rich multiples," said Haris Anwar, senior analyst at Investing.com. "After such a powerful rally, its shares may take a breather, especially when investors are still unclear how the demand scenario will evolve in the post-pandemic environment."
Revenue from personal computing, which includes Windows software and Xbox gaming consoles, rose 9% to $14.1 billion.
But Xbox content and services revenue dipped, suggesting that a pandemic-fueled gaming boom is beginning to wane, said Paolo Pescatore, an analyst at PP Foresight. The company must strengthen its presence in the home to better compete with rivals, he added.
As makers of cars to smartphones grapple with an unprecedented chip shortage, Microsoft has not been immune.
"OEM revenue declined 3 percent and Surface declined 20 percent," Microsoft Chief Financial Officer Amy Hood said on a call with analysts. She added that "both were impacted by the significant supply constraints noted earlier in a good demand environment."
The chip shortage could also be contributing to Microsoft's dip in Xbox content and services revenue, as constrained hardware sales lead to a weaker performance in services, Ives said.
"If there's any lagging part of Microsoft, it's the consumer piece," he said. "I think that continues to be a work in progress."
Microsoft projected strong growth for professional social network LinkedIn, which benefited during the quarter from robust advertising and a strengthening job market.
The company reported earnings of $2.17 per share, above the consensus estimate of $1.92. [Input from Reuters]