Profits rise for tech titans as pandemic boom continues

Tech titans rising profits

The titans of tech have reported rising profits as consumers continue upgrading their devices and seek cloud storage during lockdowns.

Apple’s profits were nearly doubled to $21.7bn (RM91.8bn) in the second quarter of 2021 as customers bought pricier 5G iPhones.

Microsoft earned a profit of $16.5bn at the same time – up 47% year-on-year, due to rising demands for cloud services and games.

Analysts warned that the figures may lead to calls for tech company curbs.

Alphabet, Google’s parent company, also reported on Tuesday that their quarterly sales and profits had surged to record highs.

This is largely because of the increase in spending on online advertising aimed at customers who were stuck at home shopping online due to restrictions.

Their video platform YouTube, for instance, had their advertising revenues jump to $7bn in the second quarter of this year, in comparison with $3.81bn the year before.

The CEO the search engine titan, Sundar Pichai, said that there was a “rising tide of online activity in many parts of the world, and we’re proud that our services helped so many consumers and businesses.”

Sundar Pichai Google
Sundar Pichai, CEO, Google | Source: Google

Their CFO Ruth Porat said that their revenues, which hit $61.9bn, also reflected “elevated consumer online activity” as some economies recover from the coronavirus pandemic.

Apple’s record sales, meanwhile, were boosted by growth in iPhone purchases, as well as digital subscriptions for its TV and music streaming services.

“This quarter, our teams built on a period of unmatched innovation by sharing powerful new products with our users, at a time when using technology to connect people everywhere has never been more important,” said Chief Executive Tim Cook.

The California tech titan also singled out China as its fastest-growing market, where consumers snapped up accessories such as the Apple Watch, as well as the latest iPhone 12 model, which can connect to faster 5G wireless networks.

Wedbush analyst Dan Ives said that taking into account the global chip shortage affecting many companies including Apple, “we would characterize this as a ‘gold medal’ performance”.

Dan added: “China remains a key ingredient in Apple’s recipe for success as we estimate roughly 20% of iPhone upgrades will be coming from this region over the coming year with the launch of the iPhone 13.”

Microsoft also said on Tuesday that sales in its fourth quarter had been driven by demand for personal computers, which includes Windows software as well as its new Xbox consoles – although sales of Xbox content slightly deteriorated.

Paolo Pescatore, an analyst at PP Foresight, said that suggested “the gaming pandemic party is coming to an end” and the firm may need to diversify its business further.

Imminent clouds

As parts of the economy have started regenerating, firms such as Microsoft, Alphabet and Apple have been putting out plans on how to grow even as people spend more time away from home – and their devices.

Microsoft recently launched a cloud-based version of its operating system.

Pescatore also pointed out that the Silicon Valley titans are facing increased scrutiny at the moment as profits rise.

“A dark and bigger cloud is looming as these latest results will lead to further calls for regulatory scrutiny to curb their dominance,” he said.

In the UK, a new regulator called the Digital Markets Unit (DMU) has just started work on creating new codes of conduct for tech firms and their relationship with content providers and advertisers.

The regime will be “unashamedly pro-competition”, Business Secretary Kwasi Kwarteng said.

US Joe Biden
US President Joe Biden | Image source: BBC

In the US, President Biden recently signed an executive order in a bid to promote further competition.

The executive order suggested that problems have arisen due to large tech firms collecting too much personal information, buying up potential competitors and competing unfairly with small businesses.

The order also included several recommendations such as better inspection of mergers in the tech sector and barring biased methods of competition on internet marketplaces.


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