Earnings are out for the big tech companies.
Amazon reported a quarterly profit and 40% growth. Facebook beat expectations for revenue, profits, and user growth. Apple far exceeded expectations, with growth across all product lines, and Alphabet slightly beat expectations (although did post its first ever revenue decline, due to drops in advertising).
Within cloud, AWS sales rose 29% for Q2, and Google Cloud saw sales rise 43% year on year.
Context – remember that GDP fell at an annual rate of 32.9% (which is slightly better than expected, but still awful).
And also for context – since the beginning of the year, these four plus Microsoft have increased in value an average of 35%, while the remaining 495 firms in the S&P 500 are down 5%.
Why do we care?
More evidence that investors and the stock market have nothing to do with reality – particularly when it comes to these companies. Remember, they also just were beaten up by Congress and we have a clear sense of some of the actual evidence against them.
Some practical lessons – these companies have built fantastic, covid resistant businesses. In my view, they are also leveraging monopoly powers in their markets to stay that way.
Take what you can from the model – each is incredibly good at what they do and should be emulated. As Forrester’s Jay McBain offered, quote “The traditional channel only sells about 20-30% of AWS, Google Cloud, and Apple products whereas managed services only deliver single digits. Are these companies driving different routes to markets on purpose? Are they just responding to customers wishes? Are they taking advantage of the explosion of marketplaces and digital selling? Or are partners and distributors not building the skills and practices fast enough to take advantage of this opportunity? “
These are good questions – I’ll simply caveat by saying it’s not as simple as that, because leveraging monopoly or duopoly position is far easier.
Also remember that, as I will continue to preach, this is not a statement of the market. In the Great Depression, worldwide GDP fell by 15%. In the Great Recession, it fell 4.3%. It just fell 32.9%. I will not accept that the economy is fine. It’s not. Plan accordingly. The big four’s success is not indicative of anything other than them leveraging their position and how dependent we are on them.
Source: Channel Partner Insight
Source: Prof G