Big five tech firms see numbers rise but Trump threatens status
While earnings season in Silicon Valley has proved exceptionally bright, last week introduced a growing sense of trepidation about what could turn out to be dangers to the profitability and earnings of companies in the valley.
Apple and Facebook sped past expectations, along with Google, Amazon and Microsoft, all seeing their stock prices at or near all-time highs. Yet the week also delivered a potential shock to the valley’s prosperity prospects with the Trump administration’s temporary immigration ban on refugees and citizens from seven nations, which could stifle an industry that relies on talent from around the world.
On a positive earnings note, Apple posted all-time record quarterly revenues of $78.4 bn and all-time record quarterly earnings per share of $3.36. These results compare with revenues of $75.9 bn and earnings per share of $3.28 in the same quarter a year ago. International sales accounted for 64 percent of the quarter’s revenue.
‘Our outstanding business performance resulted in a new all-time record for earnings per share, and more than $27 bn in operating cash flow,’ says Luca Maestri, Apple’s CFO. ‘We returned nearly $15 bn to investors through share repurchases and dividends during the quarter, bringing cumulative payments through our capital return program to more than $200 bn.’
Facebook’s latest numbers were announced on the fifth anniversary of the announcement of the company’s IPO. That year, it generated about $5 a head for each of its 1 bn users. Last year, by comparison, it produced roughly $16 a head, up from $12 the year before ‒ and user numbers are now nearly double where they are at the time of the IPO.
Following strong earnings reports from Google parent Alphabet, Deutsche Bank restated a ‘buy’ rating on Alphabet shares.
Microsoft’s net income for the second quarter of 2017 totaled $6.52 bn, up 10 percent year on year. On a per-share basis, Microsoft reported earnings of $0.83, an increase of 9 percent. The company’s earnings numbers came in above market expectations of $0.79 per share, confirming the strong growth trends underpinning the industry.
These numbers also highlight the consolidation that has taken place at the top of the technology world’s big-hitting pecking order: the big five now account for 70 percent of the stock market value of the top 20 US technology companies, up from about half five years ago.
Against such a background, investors have been presented with the challenge of the impact on the technology industry from the Trump administration. The concern caused by the president’s immigration ban is a reminder of what is at stake. If President Trump carries through on other campaign promises, he could strike a blow to the earnings of Silicon Valley.
