Big tech firms add $163bn to market values despite Covid and legal scrutiny

Big tech rallied on Thursday in earnings reports, largely shaking off the impacts of recent regulatory hearings and the coronavirus pandemic.

Major tech firms added a combined $163bn to their market capitalizations ahead of the release of their earning reports on Thursday, more than the entire value of McDonald’s.

Google reported a return to sales growth in its third quarter, as businesses initially hobbled by the coronavirus pandemic resumed advertising with the internet’s biggest supplier of ads, the company said. Google had stopped charging merchants for some promotional space and issued grants to help other businesses buy ads in recent months. The efforts followed the company’s first sales decline compared with a year-earlier period in the second quarter since going public in 2004.

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Google also saw growth fueled by the Covid-19 pandemic, with users flocking to YouTube and Google’s namesake search engine as more experiences shift online. YouTube saw 32% ad revenue growth over last year. Quarantine-related content on the video platform has been on the rise, Google’s chief executive, Sundar Pichai, said in a call with investors after the markets closed. Meditation videos are up 40% in views and DIY face mask videos have been viewed more than 1bn times.

Shares in Alphabet, Google’s parent company, rose 4.4% after ending regular trading. Wall Street had expected the rebound, because the company said in July that advertiser spending was inching back following a March plummet due to lockdowns.

But the dominance of Google services has become a liability for the company, too. The US government last week sued the company for allegedly abusing a search monopoly to stifle competition. Pichai appeared before the Senate on Wednesday along with fellow tech executives from Twitter and Facebook to defend Google’s role in content moderation. Other regulators in the United States and elsewhere have similar ongoing investigations.

Apple earnings topped analyst expectations, producing record fourth-quarter revenue to wrap up its fiscal year. However, the company declined to provide a forecast for the next quarter, sending shares falling more than 4% in after-hours trading.

Facebook reported a slight decline in its daily and monthly active users in the US and Canada, which tarnished an otherwise strong result.

The company dispelled any illusions about the financial impact of the summer’s #StopHateForProfit advertiser boycott with 22% year-over-year growth in advertising revenue in its third quarter. Net profit rose 29% year over year to $7.8bn despite rising costs, in part due to a one-time tax benefit that decreased the $800bn company’s effective tax rate to 4% for the quarter.

Facebook attributed the decline in regular North American users since last quarter to the Covid-19 pandemic. Usage had soared during the first few months of shelter-in-place orders, but will continue to level off or decline, the company said.

The company also warned of “a significant amount of uncertainty” ahead. In addition to the pandemic, the threat of regulation and limits on Facebook’s ability to collect and transfer data could create issues for the company’s business, its chief financial officer, David Wehner, said.

Amazon reported blowout third-quarter results as a pandemic sales boost helped the company triple its profits amid a 37% increase in earnings. The company’s revenues of $96.15bn were better than analysts expected and its net income increased to $6.3bn in the third quarter, compared with net income of $2.1bn in third quarter of 2019. Its cloud-services unit, Amazon Web Services, reported net sales of $11.6bn for the quarter, up 29% year over year. The company is also expecting a bumper holiday shopping period.

Julia Carrie Wong, Edward Helmore and Reuters contributed to this report