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Facebook and Apple both report 11% growth during pandemic

Facebook and Apple have both posted quarterly revenue growth of 11 percent, blowing past analyst expectations and shrugging off the pandemic to prosper.

On Thursday, both tech giants reported results for recently ended quarter, with Facebook saying it made a profit of $5.2 billion on $18.7 billion in revenue, as the number of people using the platform monthly rose to 2.7 billion.

It came despite a punishing ad boycott that has seen giant brands such as Unilever and Honda pull ads from Facebook for the rest of the year in a call for the social network to crack down on what activists call hate speech and political misinformation.

‘This was a strong quarter for us, especially compared to what we expected at the start,’ Facebook chief executive Mark Zuckerberg said.

Shares in the Silicon Valley-based social media giant were up six percent in after-hours trading following release of the earnings figures.

The number of people using the tech giant’s overall ‘family’ of apps including WhatsApp and Messenger each month topped three billion, according to Zuckerberg.

Zuckerberg said he could not predict when Facebook employees would return their offices, in light of surge in coronavirus cases.

‘It is incredibly disappointing because it seems like the US could have avoided this current surge in cases if our government had handled this better,’ Zuckerberg said.

Facebook expected as much as half of its employees to be working from home on a long-term basis in the next five to ten years.

Meanwhile, Apple also delivered blowout quarterly results, reporting revenue gains across every category and in every geography as consumers working and learning from home during the COVID-19 pandemic turned to its products and services.

The report topped Wall Street expectations, with even long-overshadowed categories like iPads and Macs getting a boost. Shares rose as much as 6 percent in extended trading after the results.

The fiscal third-quarter results, which included iPhone sales some $4 billion above analyst expectations, came on the same day that U.S. gross domestic product collapsed at a 32.9 percent annualized rate last quarter, the nation’s worst economic performance since the Great Depression.

Apple Chief Financial Officer Luca Maestri also confirmed supply chain rumblings that the new lineup of iPhones, usually released in late September, would face delays of a few weeks.

But executives predicted continued strong performance from the company’s products.

Other major tech companies Inc and Facebook Inc also posted results that topped Wall Street targets, sending their shares up.

With 60 percent of sales coming from international markets, the Cupertino, California-based company posted iPhone revenues of $26.42 billion, $4 billion above analyst expectations, according to IBES data from Refinitiv.

In an interview with Reuters, CEO Tim Cook said that after disruptions in April, sales began to pick back up in May and June, helped by what he called a ‘strong’ launch for the $399 iPhone SE introduced in April.

‘I think the economic stimulus that was in place – and I’m not just focused on the U.S., but more broadly – was a help,’ Cook told Reuters.

The continued growth in services and accessories also showed the durability of the company’s brand, which has prompted investors to view it as a comparative safe haven and pushed up share prices since March.

The company saw strong sales in its greater China region, where aggressive pricing during a June holiday shopping season and lower-priced iPhone SE model released in April helped boost sales 2 percent to $9.33 billion.

‘China remains a key ingredient in Apple´s recipe for success as we estimate roughly 20 percent of iPhone upgrades will be coming from this region over the coming year,’ Daniel Ives of Wedbush Securities said in a note.

Apple also announced a 4-for-1 stock split, saying it wanted to keep shares accessible to a broad range of investors. Shares soared past $400 for the first time Thursday, though they had been proportionally higher before a 7-for-1 split in 2014.

Apple’s fiscal third-quarter revenue and profits were $59.69 billion and $2.58 per share, compared with analyst expectations of $52.25 billion and $2.04 per share.

Sales in its services segment, which also includes offerings such as iCloud and Apple Music, rose 14.8 percent to $13.16 billion, compared with and analyst expectations of $13.18 billion. Cook told Reuters that Apple has 550 million paying subscribers on its platform, up from 515 in the previous quarter.

Sales in the wearables segment that includes the Apple Watch rose 16.7 percent to $6.45 billion, compared with estimates of $6.0 billion.

Apple did not give a fiscal fourth-quarter forecast.

Apple benefited from remote work and learning trends, reporting sales in its iPad and Mac segments of $6.58 billion and $7.08 billion, which beat expectations of $4.88 billion and $6.06 billion.

‘Both had some really significant product announcements at the end of March, beginning of April,’ Cook told Reuters. ‘You combine that with the work from home and remote learning, and it’s yielded really, really strong results.’

But the global smartphone market was already stagnating before the novel coronavirus caused it to contract, and Apple has leaned heavily into growing its services business, which is where the company’s fastest revenue growth occurred during the fiscal third quarter. The biggest component of that business is the App Store, where Apple generates commissions between 15 percent and 30 percent on some sales.

On Wednesday, Cook faced questions from U.S. lawmakers about Apple’s practices related to the store, which have come under fire from independent app developers who say its rules and unpredictable approval process put them at a disadvantage against the iPhone maker.

The chief executives of Apple and Facebook joined Amazon’s Jeff Bezos and Google’s Sundar Pichai in testifying before members of the House Judiciary Committee Wednesday.

At several points during Wednesday’s hearing the executives – Cook, Bezos, Pichai and Zuckerberg – struggled to defend themselves against scathing criticisms of their monopoly-like power and accusations of widespread anti-competitive practices from both sides of the aisle.

After the financial reports came out hours later, many analysts agreed that the firms were smart to delay their release until after the hearing.

Pichai and Zuckerberg took particularly sharp jabs from Democrats and Republicans who say Google and Facebook have crippled smaller rivals in the quest for market share – while Bezos was interrogated over Amazon’s treatment of small merchants who use its online marketplace.

In one of the most damaging moments, lawmakers unveiled Zuckerberg’s internal emails boasting about buying competitors, saying Instagram was a threat as he plotted to purchase it, and talking about a ‘land grab’ on other competition.

Democratic Representative Joe Neguse bluntly told Zuckerberg he was running a monopoly in the tech marketplace as he read from the emails.

‘You did tell one of Facebook’s senior engineers in 2012 that you can, quote ‘Likely just buy any competitive start up, but it will be a while until we can buy Google.’ Do you recall writing that?’ Neguse asked of the Facebook co-founder.

‘Congressman, I don’t specifically, but it sounds like a joke,’ Zuckerberg said.

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