TECHnalysis President and Chief Analyst Bob O'Donnell joins the On the Move panel to discuss earnings from tech giants Amazon, Facebook, Apple, and Alphabet.
ADAM SHAPIRO: We want to turn our attention to the blockbuster earnings reports from big tech. You had Amazon reporting revenue of 88.9 billion. You had Apple announcing a stock that split 4 to 1. You had Facebook beating on revenue and dismissing the concerns about the advertising boycott. Then there was Google. Revenue fell about 2.2 percent, but nobody is complaining when you have revenue of 38.3 billion.
To help us understand what all of this means, we invite into the program Bob O'Donnell. He is TECHnalaysis President and Chief Analyst. Where do you want to begin? I've heard one person say that Amazon is-- I won't say the word, but it starts with an f. Awesome
BOB O'DONNELL: They are pretty awesome, and the numbers obviously reflect that. Look, if we think about this from sort of a macro perspective, the reality is that the influence that tech has had on our lives over the last couple of years has been slowly growing in a way that we didn't actually realize.
What the pandemic has done, has brought this full force. Right? You could argue that a lot of the things that we're seeing now are things that probably would have happened, say, four to five years from now. But the pandemic has brought all of this stuff forward in a much faster way than I think people expected because we are now so reliant on things like online shopping, hence Amazon; cloud computing, hence Amazon and Google; our devices, hence Apple; and, of course, social media, hence Facebook.
So all of these things have been there. It's just that the pandemic has just highlighted how much we are dependent, and we're reliant upon them. Of course, I think it does raise some additional questions since-- ironically, of course, all these earnings came the day after those congressional hearings. So it's going to be interesting to watch, that's for sure.
JULIE HYMAN: Hey, Bob. It's Julie here. We're going to talk more about the hearings in a second, but given what you're saying, something that stuck me-- that frequently strikes me when we talk about earnings-- is how big of a surprise they were, right? Like we've all been using this stuff over the past few months. We've all been seeing the stocks go crazy. And yet the numbers still came out, and everybody was [GASPS] shocked and surprised.
Were people missing something? Are these companies just executing amazingly in addition to that high demand? What's happening?
BOB O'DONNELL: You know, it's a great question, Julie. I think it's a combination of things, and I think it really does vary depending on the company. Like to be honest with you, I don't think anybody would have been surprised by Amazon's numbers because of exactly that, right? We all kind of knew.
It's the degree, I think, is the question. With Apple, there was a big question. Could they really sell more iPhones? Everybody expected those iPhone numbers to be lower. In the case of Facebook, as Adam referred to, the ad boycott. There was that question.
So I think that-- but there's-- look. The other reality is, we're in-- I hate to use these words. We're in a period of uncertainty right now. And I think, as a result, people just aren't entirely sure, and they're not confident enough to make these big bets-- at least, they weren't.
I think it's going to be a different story as we move into Q3 because I think we're going to continue to see big tech really rally, unfortunately, perhaps at the expense of lots of other companies and industries. And that's a whole other question. But I think it's a lack of confidence because of that degree of uncertainty, frankly, that people have had.
INES FERRE: Bobby, Ines here. And speaking of Apple, Apple with almost 200 billion in cash, do you see an acquisition taking place in the future? Any type of acquisition of a studio, perhaps, for content?
BOB O'DONNELL: You know, it's a great question. People have been talking about this forever. Right? We had the Netflix, you know, rumors that they were going to buy Netflix forever ago. I think the challenge, to be honest with you, is given what's happening with those hearings, I think there's going to be a lot more scrutiny of any of these big tech providers making a big purchase, including Apple.
So while, logically, I think it would make sense for them to do something like that, and lord knows they have the cash to do it, I do have a question on whether or not it's going to be practical and possible. And I think Apple's own management probably recognizes that and may hold back on some of these bigger purchases.
DAN ROBERTS: Bob, Dan Roberts here. Let's talk about the hearings. You know, obviously the hearings were almost as big news as the earnings this week and kind of competed with the news cycle. You know, what was interesting to me-- the questions mostly to Amazon were antitrust, which was to be expected. And then the questions that Google, or Alphabet, and Facebook received were mostly about political censorship.
And that, to me, left Apple alone as kind of the one that got off easy, I thought. And I wondered if, in hindsight, that kind of made it feel like Apple has left the room in terms of the negative conversation around big tech and the problems at big tech. And I felt that way even before the pandemic, that really Apple was an outlier and that you didn't hear so many voices complaining about these issues when it comes to Apple. And then I also felt a little bit that because political censorship came up, I kind of felt like Twitter was missing from the conversation.
BOB O'DONNELL: Now it's a great point Dan. And look, Apple has been a bit of a different bird compared to the other major tech firms on these issues. Now look, I would argue, I don't think the political censorship thing should have been brought up at all. This is supposed to be about antitrust, which is a completely different animal. Not saying we don't need to address some of those other challenges, but that's a separate discussion.
But on the Apple side, if you look at it, there are still some questions around the App Store and the commissions they charge. And that's really, you know, that's in the nitty gritty. The problem is, it's a complex argument and it's a complex issue. And I think, therefore, it was harder to tease out.
Some of the other issues were a little bit more apparent, and I think that's why it was easier for the congressman to address those issues. So I think that's really what we're seeing with Apple. I still think there are some interesting challenges that they face on the commission side, in terms of how they handle some of their suppliers. There's still, I think, a few question marks. As large as they are, they have an enormous amount of influence in that regard. And so I think that's something that they're going to be looking at moving into the future.
ADAM SHAPIRO: Bob, I'm curious about Apple stock split. Is there upside for people who already hold those shares, or will they expect a long-term increase from that? And why doesn't Amazon go that route? They're trading right now at almost $3,200 a share.
BOB O'DONNELL: Well, you know, it's a great question, Adam. Look, I do think, in a weird way-- we all know, technically, a split shouldn't matter to the valuation of a company. But the bottom line is, when you split it, all of a sudden people who couldn't really afford to buy a decent lot of a particular company can do so. And so there's a lot of rumors that, you know, all the Robinhood and day traders-- because there's a lot more people doing day trading now that we're all at home-- will actually take that stock split and end up kicking the value up.
So you raise an excellent question. Why wouldn't Amazon do that? Why wouldn't Google do that? I mean, why wouldn't these other companies take advantage of that? Hard to say. It seems to be almost a philosophical question, really, and they just, perhaps, like having super-high prices. I'm not entirely sure, to be honest.