Tech Earnings Signal Strong Economic Recovery & Lasting Consumer Trends

Silicon Valley giants like Amazon, Facebook and Google experienced record-breaking growth last quarter.

The latest tech earnings provided greater insight into how brands are prioritizing digital platforms to drive growth and engage with customers. Today’s briefing features a round-up of what we learned from Amazon’s, Facebook’s, and Google’s earnings reports.

During Amazon’s earnings report last week, Amazon recorded its best first quarter ever, with sales surging 44 percent from 2020 to $109 billion. Amazon’s profits rose more than three times last year’s figures. The company’s ad business keeps growing as well, proving that ecommerce growth shows no signs of slowing down. 

Related: Amazon confirms Prime Day will take place early summer this year, reverting to its original timing after last year’s Prime Day moved to October during the pandemic. 

The ecommerce giant shared that its “Other” business unit, which includes Amazon’s advertising business, delivered almost $7 billion in the first quarter, a 77 percent year-over-year increase, continuing to be one of the company’s fastest-growing business units. Amazon advertising’s $6.9 billion total is nearly seven times Twitter’s revenue, which was reported on the same day.

Related: Twitter’s earnings were slightly above expectations though user growth and Q2 guidance were low. 

Amazon’s CFO Brian Olsavsky shared that traffic to site was a contributing factor for Amazon’s growing ad business, as were ad relevancy and new ad products. 

“The advertising team has done a great job of turning clicks into productive sales,” Olsavsky said. “We’re using new deep learning models to show more relevant sponsored products, we continue to improve the relevancy of the ads being shown on the product detail pages, and we’ve seen rapid adoption of the video creative format for sponsored brands, among other things.”

According to an early April report by IAB and PwC, Amazon only recently claimed ten percent of the U.S. ad market in 2020 but is expected to grow its share as ecommerce adoption and ad budgets continue to grow. eMarketer, on the other hand, reports Amazon’s share of digital advertising is closer to 19 percent, up from 13 percent in 2019. 

Looking ahead: Amazon will participate in IAB’s NewFronts for the first time in the company’s history this year, promising to show “how to reach customers across Amazon content, services, and devices.” 

Google parent Alphabet posted record-breaking earnings for a third-straight quarter during the pandemic, primarily fueled by a “surge in digital ad spending,” leading to first-quarter sales hitting $55.31 billion, a 34 percent year-over-year increase. Alphabet posted a record $31.88 billion in sales from Google’s signature tech products, including Google Search, Gmail, and Google Maps, a 30 percent year-over-year increase. YouTube reported $6 billion in revenue, a 49 percent year-over-year increase, which totals more than Snap, LinkedIn, and Pinterest combined. Total profit for Alphabet topped nearly $18 billion, a 162 percent year-over-year increase. 

While Google’s profits (temporarily) plunged in March 2020 as advertisers halted ad spending, analysts note the search giant has made a full recovery, and then some. The Wall Street Journal reports that Google maintains a hold on 92 percent of online traffic, 89 percent of navigation via Google Maps, and YouTube accounts for 73 percent of online video views. 

Looking ahead: YouTube reports its TikTok competitor Shorts is seeing 6.5 billion daily views, up from 3.5 billion at the end of January. 

Despite the perceived headwinds via antitrust concerns and privacy-first initiatives like Apple’s App Tracking Transparency framework, Facebook sales rose 48 percent to $26 billion last quarter, revenue increased by 48 percent, ad revenue was up 46 percent, and “other” revenue grew 146 percent. Due to increased engagement and advertiser demand, Facebook also reported daily active users (DAUs) increased eight percent to 1.88 billion in March 2021, 12 percent more ads delivered, and a 30 percent increase in the price per ad. Facebook users, including Instagram and WhatsApp, rose 15 percent to 3.5 billion. 

Commentary by Facebook CFO David Wehner in the Facebook earnings press release noted, “We are pleased with the strength of our advertising revenue growth in the first quarter of 2021, which was driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered. We expect that advertising revenue growth will continue to be primarily driven by price during the rest of 2021.”

Facebook CEO Mark Zuckerberg primarily focused his opening remarks on new technologies, including commerce, creator services, and developments in AR/VR. On commerce, Zuckerberg touted Facebook Shops already hit one million Shops and attracts 250 million visitors per month, while Facebook Marketplace now attracts an incredible one billion visitors each month. 

Looking ahead: On May 5, the Facebook Oversight Board will announce its decision on the status of President Donald Trump’s account on Facebook.

Elsewhere in tech, Apple said sales rose an impressive 54 percent, with revenue hitting $89.6 billion as profit more than doubled to $24 billion last quarter. As it relates to Apple’s high-margin services business, including the App Store and subscriptions, Cook shared with CNBC that Apple now has “over 660 million paid subscriptions across the services on the platform,” an increase of 40 million from the previous quarter. 

Snap’s and Pinterest’s revenue also grew by 66 percent and 78 percent, respectively, in the last quarter. In line with these earnings reports, The Wall Street Journal reports that “despite falling viewership, TV networks [and streaming services] are also beginning to see ad demand strengthen,” a trend that will only continue after IAB’s NewFronts wrap up later this week. 

All in all, platforms from Amazon to Pinterest reported staggering first quarter results largely fueled by rising advertiser demand, consumer engagement, and ecommerce growth. Global lockdowns and working from home translated to greater investments in computer hardware and software, shoppers opting to buy online instead of in-store, and increased spending in entertainment, and these consumer trends are retaining their popularity and stickiness as the majority of countries begin to return to a sense of pre-pandemic normalcy.