Apple, Google, and Microsoft disclosed respective Q2 2021 results on the same day. Apple’s iPhone, Google search, and a bit of everything from Microsoft helped three of the five Big Tech companies post record quarterly earnings for Q2 2021. Could they continue to ride the momentum and shine in the upcoming quarters?
Three of the five Big Tech companies, Google, Apple, and Microsoft continue to post strong numbers, still riding the COVID-19 wave nearly a year and a half into the pandemic. All three tech behemoths posted respective quarterly earnings for the quarter ended June 2021 yesterday. The week itself was one of the busiest ever with others such as Tesla, Visa, AMD, and others that also had their earnings call this week.
Late in April this year, The New York Times estimatedOpens a new window that the combined annual revenue of the Big Tech companies (Amazon, Apple, Alphabet, Microsoft, and Facebook) surged 25% to $1.2 trillion from what it was at the onset of the pandemic in March 2020. Since then, each earnings call, including this one, has only cemented the notion of the pandemic being a ‘perfect positive storm,’ for the tech giants.
What’s more impressive, but not a surprise, is that these companies continued to break the ceiling despite the United States economy shrinking for the first time sinceOpens a new window the Great Recession of 2007-2009.
Apple, for instance, made $81.4 billion as revenue for the quarter ended June 2021, which is a 36% surge year-over-year. Google posted revenue of $61.9 billion, increasing 62% YoY while Microsoft’s YoY revenue expanded 21% to $46.2 billion, its highest quarterly revenue to date.
That is not to say that industry analysts expected any of these companies to perform poorly now, a time when economies are slowly opening up, even as the Delta variant wreaks havoc globally. Analysts from Wall Street and Yahoo! expected Apple, Google, and Microsoft to earn $73.3 billionOpens a new window , $56 billionOpens a new window , and $44.1 billionOpens a new window respectively, in Q2 2021.
Moreover, the technology sector was already in momentum even before the pandemic hit but with the share price of each company hitting an all-time high in 2021, it is clear that these companies have benefited from the distinct individual and industry needs that arose due to remote work, etc.
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Standout Performers Within Apple, Google, and Microsoft
All three companies cater to distinct niches with some overlaps. For example, Apple doesn’t rely on a search engine for revenues like Google. But Microsoft does so with Bing, although its share is significantly less than Google. However, Apple does compete with Google in the smartphone segment, and with Microsoft in the personal computer business. Meanwhile, Google is engaged in the cloud computing race with Microsoft.
Breakdown of products and service revenues of the three companies.
Please note that Google services include ads, Chrome, Google Maps, Google Play, Search, YouTube, as well as hardware products and Android.
Apple
A closer look reveals that Apple’s iPhone is clearly the standout performer that alone contributed just over $39.5 billion, a 49.78% rise YoY. It is noteworthy that $35.8 billion or 44% of Apple’s sales came from the Americas and a respectable 18% from Greater China despite the presence of local competitors.
iPhone’s rise can be attributed to the company spearheading the adoption of 5G devices. However, the company’s latest line of iMacs and MacBooks with the new M1 chip hasn’t generated higher numbers despite a high buzz surrounding them.
Here’s a quick look at some of the tweets below just to understand how users regard Apple’s products:
This will never get old for me pic.twitter.com/rFtO2yrWcZOpens a new window
— Gannon (@gannonbreslin) July 23, 2021Opens a new window
In honor of Apple’s earnings today, a reminder that if Apple products were standalone companies they’d be bigger than almost every Fortune 500 company pic.twitter.com/iFTfY7yy1IOpens a new window
— Rex Woodbury (@rex_woodbury) July 28, 2021Opens a new window
And despite taking several hits from multiple companies as well as the European Union, Apple Services revenue, which includes that from its lucrative App Store, also grew by almost 33%.
Google continues to remain the undisputed king in online search ads. The company has further consolidated its position in the pandemic as the digital consumption of users swelled across Google search, Maps, and especially YouTube, which delivered an 84% growth in revenue.
Google’s ad revenue breakdown is noted below:Â
Clearly, the company is performing exceptionally well in all areas although YouTube, which has almost matched Netflix’s total Q2 2021 revenueOpens a new window ($7.34 billion), deserves a special mention. Google Cloud’s 54% revenue jump is higher than that of Microsoft Azure but considering it serves a smaller chunk of the cloud market, Google needs to buckle up if it wants to overtake Redmond anytime soon.
Google’s second quarter revenue:
2021: $61.9 billion
2020: $38.3 billion
2019: $38.9 billion
2018: $32.7 billion
2017: $26.0 billion
2016: $21.5 billion
2015: $17.7 billion
2014: $15.9 billion
2013: $13.1 billion
2012: $11.8 billion
2011: Â Â $9.0 billion
2010:  $6.8 billion— Jon Erlichman (@JonErlichman) July 27, 2021Opens a new window
Google’s operating income stood out among the three companies, surging an astonishing 203.32%. For comparison, Microsoft and Apple’s operating income grew 42.42% and 84.29%, respectively. Consequently, Google also registered the highest margin from its $18.52 billion profit.
Microsoft
Meanwhile, Microsoft Azure’s 51% growth helped its Intelligent Cloud division, which consists of Windows Server, SQL Server, Visual Studio, GitHub, and Enterprise Services, besides Azure, touch $17.4 billion (up 30% overall).
Additionally, Google was not the only company that benefited from online content consumption. Fueled by 97% growth in ad sales through LinkedIn Marketing Solutions, LinkedIn grew by 46% overall. LinkedIn’s growth was also driven by the uncertainties associated with jobs due to which users flocked the website for leads. Moreover, Microsoft’s search advertising revenue is up 53%.
The growth spurt of Microsoft’s biggest acquisition to date also means it is now an arm that fetches $10 billion in annual revenue, a milestone that its cybersecurity and gaming arms have previously surpassed.
TLDR Microsoft is doomed.
Because they might accidentally drown in money.
— Brad Sams (@bdsams) July 27, 2021Opens a new window
Productivity and Business Processes consisting of Office Commercial products (including Office 365), Office Consumer products (Microsoft 365), LinkedIn, and Microsoft Dynamics (Dynamics 365) climbed 25% to $14.7 billion. Microsoft Teams continues to be a star performer, gaining 250 million monthly users in Q2 2021, and 145 million daily active usersOpens a new window gained by April 2021.
On the personal computer front, Microsoft is performing better than Apple in absolute numbers. The company earned $14.1 billion against Apple’s $8.23 billion. However, the rate of growth is with Apple whose MacBooks and iMacs are outperforming the Microsoft Surface (down 20%) lineup and other Windows products (down 3%). The competition will be interesting once Windows 11 hits the shelves later this year.
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What the Future Holds
Microsoft CEO Satya NadellaOpens a new window is confident that there is more to come. He saidOpens a new window in April “Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning. We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.â€
Besides Windows 11, the company is also making strides in cybersecurity to augment its portfolio of security offerings. Cloud is another area to watch out for, a space that is predicted by Gartner to grow 18% in 2021Opens a new window alone. As of April 2021, Microsoft sits with a 19% market shareOpens a new window , in the second spot behind AWS.
Google’s Pixel line of devices is supposed to arrive sometime later this year but it is doubtful that revenue from Pixel sales will make a huge impact. The company is also making strides in cloud gaming through Google Stadia and could give Microsoft’s Xbox Game Pass Cloud Gaming a run for its money.
And then there’s Google Cloud, the third-largest cloud services provider in the world behind AWS and Microsoft, with the potential for more. Google Cloud certainly can continue to act as the catalyst for overall business growth, much like AWS for Amazon.
Google also engages in artificial intelligence research and recently launched Fuchsia OS for IoT devices.
Despite the saturation in YouTube, which sometimes plays two ads before the videos buffer, it posted strong results. But without any new innovations, it will be a tad difficult for the company to keep up with newer players.
When it comes to Apple, the quality of its product is a key differentiator with respect to its competitors. Sure, Android dominates the global marketOpens a new window but Apple is the one that extracts the most revenueOpens a new window through its iOS-based services, which include iCloud, Music, Arcade, TV+, Fitness+, and News+, not to mention in-app purchases on third-party apps. The same applies to the macOS, which competes with Microsoft Windows.
But that may change soon, at least in Europe, if the EU follows through on its formal statement of objections issued in April, and decides to crack down on Apple’s App Store policies. But even then, consumer optimismOpens a new window , as CEO Tim CookOpens a new window said, is what should keep the company innovating and growing.
Although, have they really innovated in the years since Jobs stepped down due to ill health?
Closing Thoughts
Riding on more than impressive quarterly results, Microsoft’s guidance for the upcoming quarter should make shareholders happy. Although the market sentiment did not resonate with the Q2 results, with shares falling over 2% before recovering by 1%.
Part of the reason might have something to do with the supply-chain bottlenecks that negatively impacted consumer electronic device (Surface, Windows OEM, and Xbox) sales.
Apple CFO Luca MaestriOpens a new window also expects supply-chain woes to “primarily impact iPhone.†iPhone 13 is expected to be launched in late Q3 or Q4 this year. It is unclear if iPhone’s launch will be affected.
Google and Apple did not provide an earnings guidance with Maestri expecting a “very strong double-digit†growth in revenue.
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