Tech earnings took a darkish flip this week with warnings concerning the coronavirus and election
The logos of Amazon, Apple, Facebook and Google in a combination photo.
Tech companies had more to report Thursday night than the billions in profits they generated last quarter.
They also painted a dire picture of the world as we head into the winter months with Covid-19 cases spiking across the U.S. and Europe, and the potential for a heavily contested presidential election.
Amazon will spend $4 billion on Covid-related expenses this quarter. That’s the same investment it made at the beginning of the pandemic as the country locked down and turned to online shopping instead. Amazon will spend the money testing employees for the virus, cleaning facilities, and making other changes it needs to keep things running in the world of Covid. Amazon is on pace to spend $11 billion for the year just to fight Covid-19.
The company also said it couldn’t accurately predict its operating income for this quarter due to uncertainty caused by the pandemic. Amazon gave extremely wide guidance, predicting between $1 billion and $4.5 billion. Who knows where it’ll actually land.
Apple CEO Tim Cook said that the spike in Covid-19 cases makes it hard for the company to provide sales guidance for this quarter. “If you look at the case count, the case counts are climbing in Western Europe,” Cook told told CNBC’s Josh Lipton on Thursday. “They’re climbing in the United States. And so there’s still a sufficient level of uncertainty out there… we don’t believe that’s an environment to guide into.”
With lockdowns restarting in countries like France and Germany, there’s increasing doubt that people will even be able to buy the hottest gadget in the world in the coming months.
Facebook CEO Mark Zuckerberg warned of civil unrest following Election Day next week. Facebook’s core business isn’t about shipping and building things, so Zuckerberg’s Q4 warning was different than his peers’, but it was equally as dire.
“I’m worried that with our nation so divided and election results potentially taking days or weeks to be finalized, there is a risk of civil unrest across the country,” Zuckerberg said on Facebook’s earnings call Thursday night. “Given this, companies like ours need to go well beyond what we’ve done before.”
He also warned of an “increased risk of violence and unrest.”
These warnings are coming from some of the savviest business leaders in the world, with reams of data about the state of their businesses, and decades of experience managing crises. They have trillions of dollars in market value on the line. They’re sounding the alarm now to their investors, demonstrating that they’re willing to pour in the resources necessary to keep moving even if the rest of the world crumbles.
These companies have the money to weather the storm. They’ll be fine. They can spend billions adjusting their shipping networks (Amazon), reshaping their retail and manufacturing operations (Apple) and tweaking their algorithms to suppress calls to violence and unrest (Facebook).
It’s not the same for the rest of the country. Small businesses like restaurants and retail stores are struggling under pandemic restrictions with no stimulus bill in sight, while both political parties and their most ardent supporters are focusing on winning the election. While Big Tech companies go into panic mode, the U.S. government had decided to stall until after the election to decide whether or not to provide aid.
If you want to see a clear example of a K-shaped recovery in the economy, look no further than Big Tech companies. They win, while the millions of people reliant on small businesses for their livelihoods lose.