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The Morning Download: Big Tech Reports Big Earnings
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Good Morning, CIOs. Five tech giants—Alphabet, Amazon.com, Apple, Facebook and Twitter reported earnings Thursday. Together the company's took in 18% more revenue in the latest quarter than a year earlier.
The huge numbers "illustrated again how increased remote working and living has elevated use of everything from online retail and social media to cloud-computing services and digital advertising," the Journal's Dana Mattioli reports. Shifts in consumer and business behavior are expected to continue beyond the Covid-19 pandemic, she added.
A warning. Moving from the heady world of digital transformation to the cold, dark corridors of power, there is a flipside to Big Tech's success. Three of the companies reporting earnings Thursday had their CEOs answering questions in a Senate hearing. "The problem is that regulators and lawmakers think Big Tech is too big and too powerful," says the WSJ's Dan Gallagher. And their combined $228 billion in revenue "in the midst of a worsening pandemic won’t help them convince critics otherwise."
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The Google campus in Mountain View, Calif. Digital ad revenue totaled $37.1 billion for the third quarter, up compared with a year earlier.
PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Cloud surge continues to lift results. Cloud service remain in hot demand as companies continue to look to transform their digital operations during the pandemic. Earlier this week Microsoft reported that Azure revenue increased 48% in the first quarter of its fiscal year from the year-ago period. On Thursday, Amazon.com and Google reported earnings. Some cloud highlights below.
Google Cloud. Google Cloud revenue climbed 44%, topping $3 billion for the quarter. The gains in cloud revenue beat analysts’ expectations and extended a growth streak, even as the company posted weaker overall results earlier in the year.
Daryl Plummer, a distinguished research vice president at Gartner Inc., said strong demand for cloud-based remote-work tools during the pandemic contributed to gains across the cloud sector.
“Covid has been good for all cloud providers,” Mr. Plummer said. Before the crisis, he said, adding that many enterprise customers with cloud strategies “were slow walking and they’re now speeding up.”
But beyond the pandemic, Mr. Plummer also credits Google Cloud Chief Executive Thomas Kurian for taking a more aggressive enterprise sales approach. That effort has attracted partners like Deutsche Bank and Target, and pushed Google deeper into the enterprise market, Mr. Plummer said. Google also has great technology and has been able to capture rapid growth throughout the market, he added.
Amazon Web Services. The company’s cloud-computing operation and main profit center posted $11.6 billion in sales in the quarter ended Sept. 30, rising 29% from a year earlier. Operating income rose 56% to $3.5 billion.
"I don’t see any signs of a slowdown in enterprise migration to cloud—the opposite, in fact," said Dave Bartoletti, vice president, principal analyst at Forrester Inc. "What is slowing is on-premises infra purchases and big-ticket back-end systems upgrades. Everyone’s focused on getting to market faster with a new customer-facing experience, and cloud was built for that."
Upshot. Research firm International Data Corporation expects 80% of enterprises by the end of the year will put a mechanism in place to shift to cloud-centric infrastructure and applications. That's a rate twice as fast as before the pandemic, WSJ's Aaron Tilley reports.
—Angus Loten and Tom Loftus
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An Apple store in New York City’s Meatpacking District.
PHOTO: RICHARD B. LEVINE/ZUMA PRESS
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Apple’s sales rise in pandemic. Apple benefited from a significant uptick in sales of laptops and iPads due to the pandemic, even as quarterly iPhone sales fell 21% from a year earlier after a delay in the launch of the company’s flagship new smartphone. Total revenue rose 1%. Revenue excluding iPhone sales rose 25% compared with a year ago, with Mac computers reaching a record of $9 billion.
Looking forward. For a third consecutive quarter, Apple didn’t provide guidance for the months ahead, a tacit acknowledgment of the uncertainty it faces.
Facebook earnings show continued strength. Facebook’s third-quarter revenue climbed 22% to $21.47 billion, as strong digital-ad spending offset a high-profile advertising boycott, restrictions that reduce the efficacy of ad targeting and continued fallout from the pandemic.
Looking forward. The company also announced its expectations for a strong fourth quarter. But Chief Financial Officer David Wehner warned of regulatory threats in both the U.S. and abroad as well as limitations imposed on its data gathering and targeting. (WSJ)
Twitter revenue jumps. Twitter said third-quarter revenue jumped 14% from a year earlier to $936 million as advertisers returned to promoting events and product launches that had been grounded during the pandemic.
Doomscrolling down? The company said it added one million daily users from the previous quarter to 187 million, the smallest increase since late 2017, the earliest period that Twitter has provided such data. (WSJ)
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Sebastian Thrun, CEO of Kitty Hawk and chairman and co-founder of Udacity, at the WSJ Pro Artificial Intelligence Executive Forum this week.
PHOTO: THE WALL STREET JOURNAL
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Never fall in love with tech and other words to live by from innovator Sebastian Thrun. Mr. Thrun, co-founder of online learning platform Udacity Inc. and, more recently, chief executive officer of flying-car company Kitty Hawk Corp. and godfather of sorts to Google's self-driving car efforts shared some principles for innovation at Wednesday's WSJ Pro Artificial Intelligence Executive Forum. Some highlights.
On 'failure.' "When people talk about Silicon Valley and talk about failures, these are not failures, these are moments of insight, moments of learning. And if you celebrate these moments of insight as much as the real progress, you will eventually win.
On not falling for tech. "Technology is a tool that lets you accomplish goals. The technology is the shovel you use to dig for gold, and it’s the gold you’re after, not the shovel. And that’s where some people fail."
Today's challenge. "It’s easy to be incrementally innovative in the existing business models. It’s very hard to be disruptively innovative, where you do something fundamentally radically new that actually might even tear down your business model. I think that’s the challenge today."
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In one of baseball’s best-known blown calls, Cleveland’s Jason Donald was called safe at first on what a video replay showed should have been the game’s final out, thus ruining a perfect game for Detroit Tigers Pitcher Armando Galarraga in 2010. PHOTO: BILL EISNER/DETROIT TIGERS/GETTY IMAGES
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Electronic officiating—bad for sports? Technology increasingly is giving sports officials the ability to double-check decisions. And in some cases, it can even make decisions for them. For many sports fans, it’s about time. For others there is a fear that technology may take the human element out of the game. The WSJ recently took the dilemma up with a couple sports fans. Let's go to the tape.
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Yes
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It tears the heart out of the game. It doesn’t matter how precise the technology is. It’s alien to judge athletes with cameras and AI. Players already get plugged into algorithms by front offices, fantasy owners and analysts. This puts the practice front and center on the field—exactly where we want to forget it —Robert J. Toth, a Wall Street Journal special writer and Mets fan
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No
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We can avoid incorrect calls. So, let’s do it. There is little downside to wanting calls made correctly. Have I really won if I feel the victory was handed to me rather than earned? Sure, I can rationalize that bad calls happen to both sides, therefore it all evens out. Yet has anyone ever scientifically studied this to see if it really does “even out”? —Andrew Blair College of Health at Queens University of Charlotte
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France has returned to lockdowns as it battles a rise in Covid cases. It relaunched its national app after fewer than three million people downloaded the original in a country of almost 70 million.
PHOTO: YOAN VALAT/SHUTTERSTOCK
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European countries try to fix their Covid apps. European health and government authorities are revamping contact-tracing apps as a fresh wave of Covid-19 cases spreads across the region and new lockdowns are put in place, the WSJ's Catherine Stupp reports. Officials overseeing the tools say the snags range from privacy concerns, difficulties understanding how people use the app and reluctance among citizens to download them.
Can't see the sky? Think new iPhone. At the Vatican, a puff of smoke can indicate the election of a new pope. In Zhengzhou, China, apparently, puffs of smoke—many, many puffs of smoke—indicate that a new iPhone is coming. Morgan Stanley analysts are tying a rise in air pollution in the area to the production of the new iPhone 12 in nearby assembly plants. (9to5 Mac)
Wisconsin Republicans blame hackers for theft of $2.3 million. The chairman of the political party's Wisconsin organization says hackers manipulated invoices and other documents from four vendors so that the party paid the hackers instead of the original vendors. (Associated Press)
The original remote workers step up campaigns. Tom Leighton, CEO of internet services provider Akamai Technologies Inc., tells CNBC that he has seen an "enormous increase" in DDoS and other attacks. “I think the threat actors are trying to take advantage of the pandemic, and of course, the prize is greater now that so much business has moved online,” he said. (CNBC)
Florida men. Armed with an IP address, law authorities subpoenaed Comcast for the address of an individual believed responsible for changing the mailing address of Gov. Ron DeSantis. The governor was made aware of the address change when he went to vote. Anthony Guevara, was charged with altering a voter registration without consent and unauthorized access of a computer. (Washington Post)
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Everything Else You Need to Know
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Markets have grown more volatile in recent sessions, ahead of the presidential election and amid concerns that increases in Covid-19 cases in Europe and the U.S. will prompt restrictions that could curb economic growth. (WSJ)
As coronavirus cases rise across much of the country, restaurants and retailers are contending again with new restrictions and staffing challenges as demand rises for dining out and holiday shopping gets under way. (WSJ)
Walmart Inc. has removed all guns and ammunition from the sales floors of its U.S. stores this week, aiming to head off any potential theft of firearms if stores are broken into amid social unrest. (WSJ)
Exxon Mobil Corp.said it expects to shed as much as 15% of its global workforce over the next year, including 1,900 jobs in the U.S., as the coronavirus pandemic continues to batter the oil industry. (WSJ)
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