Tech giants' profits soar as pandemic boom continues

Tech giants have reported soaring profits as consumers upgraded their devices and sought cloud storage during lockdowns.

Apple's profits nearly doubled to $21.7bn (£15.6bn) in the three months to 30 June as customers bought pricier 5G iPhones.

Microsoft saw a $16.5bn profit at the same time - up 47% year-on-year, due to demand for cloud services and games.

Analysts warned that the figures may lead to calls for tech company curbs.

Google's parent company, Alphabet, also reported on Tuesday that quarterly sales and profits had surged to record highs.

That was largely down to an increase in spending on online advertising aimed at customers who were stuck at home shopping online due to restrictions.

Its video platform YouTube, for example, saw advertising revenue jump to $7bn in the three months ending 30 June, in comparison with $3.81bn the year before.

The boss of the search engine giant, Sundar Pichai, said that there was a "rising tide of online activity in many parts of the world, and we're proud that our services helped so many consumers and businesses."

Its chief financial officer Ruth Porat said that revenues, which hit $61.9bn, also reflected "elevated consumer online activity" as some economies recover from the coronavirus pandemic.

Apple's record sales, meanwhile, were boosted by growth in iPhone purchases, as well as digital subscriptions for its TV and music streaming services.

"This quarter, our teams built on a period of unmatched innovation by sharing powerful new products with our users, at a time when using technology to connect people everywhere has never been more important," said chief executive Tim Cook.

The California tech giant also singled out China as its fastest-growing market, where consumers snapped up accessories such as the Apple Watch, as well as the latest iPhone 12 model, which can connect to faster 5G wireless networks.

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Wedbush analyst Dan Ives said that taking into account the global chip shortage affecting many companies including Apple, "we would characterise this as a 'gold medal' performance".

He added: "China remains a key ingredient in Apple's recipe for success as we estimate roughly 20% of iPhone upgrades will be coming from this region over the coming year with the launch of the iPhone 13."

Microsoft also said on Tuesday that sales in its fourth quarter had been driven by demand for personal computers, which includes Windows software as well as its new Xbox consoles - although sales of Xbox content dipped slightly.

Paolo Pescatore, an analyst at PP Foresight, said that suggested "the gaming pandemic party is coming to an end" and the firm may need to diversify its business further.

Looming clouds

As parts of the economy have started to reopen, firms such as Microsoft, Alphabet and Apple have been laying out plans on how to grow even as people spend more time away from home - and their devices.

Microsoft recently launched a cloud-based version of its operating system.

Mr Pescatore also pointed out that Silicon Valley giants are facing increased scrutiny at the moment as profits rise.

President Biden recently signed an executive order in a bid to promote competition in the tech sector.

"A dark and bigger cloud is looming as these latest results will lead to further calls for regulatory scrutiny to curb their dominance," he said.

In the UK, a new regulator called the Digital Markets Unit (DMU) has just started work on creating new codes of conduct for tech firms and their relationship with content providers and advertisers.

The regime will be "unashamedly pro-competition", Business Secretary Kwasi Kwarteng said.

In the US, President Biden recently signed an executive order in a bid to promote further competition.

It suggested that problems have arisen because of large tech firms collecting too much personal information, buying up potential competitors and competing unfairly with small businesses.

It included several recommendations such as greater scrutiny of mergers in the tech sector and barring unfair methods of competition on internet marketplaces.