Getting close to $5 trillion, but can the trillion-dollar techs keep growing?

Getting close to $5 trillion, but can the trillion-dollar techs keep growing?

Article updated: 11 February 2020 8:00am Author: Michael Baxter

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"Sort of blockbuster,” that’s how the Apple CEO, Tim Cook, described the latest results from Apple. He could have quite easily been talking about the latest results from any of the four biggest techs: Apple, Microsoft, Alphabet/Google and Amazon. All posted figures that felt ‘sort of’ remarkable. So let’s dig deeper (sort of) and consider what’s next.

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First there’s the latest quarterly results. Here is the summary:

  • Apple: Revenue up 9% to $91.8 billion in the latest quarter. Quarterly earnings per share was up 19% International sales accounted for 61% of total revenue. Net income was $22.2bn compared with $19.7 in the same quarter a year ago. iPhone sales were $56bn compared to $52bn a year ago and closely watched services (important as less reliant on the product cycle) were worth $12.5bn compared to $10.6bn a year ago.
  • Microsoft: Revenue $36bn, up 14%. Growth achieved by Azure, its cloud product, was 62%. Microsoft doesn’t disclose revenue for Azure, but industry estimates suggest that $18.1bn was spent on Azure last year. Windows, Surface, Xbox and Bing collectively generated $13.21bn. Productivity and Business Processes (Office, LinkedIn and Dynamics) generated $11.83 billion. Net income was $11.6bn compared with $8.4bn a year ago. Earnings per share ($1.51) increased around 40%.
  • Alphabet/Google: Revenue $46.1bn from $39.3bn. Net income increased from $8.9bn to $10.7bn. YouTube advertising (announced for the first time) was $15.1bn from $11.2bn. Cloud revenue was $2.6bn.
  • Amazon: Revenue $87.44bn up 21%t. Amazon’s highly profitable web services (AWS) saw revenues hit $9.85bn. Net income increased 8%, hitting $3.27bn. Amazon Prime now has 150 million paying subscribers.

Key talking points

Coronavirus:

There is so much we don’t know about Coronavirus yet, and how far it may spread. Apple with much of its manufacturing in China and with sales into China ($11.13bn in last quarter) an important part of its growth, is probably the most vulnerable.

Cloud infrastructure:

The move towards the cloud is an incredibly important business trend. Among its many benefits, the cloud can transform much of a company’s IT spending from a fixed cost, requiring heavy investment, to a variable cost which you pay for as you go and can turn up or down at will.


This is why cloud related services is such a rapid growth area, why SalesForce, for example, saw its share price increase 18-fold last decade. Amazon, via AWS, Microsoft via Azure and Google (along with Alibaba) are the key providers of cloud infrastructure. AWS is the market leader, and although revenue from this arm only accounts for around one eighth of Amazon’s revenue, it is a vital part of the company’s profits — indeed, until recently, it accounted for all profits. Microsoft recently pulled off a coup winning a prestigious cloud contract with the Pentagon.

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Subscription TV

Of the four giant techs, two are at it:

Apple (Tim Cook said of this area “it’s not a hobby”), and Amazon are both focusing hard on this area. For Amazon, it’s an important part of the Amazon Prime, which also offers more rapid product delivery.

But both Amazon and Apple lag behind Netflix and Disney which is likely to present formidable opposition. Personally, I think the Force is with Disney is this area, but Netflix looks strong too. I am frustrated that the Brits, via Britbox, isn’t providing tougher competition— but then again, the BBC is fighting for its life at the moment. (As an aside, if the BBC loses this battle, or is forced to radically change, quality of free TV, TV journalism and even democracy will be among the losers.)

To reiterate from above, Disney’s content assets are likely to hand the company a massive advantage — I wonder whether Apple or Amazon might eventually engage in some kind of massive joint venture with Disney. Apple and Disney have history, Steve Jobs, who founded Pixar, was once Disney’s biggest shareholder.

The future

I would say that right now the consumer technology space is between revolutions. Smart phones created one revolution — subscription content channels are proving to be the most hotly fought battle ground at the moment, but the technology revolution that enabled this has already occurred. The next big consumer revolution will take us beyond smartphones to devices which link to augmented reality. Via glasses or contact lenses, we will see virtual screens, hovering in the air in front of us. We might interact with these screens by ‘typing’ on the air on the virtual screen, or we might control them by speech or even thought. Such technology will enable us to communicate, hologram to hologram, with anyone in the world, to support business meetings, and social engagements. I predict green screen restaurants where we can have lunch with someone, even though they might be thousands of miles away.

We will also have always with us AI assistants, reminding us of stuff — who people are when we have forgotten their names, and providing us with instant information — often guessing in advance what information we need. As part of this, we will see real time language translation become ubiquitous.

Apple may well provide the hardware to make this happen.

Google’s search capability, now involving AI, will be key technology.

Amazon could benefit from the way augmented reality will change our social behaviour. Amazon Alexa may well be the forerunner of future AI assistants.

Microsoft will benefit by continuing to support business — its HoloLens product has massive potential.

Healthtech is another important area. Alphabet's life sciences unit and GSK are, for example, working together on bioelectronics.

Alphabet, with its mastery of AI and Apple hardware translating into wearable technology for monitoring health, could both flourish in healthcare/healthtech.

I believe all four techs are perfectly placed to benefit from the unfolding revolution. Other companies will join them on the (sort of) top table, including, in my opinion, Disney. Companies that provide the technology for car sharing may join this exulted list — that’s Tesla’s big long-term opportunity and why Uber has such as massive P/E.

Will there be tech share sell offs over the next few years? Yes but have these four techs reached peaked value? Not even close, in my view, but be patient.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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