Five takeaways from tech giants' end-of-year reports

Five takeaways from tech giants' end-of-year reports
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Looming regulatory threats and growing criticism over antitrust issues and social media manipulation have yet to hurt tech giants’ bottom lines, according to earnings reports filed this week.

Here are some top takeaways from the industry’s end of the year filings.

Companies are posting record numbers

Apple, Facebook, Amazon, Microsoft and Google parent company Alphabet — the top five U.S. companies by market value — are all continuing to grow, as evidenced by the record numbers that the tech giants reported making in 2017.

Alphabet revealed last Thursday that it had topped $100 billion in annual revenue for the first time in 2017, after raking in $32.3 billion in the last three months of the year, with Google accounting for the vast majority of the company’s earnings.

Amazon set a quarterly record by topping $1 billion in profits for the first time, doubling to $1.9 billion in the fourth quarter. The company brought in $60.5 billion in revenue during that period, due in part to record holiday sales, capping off a year in which it purchased Whole Foods and dominated the market for smart speakers.

The holidays also boosted Apple, which posted a record $88.29 billion in revenue for the quarter, and a record $20.07 billion in profits. Apple managed to set the new records despite selling fewer iPhones than the previous year.

Users are spending less time on Facebook

Mark ZuckerbergMark Elliot ZuckerbergFight looms over national privacy law Facebook teaming with nonprofits to fight fake election news China may be copying Facebook to build an intelligence weapon MORE revealed during his earnings report that Facebook’s users are spending 50 million fewer hours on the site per day, a decline that he attributes to algorithmic changes the company has made to overhaul the type of content that users see in their news feeds.

“Let me be clear: helping people connect is more important than maximizing the time they spend on Facebook,” Zuckerberg said.

The Facebook CEO says that the decline is largely because of a decision the company made to show fewer viral videos. The move is part of a series of changes Facebook is undertaking in response to a year of scrutiny over how the platform decides what content users will see.

Last month, Facebook announced that it would start showing users less brand content, instead prioritizing posts from friends and family. Facebook also said it would ask users to rate media outlets’ trustworthiness, with the scores determining the level of priority that publishers get in news feeds.

“By focusing on meaningful interactions, I expect the time we all spend on Facebook will be more valuable,” Zuckerberg said. “And I always believe that if we do the right thing and deliver deeper value, our community and our business will be stronger over the long term.”

Early impacts from tax bill

Some of the companies also showed that they have already been affected by the Republican tax bill passed in December.

Amazon’s record quarter was helped by a $789 million tax boost that it received from tax reform.

The overhaul was a major win for all of the companies, some of which poured record sums into lobbying ahead of its passage. And while it will surely benefit their bottom lines in the long run, it also forced the companies to make some hefty payments.

Alphabet was technically in the red for the fourth quarter after making a one-time $9.9 billion payment on overseas assets.

Many major companies will be making those kinds of payments as a result of the tax bill, a trade-off they’ll gladly accept in exchange for cuts to the corporate rate. Apple kicked off the trend last month by announcing a massive $38 billion payment to repatriate its assets.

Executives still grappling with criticisms

Facebook and Google took a lot of heat in 2017 over how their platforms could be abused after revelations that a Russian "troll farm" had used them as part of its efforts to influence U.S. voters.

That led to scrutiny over the larger ways that the platforms spread abusive content and fake news stories, which in turn prompted Facebook’s efforts to reform its platform.

Zuckerberg said he has made it his personal challenge to improve his site.

“We've seen abuse on our platform, including interference from nation states, the spread of news that is false, sensational and polarizing, and debate about the utility of social media,” he said. “We have a responsibility to fully understand how our services are used, and to do everything we can to amplify the good and prevent harm.”

And in Alphabet’s earnings call, Google CEO Sundar Pichai gave a brief nod to his company’s efforts to “protect users and stop abuse” on its platforms. Like Facebook, Google is working to crack down on abusive content, adding more moderators to YouTube and adjusting its advertising policies to cut off revenue streams for objectionable content.

Amazon is surging

The e-commerce giant was one of the few tech giants that beat investors’ estimates for the last quarter, driven by its tax boon and massive holiday sales.

But the company’s strength also rests on its growing presence in a variety of markets. Amazon highlighted the performance of its original entertainment programming, including the popular movie “The Big Sick,” its cloud computing arm and its smart speakers.

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” CEO Jeff Bezos told investors.

“We’ve reached an important point where other companies and developers are accelerating adoption of Alexa,” he added. “There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we’re seeing strong response to our new far-field voice kit for manufacturers.”

The strong report came the same week that the company shook the markets with the announcement that it would partner with Berkshire Hathaway and JPMorgan Chase in a mysterious new health-care venture.