Amazon, Apple, Facebook, Google, and Microsoft collectively increased their profit more than 55% in 2021 from a base that was already a record, while sales grew 27% to a total that would make the companies a top-15 world economy
Big Tech headed into 2021 with more than nine months of pandemic experience but was still surprised by the extent of supply-chain disruptions, labor shortages, and rising prices.
Despite these challenges, their financial performance has been staggering: Google parent Alphabet Inc. GOOGL, +0.14% GOOG, +0.26%, Amazon.com Inc. AMZN, +13.54%, Apple Inc. AAPL, -0.17%, Facebook parent Meta Platforms Inc. FB, -0.28% and Microsoft Corp. MSFT, +1.56% individually and collectively put up record profit and revenue all-around in 2021.
Collectively, the companies topped $1.4 trillion in revenue — which would rank 13th in the gross domestic product as a nation, just behind Brazil and ahead of Australia, according to World Bank figures — and they generated $320 billion in profit based on Generally Accepted Accounting Principles (GAAP).
For some context on that profit figure: Apple, the most valuable company in U.S. history thanks to a series of amazing profits, took 37 years as a public company — 1980 through 2017 — to collect that much profit in total.
Yet the iPhone manufacturer contributed the largest portion of 2021’s technology sector profit, topping $100 billion for the first time, a figure that itself eclipses the total profit Apple collected in its first three decades on the market.
Make no mistake, this is not normal. These five companies accounted for 17.8% of the S&P 500 index company profit in the first nine months of the year, according to Dow Jones Market Data, and grew their profit more than 55% from already-record earnings in 2020.
Individually, some companies saw mind-boggling profit growth last year. Alphabet, for instance, made as much profit in 2021, $76 billion, as it had in 2020 and 2019 combined —and both of those years contained record profit for the search giant at the time.
One way to see how out of line this was from a historical perspective is to look at the companies’ net margins — only Facebook saw net margins decline in 2021 from the previous year, one of the reasons its stock has been hammered after reporting fourth-quarter earnings last week, including the biggest one-day market-capitalization decline in history.
Apple and Alphabet saw huge spikes to record net margins in 2021, while Microsoft enjoyed its largest net margins since the dot-com boom went bust in 2001 and Amazon posted its biggest margin since 2004.
Those gains are expected to have an outsize effect on the S&P 500 index SPX, +0.52% as companies in the index collectively head for the highest net profit margin on record.
In total, with nine months of reported results and a combination of reported fourth-quarter results and analysts’ estimates, S&P 500 index companies are expected to produce a net profit margin in 2021 of 12.21%.
That would blow away previous numbers, which have largely been in single digits and topped out previously at 10.75%, according to Dow Jones Market Data.
Which S&P 500 sector has the widest profit margin? The Information Technology sector is expected to jump from margins of roughly 19.5% in each of the past two years to 23.27% in 2021 and has the largest margin of any of the 11 S&P 500 sectors.
Apple and Microsoft reside in that sector, while Facebook and Google are expected to push the Communication Services sector’s margins from 12.22% in 2020 to 16.08% in 2021.
While Big Tech’s annual sales growth of 27% is half of the sales-growth percentage, it is still nothing to sneeze at, if anyone would even think about sneezing at $1.4 trillion in annual revenue.
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Three of the five companies produced more than a quarter-trillion dollars in sales on their own in 2021, and Amazon came in near half a trillion, with $469.82 billion. That is more than Facebook’s total sales in its entire history. Source: MarketWatch...
