Winners and Losers in 2Q20 So Far

Since the pandemic began and the health and economic crisis became more evident, financial analysts agreed that the true effects of COVID-19 would be reflected in 2Q20. The time has come and this week, some of the biggest tech companies published their quarterly reports. Which companies have been the least affected and which have gained the most so far?

Netflix and Alone?

In 1Q20, Netflix was in the winners’ group. The streaming platform added 15.8 million subscribers (4.4 million from Europe), reaching a total of 182.9 million. This means a 125.71 percent increase in the number of subscribers it had predicted for this period, which was only 7 million. 

But everything that goes up must come down. The company's financial report for the second quarter disappointed investors, as it failed to meet earnings per share forecasts, reporting US$1.59, compared to the US$1.81 expected by analysts surveyed by Refinitiv. However, the platform exceeded revenue expectations, with US$6.1 billion, compared to the US$6.08 billion forecast.

Netflix already knew what would happen. In its 1Q20 report, the company said in a letter to shareholders that as lockdowns began to lift, it expected fewer new subscribers from July to December and said that it was almost certain that some of those who joined in 1Q20 were likely to unsubscribe. “We expect a decline and membership growth to decelerate as home confinement ends.”

The Cloud, New Microsoft’s Flagship 

In 2Q20, Microsoft's revenues amounted to US$38.03 billion, which represents growth of 13 percent compared to the same period in 2019, mainly driven by the increase in sales of Azure, its cloud services division. Azure revenue was up 47 percent primarily thanks to growth in Microsoft consumer-based services, a business that in turn boosted revenue from server products and cloud services, which reached US$1.9 billion. 

"The last five months have made it clear that tech intensity is the key to business resilience. Organizations that build their own digital capability will recover faster and emerge from this crisis stronger," said Satya Nadella, CEO of Microsoft, in the report.

Talk That Talk, Twitter

This year, Twitter has increased its market value by 21 percent despite the COVID-19 outbreak. Twitter's average monetizable daily active users (mDAU) increased 34 percent annually to 186 million, above analyst estimates of 176 million. This is the highest growth rate since the company started reporting this metric. The company attributed the growth to external factors such as stay-at-home orders due to the pandemic and the rise in talks regarding the pandemic and anti-racist protests in the US.

However, the company led by Jack Dorsey did not meet Wall Street's expectations as the economic crisis caused companies to significantly reduce their advertising spending. In 2Q20, Twitter’s advertising sales, which constitute 82 percent of its total revenue, fell 23 percent to US$562 million compared to the same period of the previous year.

Ads, Boost for Snapchat

The slump following lockdowns hit Snapchat hard. However, the company exceeded quarterly revenue expectations as advertisers turned to the app to reach young people. The company's revenue in 2Q20 was US$454 million, above the US$439 million analysts expected. Compared to the same period last year, revenue increased 17 percent, according to the company’s financial report released on Tuesday. As for active users, the company reported 238 million, 17 percent more compared to the 203 million daily users the company reported a year earlier.

Snapchat has focused on helping advertisers increase sales directly from ads on the platform, which contributed to the company's revenue growth at a time when different brands have been cutting marketing budgets due to the pandemic. The company led by Evan Spiegel has also positioned itself as a secure platform for brands to advertise due to its stated focus of serving as a communication tool between friends, rather than a place to spread ideas, said Debra Aho Williamson, an analyst of eMarketer research for EFE. 

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