You won’t want to miss our next DealBook Debrief call, where we will discuss racial injustice and corporate America with special guest Nikole Hannah-Jones, The Times’s domestic correspondent and creator of The 1619 Project. What more is needed from the business community to produce lasting change? Join us on Thursday, Aug. 6 at 11 a.m. Eastern to find out. R.S.V.P. here. (Want this delivered to your inbox each day? Sign up here.)
That’s a lot of money
“It’s certainly been a busy week, and I’m glad to be here,” Sundar Pichai told investors, as he presented Alphabet’s latest earnings. The day after he and his counterparts at Amazon, Apple and Facebook faced a five-hour congressional grilling, the tech giants all unveiled better-than-expected profits — much, much better than expected.
Combined, Alphabet, Amazon, Apple and Facebook earned more than $28 billion. In after-hours trading, the companies added $250 billion to their market caps, according to Bloomberg, pushing the total value of the firms above $5 trillion, or about a fifth of the entire S&P 500.
Talk about good timing. Focusing on the bumper haul was a relief for the executives, who were on the defensive in front of lawmakers. It was also probably better to unveil such gaudy numbers after answering pointed questions about their outsize power and the potential for abuse of their dominant positions. The earnings awkwardly followed a series of grim economic statistics released earlier in the day — more on that below — showing a steep drop in U.S. economic output and millions of workers struggling to find jobs.
• Alphabet reported its first-ever decline in quarterly revenue, hurt by a slowdown in advertising, but its $7 billion profit comfortably beat analyst forecasts. Mr. Pichai was the most forthcoming with investors about the regulatory scrutiny that Big Tech faces. “We realize, at our scale, that’s appropriate,” he said.
• Amazon had warned investors to expect profits to be wiped out by $4 billion in coronavirus-related costs. Although the firm spent as much as promised, sales grew so fast that it turned a $5 billion profit for the second quarter, double the result of the year before. Its second-quarter sales of $89 billion were $8 billion more than analysts expected.
• Facebook reported that profits doubled, to $5 billion, as its monthly active users rose by 12 percent, to 2.7 billion. A boycott by big advertisers could hurt its bottom line, the company warned, but it said that sales so far are holding up in the current quarter.
• Apple said that its profit rose by 12 percent, to more than $11 billion. Its service business performed particularly well, including sales from the App Store, a particular focus of antitrust interest. The congressional committee investigating the tech giants released a trove of internal emails this week, including some from the Apple co-founder Steve Jobs dating to the early 2010s about how to prevent Apple users from buying e-books via Amazon’s apps.
To finish, a quiz: What do the annual G.D.P. of Qatar, market cap of Cisco Systems and Apple’s second-quarter cash balance all have in common? They’re all around $195 billion.
Here’s what is happening
President Trump stokes outrage by suggesting a delay to the election. On Twitter, he questioned whether the elections on Nov. 3 should proceed as planned, drawing condemnation even from allies in Congress. Here’s why he has no power to make that happen.
Vaccine makers race to build supply lines. Drug companies face pressure not just to test their coronavirus vaccines quickly, but also to produce them in huge quantities. Separately, Gilead said it hopes to produce enough remdesivir, its Covid-19 treatment, to meet global demand by October.
Corporate America can’t quit buybacks. While share repurchases are expected to drop this year, S&P 500 companies are still buying back shares in the second quarter, in some cases more than in the first, The Financial Times reports.
Basketball is back. The N.B.A. resumed its season yesterday from its bubble at Walt Disney World with a pair of nail-biters. (And all the players, coaches and referees took a knee during the national anthems.) The question now is whether the league’s quarantined approach will spare it the problems bedeviling Major League Baseball, as more games were postponed after team employees tested positive for the coronavirus.
SpaceX faces its next test. The two astronauts who traveled to the International Space Station on the company’s rocket are scheduled to return to Earth this weekend. (Assuming Tropical Storm Isaias doesn’t force a postponement.) Elon Musk has said that the Crew Dragon’s re-entry into the atmosphere is his biggest concern. You can watch the journey live via NASA.
Five years of growth vanishes in months
The U.S. economy recorded one its most severe declines in history in the second quarter, as the pandemic erased years of growth with terrifying speed. Output fell by nearly 10 percent in the three months to June; during the 2008 recession, G.D.P. fell by “only” 4 percent over an 18-month span.
It could be worse. Aggressive stimulus programs have cushioned the blow, as reflected in this extraordinary chart showing how programs like extra unemployment insurance and payroll support have bolstered incomes during the downturn, breaking the usual relationship between income and economic output.
It might get worse. U.S. lawmakers have been unable to agree on an extension to supplemental unemployment benefits, which expire today. More than a million people have submitted new jobless claims for 19 consecutive weeks, with signs that the recovery in the labor market is stalling as coronavirus cases rise. Without extra stimulus, economists warn, the shock of the pandemic could do permanent damage to the economy. In other words, the blue line in the chart will follow the red one downwards, feeding an economic spiral.
It’s not any better in Europe, which today reported its worst economic contraction on record, with eurozone G.D.P. shrinking by around 12 percent in the second quarter.
Overheard on earnings calls
🍺 “To put a finer point in the level of demand we’re seeing, we eclipsed July 4 week shipment days in the United States four times already this year. That’s unheard of.” — Gavin Hattersley, the C.E.O. of Molson Coors
🇯🇵 “We would be in Tokyo right now under normal circumstances. So it’s a total bummer for our company that we don’t have the Olympics.” — Jeff Shell, the C.E.O. of NBCUniversal
🥣 “Special K gained share in quarter two as did Mini-Wheats and Raisin Bran. We are also excited about the consumer trial and rediscovery we are seeing from new and lapsed users in cereal.” — Steven Cahillane, the C.E.O. of Kellogg’s
🧔 “As people go back to work in offices and outside the home, we’ll see a pickup in the wet shave rate.” — David Taylor, the C.E.O. of Procter & Gamble, in response to an analyst question about the rise of “coronabeards” and mullets during lockdowns
🍩 “I love when we really get on our doughnut mojo, but look, we are leaning into beverages in a big way.” — David Hoffmann, the C.E.O. of Dunkin’ Brands
‘Innovation on steroids’
The pandemic has disrupted life as we knew it, and the Trump administration has upended American policies along with it. The Times foreign affairs columnist Tom Friedman joined us for a DealBook Debrief call with readers to make sense of it all. (Here’s the recording, if you missed it.) Some highlights:
• “I think he’s out for regime change.”
President Trump has broken countless norms of political life, both at home and abroad, in ways that Tom said worried him greatly. One area of particular concern is China policy, where Mr. Trump’s hard-line approach is both too headstrong and counterproductive. Of Beijing’s leaders, Tom said, “they know as long as Trump is president, he can never galvanize the global coalition” against them.
• “We are going to see innovation on steroids.”
Not all of the upheaval of recent months has been bad. While acknowledging the toll of the pandemic on lives and livelihoods, Tom said that changes brought about in response to the coronavirus have set us up for “one of the most massive, amazing, creative and destructive periods of human history.” Innovative thinking, aided by advanced and cheap technology, could bring major changes to how we live and work.
• “It’s flatter than ever.”
Has the pandemic wiped out the idea of globalization? Tom — whose book “The World Is Flat” examined the increasing interconnectedness of the 21st century — doesn’t think so. “It’s flatter than ever because when it comes to globalization, I am a technological determinist,” he said, pointing to the ubiquity of smartphones. “Technology is not just interconnecting the world,” he added. “It’s actually making the world interdependent.”
Weekend reading: A world without friction
One thing that the pandemic has imposed on many businesses is friction. From sourcing supplies to serving customers, everything has become harder, for public health-related reasons. Perhaps, then, it’s not the best time to publish a book titled “Frictionless: Why the Future of Everything Will Be Fast, Fluid, and Made Just for You.”
The co-authors, Christiane Lemieux and Duff McDonald, are undeterred. Ms. Lemieux is a designer, entrepreneur and former creative director of Wayfair; Mr. McDonald is familiar to DealBook readers as the author of books about Jamie Dimon, McKinsey and Harvard Business School. So what can a book with case studies about “companies that thrive in the world of frictionless commerce” reveal about the friction-filled time we now live in? We asked, and they answered:
When Covid-19 hit, the concept of frictionlessness was battled-tested in the biggest possible way. Everyone was at home. Could that website handle the increased traffic? Was it able to adjust to a disrupted supply chain? Could it communicate with customers worried about getting crucial items like toilet paper or food? The companies that have been up to the task already understood the centrality of the concept before this national nightmare began.
Why? Because those companies were ready for Covid-19, even if no one could have predicted it. They were already in the flow, making all the right and thoughtful moves. They were institutionalizing the concept of community. They were building diverse — and dispersed — workforces. They made respect for each other a condition of employment, not an afterthought.
The speed read
• Saudi Arabia’s sovereign wealth fund withdrew a $400 million takeover bid for the English soccer club Newcastle United. (NYT)
• Affirm, the e-commerce lender, has reportedly hired Goldman Sachs to lead work on an I.P.O. that could value it at up to $10 billion. (WSJ)
• Europe’s markets are having a moment, after years of being shunned by investors. (NYT)
Politics and policy
• The death of Herman Cain, the former pizza chain C.E.O. and Republican presidential candidate, from complications of Covid-19 has set off speculation about whether more Republicans will drop their opposition to face masks. (NYT)
• A Singaporean’s use of LinkedIn to try to recruit targets for Beijing intelligence highlights China’s increasingly sophisticated online espionage efforts. (FT)
• Google’s growing acceptance of remote working in the pandemic could mean the end of its famously lavish office perks. (Business Insider)
Best of the rest
• “Though I am gone, I urge you to answer the highest calling of your heart and stand up for what you truly believe”: An Op-Ed that the civil rights leader and congressman John Lewis wrote to be published on the day of his funeral. (NYT)
• How Pimco’s Cayman Islands-based hedge fund profited from the Fed’s rescue programs. (NYT)
• “Eight Shocking Secrets I Learned While Working on Private Jets” (Bloomberg Businessweek)
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