10 Jun 2021
Posted in Business Fundamentals
Robust demand for digital transformation helped majority of top 25 tech companies by revenue demonstrate strong business growth in pandemic-hit year, says GlobalData
- Despite the COVID-19 pandemic, 15 of the top 25 technology companies by revenue reported a year-on-year (YoY) rise in revenue, with 28% seeing double-digit growth
- Approximately 50% of the top 25 technology companies by revenue recorded double-digit growth in their YoY net profit
The top 25 technology companies that reported considerable improvement in profitability over the last five years remained successful in withstanding the impact of the COVID-19 pandemic and rolling out new operational and strategic plans to serve their customers in a new-normal situation, according to GlobalData, a leading data and analytics company.
Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData, comments: “Pandemic-induced disruption forced organizations to switch to new digital platforms and response mechanisms to stay resilient in new-normal conditions, which led to an increase in cloud spending by organizations worldwide. This helped bolster the overall revenue of major cloud infrastructure providers such as Amazon Web Services (AWS), Microsoft and Google Cloud in 2020, as all three companies reported over 30% year-over-year (YoY) growth in their cloud revenue.”
Facebook, Alphabet and Tencent reported significant growth in their online advertisement revenue, bolstered by an increase in search queries and ad delivery.
Jha continues: “Facebook and Tencent each registered an increase in revenue at a compound annual growth rate (CAGR) of more than 35% during 2016-2020, mainly due to growth in online advertisement revenue. Tencent’s VAS business, FinTech and cloud services also contributed significantly to growth in its revenue.”
Panasonic, Cisco and Fujitsu reported over 5% YoY revenue decline. Panasonic’s sales declined mainly due to its struggling TV and automotive solutions businesses and the impact of COVID-19. Cisco reported an 8% decline in product revenue in infrastructure platforms and applications. The impact of COVID-19 resulted in a JPY146.9bn reduction in sales of Fujitsu’s technology solutions. This was mainly due to a JPY120bn drop in net sales of its PC business.
Jha adds: “Amazon, Dell, Tencent, Taiwan Semiconductor, Quanta Computer and Xiaomi reported over 50% growth in operating profit, which resulted from organization-wide cost reduction initiatives implemented by these companies.”
In terms of profitability, 60% of the top 25 technology companies by revenue reported YoY growth, with three recording over 100% growth. Robust revenue performance by Sony and Xiaomi, along with a significant decline in tax obligations, resulted in an increase in net earnings.
IBM, Hon Hai Precision (Foxconn) and Siemens reported over 7% decline in net profit in both YoY and five year CAGR terms. A decline in revenue and workforce rebalancing charge affected IBM’s performance, whereas a fall in the sales of electronic components remained a cause for concern to Foxconn.
Jha concludes: “In the fiscal year 2020, most of the top 25 technology companies by revenue saw their business operations affected by the health crisis, particularly as they reported reduction in transactional licensing from small and medium businesses. Amid the revival in economic activity in 2021, the pandemic-driven businesses including hyper-digitalization demand are likely to help technology firms keep moving in years to come.”