From Berber Jin’s “Big Tech Firms Are Corporate Outliers: Growing Fast and Sending Cash to Shareholders” ($) posted Wednesday:
The March quarter earnings results for big tech demonstrated more clearly than ever before just how unusual a position companies such as Apple, Alphabet and Facebook are in. They’re growing at 30% to 50% a year, like relatively young companies, and yet they’re returning cash to shareholders at the pace of an old, slow-growing utility.
Bolstered by pandemic-related shifts in consumer behavior that pushed more people to shop and work online, the five tech giants’ recent performance contradicts the “law of large numbers,” or the conventional wisdom that growth slows as companies get bigger. “These are the new consumer staples stocks—this is where we are spending our money,” said Brian Belski, chief investment strategist at BMO Capital Markets.
The revenue growth translated into enormous increases in profits and cash generation. So far this fiscal year, Apple, Alphabet, Microsoft and Facebook each grew the free cash they generated after taking into account capital expenditures on items like data centers and servers. Apple’s cash generation rose 43% for the first half of its fiscal year, while Alphabet’s grew 144% in the first quarter and Microsoft’s grew 27% in its first nine months (all three have different fiscal years). Facebook was a relative laggard: Its free cash flow grew just 7%.
Spouting cash like an oil well, the companies also ramped up what they return to shareholders. Alphabet last week said it was earmarking up to $50 billion to repurchase shares after announcing it bought back $11.4 billion worth of stock from shareholders, up from $8.5 billion in the first quarter of 2020. Soon after, Apple announced a $90 billion expansion of its stock repurchase program alongside a 7% increase in its quarterly dividend to 22 cents per share.
My take: Somebody noticed.