The 2021 net profit posted by GAFAM reached S. Africa’s estimated GDP

(Ecofin Agency) – In an era where digitalization has become a key lever of human activity, the capacity of large American digital groups seems to have slowed down. Some of them are even facing regulatory challenges that could further reduce their sales.

In their latest financial reporting, the tech giants known as GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) revealed they have achieved a cumulative net profit of $320.47 billion in 2021. In comparison, this amount is slightly more than the 2021 estimated GDP of South Africa, the most diversified and industrialized economy in Africa.

Amazon, the world’s leading e-commerce company, comes first in terms of sales with a turnover of $469 billion. However, when it comes to net profit, Apple, the electronics and telecommunications company, dominates with a reported margin of $100.5 billion.

This level of performance reflects the interest investors have had in the stocks of these companies in 2021. Except for Facebook and Amazon, their stock values have risen by double digits over the past 12 months. However, earnings growth has not been as robust as it was in 2020. Except for Google (+88.8%) and Microsoft (+38.7%), earnings growth for the other GAFAMs was more moderate in 2021, during the post-covid-19 recovery. This signals a slowdown in the ability to grow margins. Also, for some of these companies, debt-to-equity levels remain high reflecting a risk that investors’ margins will be reduced for debt repayments.

The 2021 net profit of Facebook, for example, only grew by 35.1%, according to information from Capital IQ. A year before, it was +57.7%. The company announced that Europe, one of its main markets that generated $29 billion in revenue in 2021, up 72.6% compared to 2019 before the pandemic, is subject to risk. A legislative challenge may lead to the suspension of some of Facebook’s services in that market by Q2 2022.

The year 2022 started on a sour note for the 5 U.S. digital giants. Facebook’s value has fallen by 33% since the beginning of the year, and Microsoft’s by almost 10%. Nevertheless, this situation has not jeopardized the position of GAFAM on the stock market. As of mid-day February 8, they were worth $915.6 billion, or just over three times the estimated GDP of Africa as a whole in 2021.

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