What we've learned from earnings: Big tech is OK for now, but the worst is yet to come

After two nonstop weeks of earnings, things are starting to calm down a little. On the whole, it's been a good time for tech, even as the pandemic took hold in much of the West. The S&P Info Tech Index, which counts Microsoft and Apple as its biggest holdings, is up almost 3% for the year, compared to a 10% loss on the S&P 500. Even its communications index, which includes Alphabet, Facebook and Netflix, is down less than 5%. It's a sign of tech's resilience amid a crisis that's upturned the entire economy. Here are the main things we've learned.

Ecommerce is having a moment

This came as no surprise: With stores closed, online shopping has boomed. Amazon's revenue was up 26% year-on-year, while gross merchandise volume on Shopify's platform rose 46%. It's not all sunshine, though: Amazon said it would spend $4 billion on COVID-related expenses this quarter; PayPal, which is exposed to online travel and event booking, disappointed investors with its Q1 results.

PayPal said things would pick up in the current quarter, though, with Shopify also signaling that online spending has increased in recent weeks. But the future's uncertain: Shopify warned investors that "it is unclear how sustainable consumer spending levels will be in this uncertain economic environment."

Digital advertising revenue is better than you'd think

There's been much talk of an adpocalypse: When companies run into trouble, the first thing to go is often marketing budgets. But tech companies showed relative stability. Facebook said that though revenue dipped in March, it was "approximately flat" year-on-year in early April. Snap, meanwhile, blew investors away with its 44% year-on-year revenue growth in the quarter. The effect here seems to be that advertisers are happy to keep spending on things that lead directly to measurable outcomes, like purchases — something digital advertising is ripe for.

The cloud has never mattered more

It's fair to say we're all using more internet than ever before, at least from home, which is great news for the companies that run the internet. Cloud providers such as Microsoft, Alphabet and Amazon all reported huge increases in cloud usage, with corresponding revenue boosts. Microsoft CEO Satya Nadella said "we have seen two years worth of digital transformation in two months," a thought echoed by most tech leaders. This pandemic has accelerated companies' moves to the cloud, and providers are set to clean up as a result.

Chipmakers are seeing an enterprise boost, too

Those cloud providers need machines to cope with all that extra demand, and Qualcomm, AMD, Intel and Samsung all said they were seeing increased demand in their server businesses as a result. That makes up for the corresponding declines they're seeing in consumer tech, with smartphone and TV sales set for pretty drastic declines.

Supply chain weaknesses aren't as bad as we feared

The earlier Asian outbreak did hamper tech manufacturing: Nokia said supply-chain disruptions cost it $217 million last quarter. But it seems like China's ramped back up with remarkable speed: Tim Cook said Apple's supply chain was "running at full-throttle at the end of March," highlighting just how "durable and resilient" it is. That tampers down some people's predictions that this crisis will spur a move away from China. While tech companies are certainly realizing they need backup plans, China seems set to remain the world's factory.

We all just want to be distracted

With little but screens to distract us, entertainment-tech companies are measuring more activity than ever. Netflix added 15.8 million subscribers last quarter, more than double the 7 million it had expected. Apple, meanwhile, reported a boost in Apple TV and Music usage, while Spotify said we're listening to more podcasts, too. Video games have been another beneficiary. But nobody knows if this trend will continue. In its letter to shareholders, Netflix noted that "the person who didn't join Netflix during the entire confinement is not likely to join soon after the confinement." These boosts may just be a pull-forward in demand.

Diversification is key

A resounding theme across all companies' earnings was the importance of being diversified. Companies that cater to different geographies can offset the effects of the pandemic in one with the benefits of lockdown lifting in another. Those that make both consumer and enterprise tech can lean on the latter when the former sags. SaaS firms that cater to ecommerce businesses can get through the crisis even if their travel customers disappear. Gig economy companies that primarily rely on consumer travel, like Uber, Lyft and Airbnb, are unsurprisingly suffering. That offers a major advantage to big tech firms, which have the scale and resources to be diversified.

It's probably going to get worse

The first-quarter of this year ended in March — just a couple weeks after the U.S. economy started to shut down. That means that this earnings season offered just a taste of what's to come. Around 20 million Americans lost their jobs last month, and that's going to take a serious toll on the economy. We're on the cusp of mass defaults and bankruptcies, and tech will be affected. And with no end to this crisis in sight, things could get an awful lot worse before they get better.