No boom can last forever, even for the wealthiest companies in the tech industry. Investors chastised the biggest tech companies earlier this year, erasing $2 trillion in market value on fears the industry would stall in the face of rising inflation and a rising economy. growth slows down.
But this week, as the United States reported that economic output fell for the second consecutive quarter, Microsoft, Alphabet, Amazon and Apple The sales and profit announcements show that their business has the dominance and diversity to weather the economic woes that are hurting smaller companies.
Microsoft and Amazon have proven that their lucrative cloud businesses are continuing to expand even as the economy cools. Alphabet’s subsidiary, Google, has proven that search ads are still in demand among travel agencies and retailers. And Apple demonstrated a downturn in its device business by increasing sales of apps and subscription services.
All in all, it’s a sign that technology may have bottomed out and is starting to recover, said Dave Harden, chief investment officer at Summit Global, a firm near Salt Lake City with about $2 billion in investments, count Apple in the number of shares held. .
“These guys are still delivering,” Mr. Harden said. “They are acting responsibly and getting through the tough times.”
The dreaded better result lifted the stock prices of companies and sent shockwaves through the stock market, even like Alphabet and Microsoft failed Wall Street expectations.
The results clearly show that companies are not immune to problems such as supply chain disruptions, increased costs, and shifts in customer spending. But their giant businesses are not as vulnerable to the various challenges plaguing the economy as smaller companies like Twitter and Snap, owner of Snapchat.
In calls with analysts, the company’s executives warned investors about the months ahead, using words like “challenge” and “uncertainty.” Concerns about the economy are causing some of them, including Alphabet, to slow hiring and take other precautions, but no one has said they plan to initiate layoffs.
Sundar Pichai, Alphabet’s chief executive, sees the slowing economy as an opportunity, saying the company will be more focused and “more disciplined as we move forward”. He added, “When you’re in development mode, it’s hard to always make time to make all the adjustments you need to do, and moments like this give us an opportunity.”
In what many investors see as testament to industry optimism, Microsoft said it expects double-digit revenue growth next year, and Amazon said it expects sales to grow slightly. 13% in the current quarter.
Satya Nadella, chief executive officer of Microsoft, said the company will invest over the year to share and build its business, while Brian Olsavsky, Amazon’s chief financial officer, said it will have multiple products. More in stock and faster delivery.
“It’s not a recession forecast,” said Sean Stannard-Stockton, president of Ensemble Capital, a San Francisco-based investment firm with $1.3 billion under management. “If we avoid a severe recession, it is clear that many of these businesses will see growth return. “
Although Apple and Alphabet did not provide guidance, the companies repurchased tens of billions of dollars in stock during the period. Apple’s $21.7 billion purchase and Alphabet’s $15.2 billion purchase testify to the companies’ confidence that their businesses will continue to grow in the coming years.
Meta, the company formerly known as Facebook, which is among the biggest tech companies, reported a decline in quarterly revenue for the first time since going public a decade ago. Its woes are due to increasing competition from TikTok, which has robbed users and advertisers, as well as challenges from iPhone privacy changes made by Apple.
According to GroupM, a market research firm, the advertising market is forecast to grow 8.4% this year and 6.4% in 2023. Brian Wieser, GroupM’s president of business, said: Facebook’s sales growth last year, when quarterly sales jumped 56%, makes it “unreasonable” to continue the growth.
Similar challenges have hit the e-commerce market. Convinced that the surge in online orders during the pandemic represents a fundamental change in the way people shop, Amazon has launched an ambitious plan to open dozens of new warehouses. But as sales cooled – with item sales up just 1% in the most recent quarter – it reversed course and decided to close, delay or cancel at least 35 store openings. .
Amazon’s smaller e-commerce competitor, Shopify, says it will cut about 10% of staff. Harley Finkelstein, president of Shopify, said this year will be “a transitional year in which e-commerce is largely reset” in terms of the growth it recorded before Covid-19.
Apple’s biggest obstacle comes from the fact that it depends on China to make most of its devices. In April, the company said it would lose about $4 billion in revenue due to the shutdown of its Shanghai factory, which makes iPads and Macs. But they still managed to increase iPhone sales for the period by 3% and set a quarterly record for the number of Android smartphone buyers taking iPhones.
Tim Cook, Apple’s chief executive, says that Apple has seen “a tornado,” including supply constraints, a stronger dollar that drives up device prices abroad, and the global economy. demand is slowing.
“When you think about the number of challenges for the quarter, we’re really pleased with the growth we’ve set out,” Cook said. He added that the company will invest through the downturn, but “will do so in recognition of the realities of the environment”.
