Big tech was in the spotlight this week as the most valuable companies in the United States reported how they fared this quarter amid the global economic crisis and pandemic-era tech growth appeared to have slowed.
Results were more mixed than expected with Apple, Facebook owner Meta and Google Alphabet reporting falling ad sales amid the economic downturn.
Tech giant Apple reported its third-quarter results on Thursday, beating the market’s expectations for sales and profit. Apple’s revenue rose 2 percent in the quarter, which was slower than the same period last year.
However, the results showed slower growth as investors worried about the iPhone maker’s smartphone slowdown as other companies faced declining demand for smartphones and PC users, as well as higher inflation and a stronger dollar.
“We see inflation in our cost structure,” Cook told CNBC in an interview. “We’re seeing it in things like logistics and wages and in certain parts of silicon, and we’re still working on it, but we’re being intentional about it.”
E-commerce giant Amazon also posted good results on Thursday. Last quarter, it reported that its sales volume grew more than expected despite the economic crisis.
Amazon’s sales reached $121 billion (118 billion euros) in the quarter, but the company reported a loss of $2 billion (1.95 billion euros) due to acquisition costs.
While the results let investors breathe a sigh of relief that things aren’t getting any worse, other tech companies have seen tougher spots.
On Wednesday, Meta, which owns Facebook and Instagram, reported its first ever decline in revenue and forecast a decline in revenue for the next quarter.
The social media giant, whose social media platforms rely on advertising, said ad sales have suffered as businesses scramble to spend on advertising amid economic uncertainty since the war in Ukraine. The company blamed softer e-commerce spending.
“Engagement trends on Facebook are generally stronger than we expected, and strong real estate growth continues to drive engagement on Facebook and Instagram,” META CEO Mark Zuckerberg said in a conference call with analysts.
“It looks like we’re in for a recession that’s going to have a big impact on the digital ad business. It’s always hard to predict how deep or how long these cycles will be, but I’d say the situation looks worse than it did a quarter ago.”
The social media giant has come under pressure this year after a 50 percent drop in shares, meaning the company’s market value has fallen below $500 billion (€492 billion), making the company worth less than Tesla.
Do more with less
Meta and tech companies like Google said they are hiring less given the current economic climate.
Rising interest rates, inflation and fears of recession have weighed down the tech sector this year.
On Tuesday, Google’s parent company Alphabet reported better-than-expected earnings and revenue for the second quarter. The company reported adjusted earnings per share of $1.21 (€1.19) in the second quarter, compared to expectations of $1.32 (€1.30).
Revenue growth slowed to 13 percent from 62 percent in the quarter as consumer spending rose after the lifting of Covid-19 lockdowns.
But investors focused elsewhere, particularly hitting targets on Google’s ad business, despite “uncertainty” in the economy, Alphabet officials warned in a call with investment analysts.
Alphabet expected second-quarter revenue of $69.69 billion (€68.66 billion), with 81 percent coming from Google’s ad business, and an average of $69.88 billion from investment analysts tracking Refinitive.
In contrast, Snap shares fell more than 25 percent last week after the company missed sales expectations and warned of a slowing ad market.
Alphabet’s founders say Google has not been immune to pushback from customers facing product shortages, low demand and a variety of other issues.
Rising wages, as well as rising prices for fuel and other commodities, have forced some ad buyers to adjust marketing this year.
It’s not so cloudy for Microsoft.
Meanwhile, Microsoft reported its slowest revenue growth since 2020. The US tech giant reported a profit of $16.7 billion on revenue of $51.9 billion (€50 billion) in the quarter.
He blamed currency fluctuations and challenges in advertising, as well as a hit to personal computer sales due to production gluts and lower demand in China.
But this fiscal year, Microsoft forecasts revenue to grow by double digits due to demand for cloud computing services Azure.
The strong outlook comes as Microsoft continues to move away from the pandemic-driven shift to hybrid operating models and as investors grapple with an economic downturn, rising inflation and consumers cutting back on spending.