Booms don’t last forever, even for the wealthiest companies in tech. Investors punished the biggest tech companies earlier this year, wiping out $2 trillion in market value over fears the industry would languish in the face of rising inflation and a slowing economy.
But this week, as the U.S. reported a second straight quarter of decline in economic output, Microsoft, Alphabet, Amazon and Apple posted sales and profits, showing advantages and diversification to buck the economic woes hitting small businesses. We have shown that our business has the quality.
Microsoft and Amazon have proven that profitable cloud businesses continue to grow even as the economy cools. Google, a subsidiary of Alphabet, showed that search advertising remains in high demand among travel agencies and retailers. Apple also blamed its sluggish device business by boosting sales of apps and subscription services.
Overall, this indicates that technology may have already hit a bottom and is starting to recover, said Dave Harden, chief investment officer at Summit Global. .
“They are still making deliveries,” Harden said. “They are acting responsibly and getting through these uncertain times.”
Even though Alphabet and Microsoft underperformed Wall Street expectations, the better-than-feared results sent shockwaves through the stock market, boosting share prices for both companies.
The results reveal that companies are not immune to problems such as supply chain disruptions, rising costs and changes in customer spending. are less vulnerable to a range of challenges across the economy than smaller businesses such as
On a conference call with analysts, the chief executives of both companies warned investors about the coming months, using words like “challenge” and “uncertainty.” While some companies, including Alphabet, have slowed the pace of hiring and taken other precautions due to concerns about the economy, no one has disclosed plans to begin layoffs.
Alphabet CEO Sundar Pichai sees the slowing economy as an opportunity, saying the company will sharpen its focus and “be more disciplined as we move forward.” “When you’re in growth mode, it’s hard to constantly take the time to do all the necessary recalibration, and moments like this give us a chance.”
Taken by many investors as a testament to the industry’s optimism, Microsoft said it expects double-digit revenue growth next year, while Amazon expects revenue to grow at least 13% this quarter. said.
Microsoft CEO Satya Nadella said the company will invest later this year to gain market share and build its business.
“This is 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 deep recession, it is clear that growth rates will return for many of these companies.”
Apple and Alphabet didn’t provide guidance, but both companies bought back tens of billions of dollars of stock during this period. Apple’s $21.7 billion purchase and his $15.2 billion purchase of Alphabet prove the companies’ belief that the business will continue to grow in the years to come.
Meta, formerly known as Facebook, reported a quarterly revenue decline for the first time since going public a decade ago, unusually among the largest tech companies. The company’s woes were the result of increased competition from TikTok, stealing users and advertisers, and challenges from Apple’s iPhone privacy changes.
The advertising market is expected to grow 8.4% this year and 6.4% in 2023, according to market research firm GroupM. Brian Wieser, GroupM’s president of business intelligence, said Facebook’s revenue growth last year “cannot continue to grow” as quarterly sales surged 56%.
Similar challenges are hitting the e-commerce market. Convinced that the surge in online orders during the pandemic represented a fundamental change in the way people shop, Amazon went ahead with ambitious plans to open dozens of new warehouses. However, after sales cooled and the number of units sold increased by just 1% in the most recent quarter, we decided to reverse course and close, postpone or cancel the opening of at least 35 warehouses.
Shopify, Amazon’s smaller e-commerce rival, said it would cut about 10% of its workforce. Harley Finkelstein, president of Shopify, said this year will be “a transitional year with a major reset for e-commerce” and will return to the growth levels it recorded before Covid-19.
Apple’s biggest stumbling block was its reliance on China to manufacture most of its devices. The company announced in April that it would lose about $4 billion in sales due to the closure of the Shanghai factory that makes iPads and Macs. Yet the company increased his iPhone sales by 3% over the period, setting a quarterly record for the number of people who replaced their Android smartphones with his iPhone.
Apple Chief Executive Tim Cook said Apple faced “various headwinds” including supply constraints, a strong dollar that pushed up device prices abroad and a slowdown in the global economy.
Cook said, “Given the number of challenges we’ve had this quarter, I’m really happy with the growth we’ve put up. He said the company will invest through the downturn, but ‘recognizing the realities of the environment. We will invest carefully,” he added.