After charging double digit growth during the pandemic, results from the five biggest tech giants in the US this week showed a slowdown as they grapple with inflation, a looming recession and an overall slowing economy, but they were largely rewarded by Wall Street because they are the size It shows their strength.
distortion of aggregated results. But even with the strongest results from Apple Inc. AAPL,
Alphabet Inc. GOOG,
Amazon.com Inc. AMZN,
and Microsoft Corp. MSFT,
Consolidated revenue totaled $354.5 billion, before Alphabet’s traffic acquisition costs, showing an overall growth rate of 6.91%, up from $331.64 billion in consolidated revenue in the June quarter of last year.
Each giant had slower revenue growth, and Meta was its first ever drop in revenue. And while analysts described Apple’s iPhone as “resilient” amid a great deal of economic uncertainty, revenue growth for the June quarter was a weak 2%. In contrast, revenue in the June quarter of last year grew by 36%. Alphabet, which saw total revenue growth before TAC growth of 62% in the June quarter of last year, saw revenue growth of 13%, or 16% in constant currency, as digital ad spend fell. Amazon saw a slightly better-than-expected 7% revenue increase, compared to 27% revenue growth in the second quarter of last year. But CEO Andy Gacy made a hopeful statement, saying he saw revenue accelerating, which also helped.
Even worse were the profits. With Amazon announcing another net loss due to Rivian Automotive RIVN,
Investing and Meta posted a massive 36% drop in net income, and the Big Five totaled $56.9 billion, down 24% from last year’s net income of $74.9 billion, as higher costs slashed their bottom line, along with growth Less revenue.
The big drop in Meta’s net income, after last year’s second-quarter net income jumped 101%, has been particularly sharp, as the company spends generously on CEO Mark Zuckerberg’s unproven vision of Metaverse. Reality Labs, the business unit focused on virtual and augmented reality, reported a loss of $2.8 billion, on revenue of $452 million. Ad revenue could not fully compensate, and fell slightly, amid Zuckerberg’s comments saying the situation was worse than it was before the quarter.
However, Meta stock will essentially end July as the break-even month, down less than 1%, down less than 1%, which is the worst performance of the Big Five. Apple stock is up more than 19% in July, Amazon stock is up more than 28%, Microsoft is up 9%, and Alphabet stock is up nearly 7%, all gains after its earnings reports, except for Meta.
Facebook’s father has escaped the slaughter of other companies based on digital ads, such as Snap Inc. SNAP,
whose stock will end in July down nearly 25%, continuing a rapid decline that includes a 50% drop in May, after executives warned of a significant advertising slowdown also affecting Google and Facebook.
This split between dominant Big Tech platforms and smaller companies trying to compete is likely to continue. While they are all experiencing slow growth and have unclear prospects for the near future, the sheer size and billions of dollars that major tech companies have generated in revenue and income will often continue to insulate these giants from the kind of pain that Wall Street Snap, Roku Inc. is causing. ROKU,
More Info: Read About Roku’s “Frankly Appalling” Earnings
It’s worth noting that for the whole of 2021, the Big Five reported annual revenue growth of 27% and a whopping 55% net income growth, collectively exceeding $1.4 trillion in revenue for the year. At the time, MarketWatch noted that this wasn’t a natural growth, and in fact, this may have been the year the technology jumped the shark.
With the vociferous topics of most conference calls revolving around business reining in, cost cuts, a slowdown in hiring or job cuts, and macroeconomic uncertainty, investors mostly seemed happy to avoid the worse-than-expected results of the big tech companies. However, for the rest of the technology, there are many more questions that lie ahead as we move into earnings season with many more reports to come.