American tech worries with slow growth and unexciting forecasts. The giants who seemed untouchable are overtaken by the crisis.
Published: 28.10.2022, 01:14
"This week will go down in financial earnings history as one of Big Tech's worst, if not a possible turning point," said Wedbush Securities analyst Dan Ives.
Alphabet, the parent company of Google, achieved its weakest revenue growth this summer since 2013, apart from the start of the Covid-19 pandemic.
Amazon posted a 9% drop in third-quarter net profit and reported lower-than-expected revenue, sending its stock down 15% in electronic trading after Wall Street's close on Thursday.
Meta (Facebook, Instagram, WhatsApp, Oculus) suffered a similar sanction: its title plunged 19% on Wednesday evening, a consequence of profits halved to 4.4 billion dollars, and especially comments from Mark Zuckerberg.
"The worst is over"
“There is no information on the potential in terms of income that Meta could derive from the metaverse. No one knows,” notes Insider Intelligence analyst Debra Aho Williamson. “Google has a better chance of rebounding quickly, because its search engine has been a bedrock of the internet for decades, both for consumers and businesses. Its economic model is not broken”, she elaborates.
Faced with global economic difficulties, many advertisers have cut their marketing budgets. “We knew that global ad spend was going to contract. But I think the worst is over”, nuance Tejas Dessai, analyst at Global X ETFs. "And it's not going too badly, the declines remain modest given the pressure on exchange rates and inflation."
The threat embodied by TikTok, on the other hand, is not about to disappear. In 2021, the entertainment app overtook Google as the world's most popular website, according to Cloudflare. But in terms of advertising revenue, "there is no possible comparison," recalls Debra Aho Williamson. Industry veterans are “still way ahead.”
Holiday season uncertain
Tech companies are also suffering from an unfavorable comparison effect with 2021, when the pandemic was still hugely beneficial to online services. Only Apple has pulled out of the game, thanks to its indestructible iPhones.
"We have reached a new record for our base of devices in service" welcomed Tim Cook, the company's boss, highlighting a "record" number of customers who traded in their smartphone or tablet to acquire a more recent.
The apple brand exceeded market expectations with 90 billion dollars in turnover (+8% over one year) and 20.7 billion in net profit earned from July to September.
But the negative impact of the strong dollar should be accentuated during the holiday season: "we expect the effects of exchange rates to have a negative impact of almost 10 percentage points over one year", warned the chief financial officer of 'Apple, Luca Maestri. "Mac revenue will decline substantially in the current quarter compared to last year," when the company released a new laptop, he said.
Amazon is also counting on lower year-end sales due to the strong dollar. The e-commerce platform predicts that they will only increase by 2 to 8% over one year. Microsoft, for its part, still driven by the cloud, published good quarterly results on Tuesday, but warned that Azure, its remote computing platform, would grow less quickly during the end of the year.