A crowded period of quarterly financial releases from the world’s biggest tech companies has been marred by failure and uncertainty – showing the boom fueled by Covid-19 restrictions has tipped into a downturn.
As people are freed from a pandemic lifestyle that has relied on the internet to shop, play, work and study, inflation is driving prices up and Covid-19 is causing temporary shutdowns of factories in China that technology companies rely on leaving.
Fears of recession, a strong dollar, shrinking advertising budgets and inflation – headwinds are currently coming from all directions.
“When you think about the number of challenges we faced in the quarter, we feel really good about the growth we’ve delivered,” Apple CEO Tim Cook said on a conference call.
At Apple, product sales were $63.4 billion, down from the same period last year, but the decline was more than offset by services revenue, which rose to $19.6 billion, like the showed winning numbers.
Demand for iPads and Mac computers exceeded supply in the recently-ended quarter, mainly due to pandemic restrictions that caused “plant closures and facilities operating at less than full capacity,” Cook noted.
Apple has also been hampered by a continuing shortage of computer chips, Cook said.
Meanwhile, US chip giant Intel reported disappointing earnings hurt by its own missteps as well as economic conditions – a post-Covid demand slump and “supply disruptions in China and other parts of the supply chain,” executives said on a conference call.
Amazon beat sales estimates, hitting $121 billion in the quarter, and sales at its cloud-computing platform, Amazon Web Services, rose.
The retailer has made progress in shedding staff who have been boosted to handle online purchases, which have increased sharply during the pandemic, executives said.
“Amazon weathered the second quarter fairly well despite difficult macro conditions and additional costs weighing on results,” said analyst Andrew Lipsman.
Apple, Microsoft and Facebook owner Meta have spoken of the strong dollar hurting profits because if the US currency appreciates too much, it can make products more expensive overseas or erode a favorable exchange rate.
Meta pointed to the greenback’s role in the company’s first year-over-year sales decline since its IPO in 2012.
– Not Much Good News – In addition to generally bumpy economic times, companies like Netflix and Meta are grappling with stiff competition from rivals — and both said they’ve lost some ground.
Meta lost about two million monthly users between quarters, and Netflix lost nearly a million paying customers.
Still, Netflix stock is up about 1 percent over the past five days, with investors possibly feeling hopeful after the company forecast an imminent subscriber recovery.
Markets appeared similarly reassured, although Google parent Alphabet was absent from revenue and earnings.
The Silicon Valley giant’s bad news didn’t come as a surprise as the flow of online advertising money that fuels the company’s fortunes has slowed as inflation, war and other troubles plague the broader economy.
“Nevertheless, Google, with its tremendous market share in search advertising, is relatively well positioned to weather the stormy weather ahead,” said analyst Evelyn Mitchell.
As advertisers tightened their belts and Apple’s privacy changes impacted the companies’ sales of expensive but highly targeted ads, the damage has been uneven.
Meta’s earnings have taken a hit, and with a share price down about half of its value since February, it’s clear that investors are still concerned about the company’s future.
“The good news, if we can call it that, is that its digital advertising peers are also experiencing a slowdown,” said analyst Debra Aho Williamson.
Snapchat’s parent company, for example, reported that its loss almost tripled to $422 million in the recently ended quarter, despite revenue up 13 percent in “more challenging” than expected conditions.
“We are not satisfied with the results we are delivering, notwithstanding the current headwinds,” California-based Snap said in a letter to investors last week.