Tencent Technology News on February 3, big tech companies failed to ease Wall Street's concerns about slowing growth and the industry's challenges amid global economic uncertainty. Shares of Apple, Amazon and Google parent Alphabet all fell more than 3 percent in after-hours trading after the release of their last quarter's earnings report after hours on Thursday.
Investors were overly optimistic about tech stocks: The tech-heavy Nasdaq Composite jumped 3.3 percent on Thursday as Meta's cost-cutting and slowing investment strategy struck investors. Previously, several large tech companies had previously announced layoffs of tens of thousands of workers due to tight advertising budgets and fears of a recession.
Apple's revenue fell for the first time since 2019, and the iPhone was dragged down by the supply chain less than expected
Apple's fiscal first-quarter revenue declines: iPhone dragged down performance, Greater China revenue exceeded expectations, showing that in the first fiscal quarter ended December 31, 2022, the company's net revenue was $117.154 billion, down 5.5% from $123.934 billion in the same period last year, and less than Wall Street's forecast of $121.10 billion. This is also the first time since 2019 that Apple's quarterly revenue has declined year-on-year. In addition, Apple's net profit in the first fiscal quarter was $29.998 billion, down 13.4% year-on-year; Earnings per share were $1.88, down from $2.10 a year ago and below Wall Street's expectation of $1.94.
The disappointing results came after Apple faced a major Chinese factory shutdown late last year, affecting its supply. At the same time, as recession fears loom, there are fears that consumers may spend less on expensive tech products. In addition, Apple has been hit by high inflation and high interest rates.
"Our revenue is down 5% year-over-year because of a challenging environment, but I'm proud of the way we've responded to visible and unforeseen circumstances over the past few years," CEO Tim Cook said Thursday during a conference call with analysts to discuss the financial data.
Cook said the three factors affecting first-quarter revenue were foreign exchange headwinds, coronavirus-related challenges affecting the iPhone 14 Pro and iPhone 14 Pro Max supply chains, and a "challenging macroeconomic environment." In particular, Cook noted, "the world continues to face unprecedented circumstances, from inflation in Eastern Europe to wars to the lasting effects of the pandemic." Cook said: "Apple is not immune to these challenges. ”
Despite the challenges, Apple stressed that its global installed base has exceeded 2 billion units. Cook called it "a truly incredible milestone" during the call. The company also said services that include Apple TV+ and games have been a focus area in recent years, with fiscal first-quarter revenue reaching a record $20.8 billion, up 6 percent from a year ago but a sharp slowdown from nearly 24 percent a year ago.
"Apple released a shockingly weak earnings report," said Jesse Cohen, a senior analyst at Investing.com. "Apple's poor financial data proves that even the most valuable U.S. public companies are not immune to challenges facing the entire tech industry."
Apple CFO Luca Maestri said on a conference call that the company did not provide a revenue forecast for the next quarter given the "recent ongoing global uncertainty." Still, Maestri said he expects revenue performance in the fiscal second quarter ending March to be similar to the fiscal first quarter.
Amazon CEO: Efforts to streamline costs will continue to slow hiring and brick-and-mortar expansion
Amazon's fourth-quarter net profit was only $300 million, down 98% year-on-year, and fourth-quarter revenue reached $149.2 billion, up 9% year-on-year, exceeding Wall Street expectations. However, Amazon also pointed out that revenue in the first quarter of this year may be lower than analysts' expectations. The company expects first-quarter revenue to be between $121 billion and $126 billion through the end of March, below analyst estimates of $125.1 billion. Amazon's fourth-quarter net profit fell to $300 million, down 98% from $14.323 billion in the same period last year.
While overall revenue growth in the fourth quarter beat Wall Street expectations, revenue growth in some key segments appeared to have slowed. According to the financial report, Amazon's cloud computing unit AWS generated revenue of $21.4 billion in the fourth quarter, a year-on-year increase of 20%. This means that the growth rate in the fourth quarter was lower than the previous quarter.
Amazon executives said on the conference call that many cloud customers are scaling back spending and looking to cut costs amid economic uncertainty. "We're going to help customers find ways to save money," said Andy Jassy, Amazon's chief executive, as we build relationships that can weather a recession. ”
Thursday's earnings report comes at a difficult time for Amazon. After seeing a surge in demand for e-commerce goods in the early days of the pandemic, Amazon now has to deal with consumers returning to the habit of shopping in person. Recession fears and inflation have also dampened spending by consumers and businesses. Last month, Amazon announced it would cut more than 18,000 jobs worldwide as part of the company's overall spending cutting strategy. Jassy said during the call: "In the short term, we face an uncertain economy, but we remain optimistic about Amazon's long-term opportunities. ”
Jassy also said Amazon is "working to streamline costs without forgoing investments" that can drive growth and "transform Amazon in the long term." Amazon's distribution network has grown rapidly in recent years, he said, and "there are a lot of questions that need to be addressed about how to optimize and improve efficiency." He also added that Amazon plans to slow down-and-mortar store expansion and hiring.
While a general slowdown in digital advertising has hurt the performance of companies like Alphabet, Facebook parent company Meta and Snap, Amazon's advertising business continues to grow. According to Thursday's earnings report, Amazon's advertising services division achieved revenue of $11.6 billion in the fourth quarter, up 19% year-over-year. While Amazon's advertising division still accounts for only a fraction of the company's fourth-quarter revenue of $149.2 billion, it represents a fast-growing area that analysts believe could be a significant player in the digital advertising market.
Alphabet's profits plummeted 34 percent, and YouTube advertising revenue plummeted
Google's parent company's fourth-quarter net profit of $13.624 billion fell 34% year-on-year Alphabet's financial report showed that due to the intensification of competition in the digital advertising market and the reduction in advertiser spending due to economic uncertainty, the company's fourth-quarter revenue was $76.048 billion, an increase of 1% over the same period last year, in line with Wall Street expectations; Net profit was $13.624 billion, down 34% from $20.642 billion in the same period last year, falling short of Wall Street expectations.
YouTube ad revenue fell short of analysts' expectations at $7.96 billion, down 8% from $8.63 billion last year. In addition to the overall decline in ad spend, YouTube is also facing stiff competition from Tiktok short videos. CEO Sandel Pichai said Thursday on a conference call with investors that YouTube shorts currently has 50 billion daily views.
Last month, Alphabet announced it would cut 12,000 jobs worldwide in order to refocus on the company's core business. Ruth Porat, chief financial officer of Alphabet and Google, noted in the earnings report: "We are doing a lot of work to improve all aspects of our cost structure to support our investments in the highest growth priorities for long-term profitable growth." ”
In the world's most critical fourth quarter, Google's core advertising revenue fell 3.5% year-over-year, another sign that the digital advertising market has become more difficult. But revenue from the company's cloud business — Google's increasingly important source of revenue — rose 32 percent from the year earlier to $7.3 billion. "Almost all of the search giant's business units underperformed our expectations, most importantly its core ad search business," Jesse Cohen, senior analyst at Investing.com, said in an investor note following the report's release.
Tech companies powered by digital advertising have been under pressure from several factors, including a tough economy, increased competition from Tiktok, and the lingering impact of Apple's 2021 iOS privacy update. According to the latest Insider Intelligence Global Digital Advertising Revenue Share Survey, Amazon now accounts for 7.3% of the entire online advertising market, behind Alphabet's Google and Facebook and Instagram, which account for 28.8%, 11.4% and 9.1% of the digital advertising market, respectively.
During Thursday's conference call, Alphabet executives highlighted the company's plan to "redesign the cost structure" and prioritize "efficiency" and growth in core growth areas. In addition to the layoffs in January, the company plans to reduce its real estate investments in the first quarter and "significantly slow the pace of hiring in 2023," Porat said. The company said it would cover $1.9 billion to $2.3 billion in the first quarter in connection with the layoffs announced in January. The company also expects costs associated with office space reductions in the first quarter to be about $500 million, and warns that other real estate charges may arise in the future.
Alphabet executives reiterated in the phone call that the company is focused on artificial intelligence. CEO Pichai said: "Soon, people will be able to interact directly with our newest and most powerful language models in experimental and innovative ways as companions to search. It has previously been reported that Google is experimenting internally with several potential products that could impact its search business. The popularity of ChatGPT, an AI-based chatbot launched by Microsoft-backed OpenAI late last year, has put pressure on the company. Executives have previously joked that the company may launch a similar product to the public sometime this year.
Google did not provide an outlook for the first quarter of 2023, though Porat provided some insight into the company's expectations. In the advertising business, she said, the company is using AI to improve its products, including return on investment and ad targeting, as well as improve the profitability of YouTube short videos. For Google Play, Porat said the company is "optimistic about the long-term outlook for mobile apps and games" but cautious about "current trends."
The outlook for hardware and Google Cloud seems brighter. Porat said the company will continue to invest in these areas for future growth. (Mowgli)
![Can the Big Three compete for the title? Nets: I believe he's a ghost[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)