Most of the biggest tech names managed to regain ground on Friday, boosted by Apple’s relatively healthy performance. But the general mood remained gloomy.
Several hundred different data points were shared with the market. Combined, they tell a tale of industries hit by the greenback’s strengthening, supply chain drags stretching into a third year, inflation that still needs to be contained and economic growth figures that look increasingly bleak. We distilled it all down into 10 tables – be sure to let us know what we missed.
The malaise in the semiconductor industry can best be summed up by the unfolding disaster at Intel Corp., the largest U.S. chipmaker. As a supplier of components for computers and servers, Intel was hit hard by the slowdown and is desperately trying to adjust even as it vows to catch up with rival Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Corp. But the cost cuts won’t come in time to help the fourth-quarter numbers.
A year ago, the world had a shortage of chips and suppliers were rushing to buy equipment and ramp up production. In the past month, they have collectively cut 2022 budgets by more than $16 billion and are preparing to cut spending next year.
A recurring theme in earnings this season has been the impact of the rising US dollar against nearly every peer. Few companies are immune, with Amazon.com Inc. among the most hit.
Apple Inc. it seems relatively strong compared to all the others. Its iPhone did quite well, albeit a touch below estimates, and it grew by a few more days of availability. Services, the division that includes Apple Music and Apple+ TV that is the company’s second-biggest contributor to revenue, continued to post solid growth, albeit at a slower pace than previous quarters.
Meta Platforms Inc. it is being hit from all sides. The owner of Facebook, Instagram and WhatsApp has been hit hard by changes to Apple’s privacy rules, which make it harder to track users across apps and thereby lower ad rates. The global recession, including higher inflation, only adds to the problems. Although user numbers are slowly growing — it has 3.7 billion monthly active users across its family of apps — average revenue per person is falling.
Meanwhile, the social media company is burning cash in its Reality Labs division — founder Mark Zuckerberg’s venture into virtual reality and the metaverse that inspired the name change last year. That business has lost more than $20 billion to date, and Zuckerberg told investors to expect the shortfall to continue for a while.
Alphabet Inc. it’s not doing so well, but at least it’s growing. A 6.1% rise in third-quarter revenue was the slowest since June 2020 after the Covid-19 pandemic hit. Its Google search-based advertising divisions are outperforming the network’s affiliate businesses and YouTube video service, while cloud services remain stable.
At Microsoft Corp., a decade-long transition away from the consumer PC — where revenue is tied directly to hardware and server sales — is helping it weather the storm better than most. Revenue for the September period rose just 11%, the slowest in five years, but that’s far better than most tech peers. Its cloud offerings and productivity are the main reasons for this relative strength. Customers — both consumer and corporate — are somewhat tied to the Office suite of products, while those who sign up for its Azure cloud services are unable to run away when times get tough.
The last two charts show how badly investors have reacted to all this news. The stock market crash is a global, cross-industry phenomenon. However, the technology sector has fared much worse, with the Nasdaq down 30% from a year ago.
Those companies that rely heavily on advertising or short-term consumer purchases suffer the most. Money appears to be shifting to what could be seen as more defensive tech stocks and Netflix Inc . shines the most among them.
If there’s any consolation, it’s that investors no longer have to worry about Twitter Inc.’s fortunes. This is Elon Musk’s problem now.
More from other writers at Bloomberg Opinion:
• Chips Act will not work without any part of the chip: Thomas Black
• Airbnb hosts who lose money have three options: Teresa Ghilarducci
• Tech investors react like shouting at a cloud: Tim Culpan
This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
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