As four of the biggest tech companies in the US report results this week, expect to see arrows pointing downward.
Meta, the parent company of Instagram and Facebook that is reporting earnings after market close today (Feb. 1), is poised to see its net income shrink on the back of declining ad revenue and higher costs.
“Meta finds itself in somewhat of a downward spiral. Costs are rising, advertising spend is falling and markets are expecting to see another profit decline in next week’s fourth quarter results, Matt Britzman, equity analyst at Hargreaves Lansdown, wrote. “These aren’t small declines either, with operating profit expected to come in around $7.7 billion–that’d be down 39% year on year.”
Off the back of underwhelming third quarter results, Meta focused on reducing costs, starting from its headcount. The company announced it would cut 11,000 jobs in November. Investors, as well as Meta’s tech chief Andrew “Boz” Bosworth, are waiting for the company to regain its focus on core competencies, instead of throwing billions at the loss-making metaverse arm Reality Labs.
Meta won’t be alone in delivering poor results. When Apple, Amazon, and Alphabet release earnings tomorrow (Feb. 2), things aren’t bound to look any rosier.
What to expect from Apple, Amazon, and Alphabet earnings
📱 Apple: The iPhone maker is expected to post its first year-over-year revenue decline in four years owing to covid-19 lockdowns in China as well as factory unrest hitting both supply and demand.
📦 Amazon: Everything-retailer and cloud computing provider Amazon has prepared investors for sliding results, citing increased costs amid investments in its fulfillment capacity. With 18,000 layoffs under way at the company, severance bills will also run high.
👨💻 Alphabet: Google’s parent company, among the last of the lot to cave with 12,000 job cuts just last week, will likely witness a significant slide in ad revenue—one that even its growing cloud business can’t make up for. At the end of last quarter, YouTube posted its first-ever fall in ad revenue, and that business likely continued to struggle.
Tech’s coal canary Snap, by the digits
Snap, the parent company of messaging app Snapchat, reported its earnings yesterday (Jan. 31). Just like Meta and Alphabet’s Google and YouTube, Snap heavily relies on ad spending, and its results painted a gloomy picture.
- $1.3 billion: Snap’s revenues were flat for the fourth quarter, missing the expected $1.31 billion
- 2-10%: How much Snap told investors it expects revenues to drop in the current quarter, as it restructures to deal with economic headwinds, Apple’s privacy changes, and burgeoning competition from rivals like TikTok.
- 15%: How much shares in Snap Inc. plunged in after-hours trading after the firm missed analyst estimates. It also dragged other ad-reliant stocks like Meta and Pinterest down by 2% and 5% respectively. (They both recovered.)
- 11%: Decline in Snap’s revenue from brand advertising, aimed at promoting a brand’s image.
But there was one bright spot…
- 4%: Rise in Snap’s direct response ads business geared towards driving product sales or website visits—good news for Meta and Google since they lead this segment.
Quotable: Don’t worry about tech
“I believe that we need to zoom out to get proper perspective. These tech titans—which got carried away during the pandemic era amid soaring revenues and profits and which are now being forced to regroup—still have piles of cash, in some cases hundreds of billions of dollars, and remain enormously profitable.” —Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.
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