From San Francisco to Seattle, US tech companies are troubling the market with lower-than-expected growth and poor forecasts, a sign that even the ‘tech bigs’ are suffering from a fragile economy and competition from new players.
“This week will go down in the history of financial results as one of the worst for ‘Big Tech’, including the turning point,” said analyst Dan Ives, of Wedbush Securities, this Thursday (27).
Alphabet, Google’s parent company, saw its lowest revenue growth in the third half of the year since 2013, with the exception of the pandemic period.
Microsoft, led by cloud computing, reported strong quarterly results on Tuesday but issued a warning about the growth of its Azure platform for the sector.
Meanwhile, Meta (Facebook, Instagram, WhatsApp, Oculus) was a “disaster,” according to Ives. Its bonds fell nearly 25% on Thursday from late Wednesday, when it reported quarterly results that halved profits ($4.4 billion, -52%) compared to the same quarter in 2021.
The massive mobilization of resources to build a parallel universe — a “metaverse” — accessible through augmented and virtual reality is generating growing skepticism among company watchers at a time when inflation and rising interest rates to curb it are further eroding corporate margins.
“There is no information about the potential in terms of revenue that Meta could get from the metaverse. Nobody knows,” said Debra Aho Williamson, an analyst at Insider Intelligence.
“Google is more likely to recover quickly because its search engine has been a mainstay of the Internet for decades, both for consumers and businesses. Its economic model is not broken,” he added.
Faced with economic difficulties worldwide, many advertisers are reducing their marketing budgets, and this is affecting companies that derive most of their revenue from online advertising.
Snapchat suffers from this in particular: although the number of users is growing, the application is considered an experimental communication channel.
Meta, on the other hand, sold 17% more advertising space in the third quarter. However, the average price fell by 18% compared to the same period last year.
“We knew global ad spending would fall. But I think the worst is over,” said Tejas Dessai, analyst at Global X ETFs.
– “Terrible competitor” –
Silicon Valley is also suffering from the effect of comparing it to 2021, when the pandemic favored online businesses.
But one of the factors hitting the big platforms the hardest won’t go away easily: the ultra-popular TikTok is taking up more and more space.
In 2021, this entertainment platform surpassed Google as the most popular website in the world, according to Cloudflare.
Google and Meta have copied the TikTok video format with “shorts” and “reels”, but so far they have not been able to turn their investments in this segment into profits.
“More than 140 million ‘reels’ spin on Facebook and Instagram every day, 50% more than six months ago,” said Mark Zuckerberg, Facebook’s number one. “And we believe we’ve gained market share (relative to apps) from competitors like TikTok in the past,” he added.
“TikTok is a feared competitor, but in terms of ad revenue there is no comparison,” said Debra Aho Williamson. Industry veterans “are still way ahead.”
In the field of e-commerce, US giant Amazon saw a contraction of 9% in net profit in the third quarter compared to the same period last year, as well as lower traffic than the market expected, according to data its results released on Thursday.
The stock market reacted very poorly to these numbers, with Amazon shares down more than 19% in after-hours trading.
In turn, Apple exceeded market expectations with $90 billion in revenue and $20.7 billion in net profit in the third quarter. Sales of the iPhone, its flagship product, were disappointing.
In the fourth quarter of its fiscal year, the third of the year, the California group sold smartphones for $42.6 billion, below the $43 billion expected by analysts.
Its shares fell slightly in after-hours electronic trading on Wall Street, closing at $143.60, close to the day’s close.
© Agence France-Presse