Alphabet, Microsoft, Spotify dampen hopes of a tech rebound after downbeat earnings reports

Alphabet, Microsoft, Spotify dampen hopes of a tech rebound after downbeat earnings reports

Wall Street is once again batting down the hatches after a series of disturbing earnings reports of four Big Tech titans on Tuesday – results that rained down on dim hopes for an industry-wide recovery.

Alphabet, Microsoft, Spotify, and South Korean semiconductor giant SK Hynix all disappointed in the latest quarter, setting the stage for a harrowing remnant of the budding earnings season. The quartet reported a combination of sluggish revenue growth, declining profits, off-balance sheet expenses, hostile exchange rates and warnings of continued pain in the fourth quarter.

A brief review of Tuesday’s carnage:

Google parent alphabet missed analyst earnings and revenue forecasts, with company-wide growth falling to its lowest point since 2013 (excluding an early pandemic quarter). Alphabet’s advertising revenue, the vast majority of which is derived from Google Search and Youtube, grew just 3% year over year as companies cut their marketing budgets. Alphabet shares fell 8% in midday trading on Wednesday.

— Microsoft beat analysts’ fiscal first-quarter expectations, but company officials offered disappointing guidance for the current quarter that sent shares down 6% in midday trading on Wednesday. Executives warned that weak PC sales will continue to weigh heavily on sales of the Windows operating system, while growth at its cloud computing division is likely to slow.

— Spotify beat revenue forecasts, but recorded operating losses of $227 million, well above analyst projections of around $168 million, as expansion costs soared at the Swedish audio company. CEO Daniel Ek responded in part by telling the Wall Street Journal that US subscribers, who make up about a quarter of the company’s subscriber base, could expect a price increase next year. Spotify shares fell 12% in midday trading on Wednesday.

S.K. Hynixthe second largest memory chip maker in the world, announced plans to cut its capital investments by 2023 in half after third-quarter profit fell 60% year over year. On an earnings call, SK Hynix’s chief marketing officer called the ongoing drop in demand for semiconductors “very serious” and “unprecedented.”

Most worryingly, all four companies lamented problems spreading to various sub-sectors of the industry, suggesting that a wide range of other tech giants will struggle to meet investor expectations in the coming weeks.

Google’s weaker-than-expected ad revenue, combined with equally soft sales informed last week of Snapchat Snap, father, bodes ill for businesses that rely heavily on digital marketing. Meta announces its results after the close on Wednesday, with pinterest ready to go on Thursday.

Microsoft’s warning about slowing growth in cloud computing also dragged down its main rival in the sector, Amazon, which saw its shares fall 4% by midday. (The nasdaq The compound dropped 1%).

Meanwhile, Microsoft’s report on Windows’ grim trends was reinforced Widespread Tank PC Sales Accountswho have already sent shares of dell Y hp falling in the last two months. The same principle applies to the semiconductor business, and SK Hynix’s results harden fears of a prolonged chip winter that could stretch into 2023 and beyond.

For companies still willing to disclose their earnings, sporadic glimmers of hope remain. Applescheduled to report results Thursday, could show stronger-than-expected iPhone 14 sales (though reports on this possibility are mixed). Companies that rely on discretionary consumer spending, such as Amazon, Uberand Airbnb, could also surprise later Netflix and Spotify posted steady subscription revenue growth.

However, until those good omens arrive, investors are expected to remain in the dark.

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jacob carpenter

OF JOURNALISTIC INTEREST

Shifting at high speed. Actions of Intel cleave Mobileye rose on the company’s first day of public trading, rising about 30% above its IPO price in midday trading on Wednesday. Mobileye, a self-driving technology unit of Intel, valued its initial offering at $21 per share at a valuation of roughly $17 billion, far below the hopes of the chipmaker just a year ago to get a valuation of $ 50 billion. Mobileye’s value has been affected by the global economic slowdown and growing investor skepticism about the future of autonomous vehicle technology, among other factors.

Even more angry at Apple. Father of Facebook and Instagram Goal condemned Applelatest change in App Store policy, which states that the iPhone maker will now get a share of revenue from some ad purchases made within social media apps, Bloomberg reported Tuesday. Meta officials said Apple is “undermining others in the digital economy” by diverting up to 30% of revenue from in-app purchases from ads displayed within those respective apps. Some small business owners and influencers buy or pay to “boost” their ads on the Facebook and Instagram apps, though Meta hasn’t said how much revenue it makes from those purchases.

Sex sells, news doesn’t. Frequent Twitter users are lose interest in topics valued by advertisersa tendency that the future owner Elon Musk will inherit if its long-running purchase of the social media company closes, Reuters reported on Tuesday. Citing a newly obtained internal investigation, Reuters reported that Twitter devotees are posting less about news and sports, while some users are turning to Instagram and TikTok to follow fashion and celebrity accounts. Interest in cryptocurrencies and pornography is on the rise, although Twitter advertising clients are less interested in associating themselves with those topics.

A crypto bull is gored. The flagship cryptocurrency fund operated by venture capital titan Andreessen-Horowitz has lost about 40% of its value this yearthe Wall Street Journal reported on Wednesday, citing sources familiar with the matter. The firm has emerged in recent years as one of the biggest crypto bulls in the industry, pouring billions of dollars into the sector, but is slowing the pace of its investments amid a sharp decline in digital asset values. Crypto fund investors told the Daily Andreessen Horowitz’s losses as a percentage of investment are likely to be two to four times higher than those of other hedge funds.

FOOD FOR THOUGHT

Returning to the herd. Three pillars of the technology industry in FortuneThe list of the 100 fastest growing companies has lost its places. Goal, AmazonY Netflix they are no longer among the crowd of up-and-coming teams, due in large part to the slowdown in tech finance across the industry. With Silicon Valley in the dumps, energy companies surged in the annual rankings and the financial sector retained the most places on the list. Tech companies still got 21 slots, the second most of any industry, with amd, Zoom Video CommunicationsY nvidia securing positions in the top 20.

From the Article:

Those three tech giants weren’t alone: ​​Falling share prices and rising costs rocked the entire list this year, with just 24 companies from 2021 returning to the top 100. That’s a 76% turnover rate, the highest since Fortune began tracking that stat in 2000.

Our annual list, now in its 37th year, ranks companies based on growth in revenue, earnings, and stock returns over the three-year period through June 30, 2022. Those metrics have been excellent lately for the energy sector, which has rebounded on the strength of the rebound in demand as COVID-related restrictions eased. In 2021, there were no energy companies on our fastest growing list; this year, there are five.

IN CASE YOU MISSED IT

Elon Musk isn’t even done buying Twitter, but he’s already fighting with Apple over Spotify and payment guidelines.by Chris Morris

Uber whistleblower says company used ‘unlimited funding’ to silence drivers who complainedby Alice Hearing

In corporate AI, a gap is emerging between the haves and have-notsby Kevin Kelleher

Here’s what a tech startup advisor says founders need to do to survive the recessionby Kylie Robinson

What Matt Levine’s Crypto Work Means For The Industryby Jeff John Roberts

How digital twin technology can bridge America’s chip manufacturing gapby Chris Rust

BEFORE YOU LEAVE

Get feisty with football. Amazon is sending a rare blitz to one of the TV advertising industry’s heavyweights. The Associated Press reported Wednesday that the tech conglomerate and nielsonbest known for broadcasting television audience figures, are fighting for how many people are watching Amazon’s Thursday Night Football stream this year. Amazon, the first company to sign a multi-year deal to exclusively stream National Football League games on a subscription-based platform, says its accurate tracking technology puts the average number of viewers at around 12 million per game. . Nielsen, which produces viewership estimates based on a sample of households tracked by the company, puts the number at just over 10 million per game. TV executives, whose ad revenue is often closely tied to audience estimates, have long complained about the inaccurate approximations produced by Nielsen, but few have taken their complaints as publicly as Amazon. Game on.

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