CNN pointed to upcoming tech earnings reports from Apple, Alphabet, Amazon, Meta, Microsoft, Twitter — and suggested they wouldn’t be pretty.
The site claims this may be the quarter in which the tech giants reveal their apparent immunity to the broader economic climate is coming to an end…
NC:
After months of layoffs, hiring freezes and other cost-cutting measures, big tech companies are set to provide the most detailed insight yet into the severity of the situation for their businesses amid fears of an impending recession.
Snapchat’s parent company, which wiped out much of the tech sector in May with a warning of a deteriorating economy, is set to report third-quarter results on Thursday. Apple (AAPL), Amazon (AMZN), Facebook (FB)-parent Meta, Microsoft (MSFT), Twitter (TWTR) and Google-parent Alphabet (GOOGL) will each release their results the following week.
“People should probably brace themselves for these results,” said Scott Kessler, head of the global technology sector at research firm Third Bridge Group.
Inflation has seen prices rise while most consumers have seen their purchasing power decline as wages are not keeping pace. Higher interest rates make credit more expensive, and record dollar strength pushes up prices overseas or cuts profits.
A stronger U.S. dollar can also make hardware products from companies like Apple less affordable to overseas consumers, which, as Zino points out, is problematic given that “most of these companies generate more than half of their revenue outside the United States”.
American companies react in different ways to currency fluctuations. Apple raises at least some prices based on the strength of the dollar, resulting in price increases of around 20% on some products sold in Europe. Google, on the other hand, maintains product prices but earns much less on overseas sales.
Analysts expect most tech companies to report reduced growth (or declines), along with even steeper declines in earnings.
Apple has weathered the storm better than most companies, and next week’s earnings report won’t take into account the effects of the latest price hikes. Given the apparent and continued strong demand, it seems unlikely that AAPL’s earnings will disappoint.
However, poor results from other tech companies could have a ripple effect, as investors are more generally scared off by tech earnings and shift their money to other sectors.
Apple is expected to release its fourth quarter 2022 results on October 27. Consistent with previous quarters, the company offered no guidance, although CEO Tim Cook said he was “optimistic” for the quarter.
July-September revenue will include introductory sales of three of the four iPhone 14 models, as well as early sales of Apple Watch Series 8, Apple Watch Ultra and the latest generation AirPods Pro.
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