Big tech proves resilient as the economy cools

No boom can last forever, even for the richest companies in the technology industry. Earlier this year, investors punished the biggest tech companies by destroying $2 trillion in market value over fears that the industry would falter in the face of rising inflation and a slowing economy.

But this week, since the United States reported that economic output fell for the second quarter in a row, Microsoft, Alphabet, Amazon as well as Apple announced sales and profits that showed their business has dominance and diversity to challenge the economic woes hurting smaller companies.

Microsoft and Amazon have proven that their lucrative cloud business continues to expand even as the economy cools. Google, a subsidiary of Alphabet, has demonstrated that search advertising remains in demand among travel companies and retailers. And Apple has masked the downturn in its device business by boosting sales of apps and subscription services.

Taken together, this was a sign that technology may have already bottomed out and is starting to recover, said Dave Harden, chief investment officer of Summit Global, a Salt Lake City-based firm with an investment of about $2 billion that includes Apple. .

“These guys are still delivering,” Mr. Black said. Harden said. “They are acting responsibly and going through a turbulent period.”

Better-than-expected results lifted stock prices and boosted the stock market. even like an alphabet as well as Microsoft has failed or Wall Street expectations.

The results showed that companies are not immune to issues such as supply chain disruptions, rising costs and changes in customer spending. But their gigantic business is not as vulnerable to the various problems plaguing the economy as smaller companies such as Twitter as well as Snap, owner of Snapchat.

In conversations with analysts, company executives warned investors about the coming months, using words like “problems” and “uncertainty.” Fears about the economy are causing some, including Alphabet, to slow their hiring pace and take other precautions, but no one has said they plan to start layoffs.

Sundar Pichai, chief executive of Alphabet, called the economic slowdown an opportunity, saying the company will focus and “be more disciplined as we move forward.” He added: “When you’re in growth mode, it’s hard to always make time for all the adjustments you need to make, and moments like this give us a chance.”

In what many investors have interpreted as evidence of industry optimism, Microsoft said it expects double-digit revenue growth next year and Amazon said it expects sales to increase by at least 13 percent in the current quarter.

Satya Nadella, Microsoft’s chief executive officer, said the company would invest within a year to gain stake and grow its business, while Brian Olsawsky, Amazon’s CFO, said he would have more products in stock and faster supplies.

“This is not a recession forecast,” said Sean Stannard-Stockton, president of Ensemble Capital, a $1.3 billion San Francisco investment firm. “If we do avoid a major recession, it is clear that many of these businesses will see growth rates pick up again.”

Although Apple and Alphabet did not provide forecasts, the companies bought back tens of billions of dollars worth of stock during this period. The $21.7 billion purchase of Apple and the $15.2 billion purchase of Alphabet showed the companies’ confidence that their business will continue to grow in the coming years.

Meta, the company formerly known as Facebook, was an exception among the largest tech companies to report the first decline in quarterly revenue since it went public a decade ago. Its woes were the result of growing competition from TikTok, which has deprived it of users and advertisers, as well as concerns over privacy changes to the iPhone implemented by Apple.

Market research firm GroupM predicts the ad market will grow 8.4% this year and 6.4% in 2023. Facebook’s sales surge last year, with quarterly sales jumping 56 percent, made it “unbelievable to see further growth,” said Brian Wiser, president of business intelligence at GroupM.

Similar problems hit the e-commerce market. Convinced that the surge in online ordering during the pandemic represents a fundamental change in how people shop, Amazon has put forward an ambitious plan to open dozens of new warehouses. But as sales cool off – the number of items sold in the last quarter rose by just 1 percent – the company reversed course and decided to close, postpone or cancel at least 35 warehouse openings.

Amazon’s smaller e-commerce competitor, Shopify, has said it will cut about 10 percent of its staff. Harley Finkelstein, President of Shopify, said this year will be “a year of transition, with e-commerce largely returning to pre-Covid-19 growth levels.”

Apple’s biggest hurdle has been its reliance on China for most of its devices. In April, the company said it would lose about $4 billion due to the closure of factories in Shanghai, where it makes iPads and Macs. But he still managed to increase iPhone sales by 3 percent during that period and set a quarterly record for the number of people who traded Android smartphones for iPhones.

Tim Cook, Apple’s chief executive, said Apple was facing a “cocktail of headwinds” including supply restrictions, a stronger dollar that pushed up device prices overseas, and a global economic slowdown.

“When you think about the number of challenges in the quarter, we are very pleased with the growth we have created,” Mr. Cook said. He added that the company will invest during the economic downturn, but will “consciously do so, given the realities of the environment.”