US tech giants stumble after pandemic boom

(FILES) This July 4, 2022 image shows the logo of Amazon, a large online shopping company, at the Amazon Amagasaki fulfillment center in Amagasaki, Hyogo Prefecture. (Photo by Kazuhiro NOGI/AFP)

Glenn Chapman
Agence France-Presse

SAN FRANCISCO, USA (AFP) — Amazon and Apple were a relatively bright spot in a week when earnings results were otherwise lackluster for an industry considering the end of a boom in a pandemic era.

A crowded period of quarterly financial reports from the world’s biggest tech companies has been marred by near misses and uncertainty, making it clear that the Covid-19 lockdown boom has turned into a bust.

As people free themselves from the pandemic lifestyle that relied on the internet to shop, play, work and learn, inflation is pushing prices up and Covid-19 is causing temporary closures of factories in China that tech firms rely on. .

Recession fears, a strong dollar, shrinking advertising budgets and inflation are headwinds coming from all directions at the moment.

“When you think about the number of challenges in the quarter, we’re really happy with the growth we’re delivering,” Apple chief executive Tim Cook said during an earnings call.

For Apple, product sales were $63.4 billion, down from the same period a year earlier, but the drop was more than offset by services revenue, which rose to $19.6 billion, earnings data showed.

Cook noted that demand for iPads and Macs outpaced supply in the recently ended quarter, driven primarily by pandemic restrictions that have resulted in “factory closures and factories operating at less than full capacity.”

According to Cook, Apple also faced a constant shortage of computer chips.

Meanwhile, U.S. chip giant Intel reported disappointing earnings driven by its own missteps as well as economic conditions — post-pandemic slumping demand and “supply disruptions in China and other parts of the supply chain,” executives said in an earnings call.

Amazon beat sales forecasts to $121 billion in the quarter, while revenue from its cloud computing platform Amazon Web Services surged.

The retailer has made progress in reducing its workforce, which has been beefed up to handle online purchases that have skyrocketed during the pandemic, executives said.

“Amazon fared well in the second quarter, despite challenging macroeconomic conditions and incremental spending that weighed on bottom line,” said analyst Andrew Lipsman.

Apple, Microsoft and Facebook owner Meta spoke of a strong dollar eating into profits because when the US currency gains too much value, it can drive up the price of products abroad or eat into a favorable exchange rate.

Meta pointed to the dollar’s role in the firm’s first annual decline in revenue since going public in 2012.

– Not much good news –
In addition to usually tough economic times, firms like Netflix and Meta are battling stiff competition from competitors — and both have reported some losses.

Meta lost about two million monthly users between quarters, and Netflix lost nearly a million paying customers.

However, Netflix’s stock has risen by about a percentage point over the past five days, and investors are potentially looking to the company for a sign of subscriber growth to come.

Markets seemed just as confident despite the fact that Alphabet, the parent company of Google, was not generating revenue and profits.

The bad news for the Silicon Valley giant was not unexpected as the flow of dollars from online advertising that fuels the company’s fortunes has slowed as inflation, war and other issues poison the broader economy.

“However, with its huge market share in search advertising, Google is relatively well positioned to weather the rough waters that lie ahead,” said analyst Evelyn Mitchell.

If advertisers have tightened their belts and Apple’s privacy changes have impacted companies’ sales of costly but highly targeted ads, the damage has been uneven.

Meta’s earnings have been hit hard, and with the stock price losing roughly half its value since February, it’s clear that investors remain wary of the company’s future.

“The good news, if you can call it that, is that its digital advertising competitors are also in decline,” said analyst Debra Aho Williamson.

Snapchat’s parent company, for example, said its losses nearly tripled to $422 million in the recently ended quarter, despite a 13 percent increase in revenue in “more difficult” than expected conditions.

“We are not satisfied with the results we are achieving despite the current headwinds,” said a letter to investors from California-based Snap last week.

© Agence France-Presse