Big Tech fails on lackluster Q4 earnings and guidance – Meta has worst week ever, Amazon drops 13%

Other than Appleit was a brutal results week for Big Tech.

Alphabet, Amazon, Meta and Microsoft handsets lost more than $350 billion in market capitalization after offering commentary on the third quarter and the rest of the year. Between slowing revenue growth — or decline in Meta’s case — and efforts to control costs, the tech giants have found themselves in an uncharted waters position after rampant growth over the past decade.

This week’s third-quarter results came amid soaring inflation, rising interest rates and a looming recession. Apple bucked the trend after beating revenue and profit expectations. Friday’s action had its best day in more than two years.

At the other end of the spectrum was Meta, which saw its share price crash in 2022. Facebook’s parent company missed out on profits, recorded its lowest average revenue per user in two years and said Fourth-quarter sales would likely decline for a third consecutive period.

“There’s a lot going on right now in the business and in the world, and so it’s hard to have a simple, ‘We’re going to do this thing, and that’s going to solve all the problems,'” Meta CEO Mark Zuckerberg said Wednesday during the company’s earnings call.

Meta’s stock had its worst week since the company went public in 2012, plunging 24% in the past five days. Microsoft fell 2.6% for the week, driven by a 7.7% decline on Wednesday after the company gave weak guidance for the year-end period and missed cloud revenue estimates.

Things were also bleak at Amazon, which fell 13%. A bleak outlook for the fourth quarter along with a dramatic slowdown in its cloud computing unit were largely responsible for the selloff.

While Amazon Web Services saw expansion slow to 27.5% from 33% in the prior period, Google’s significantly smaller cloud group accelerated growth to almost 38% from around 36 %. Google plans to continue spending on the cloud, although it intends to curb overall headcount growth in the coming quarters.

“We are excited about this opportunity, given that businesses and governments are still in the early days of public cloud adoption, and we continue to invest accordingly,” said Alphabet CFO Ruth Porat on Tuesday. , during a conference call with analysts. “We remain focused on the longer-term path to profitability.”

However, the results of the rest of Google parent Alphabet were less impressive. The company’s core advertising business grew only slightly, and YouTube’s ad revenue fell from a year earlier. The reverse was true for Amazon, which is catching up with Google and Facebook in digital advertising. In Amazon’s advertising business, revenue growth accelerated from 21% to 30%, beating analysts’ estimates.

“Advertisers are looking for effective advertising, and our advertising is at the point where consumers are willing to spend,” said Brian Olsavsky, the company’s chief financial officer. “We have a lot of benefits that we believe will help both consumers and our partners like sellers and advertisers.”

Raymond James analyst Aaron Kessler lowered his Amazon stock price target to $130 from $164 after the results. But he maintained his equivalent of a buy rating on the stock and said the company’s “robust advertising growth” had the potential to help Amazon boost its margin.

As investors continue to move away from technology, they are finding lucrative opportunities in other parts of the market that previously lagged behind software and internet names. The Dow Jones Industrial Average rose 3% this week, the fourth consecutive weekly gain for the index. Prior to 2021, the Dow had underperformed the Nasdaq for five consecutive years.

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