CNN has pointed to upcoming tech earnings reports from Apple, Alphabet, Amazon, Meta, Microsoft, Twitter – and suggested that they aren’t going to be pretty.
The site argues that this may be the quarter in which tech giants reveal that their seeming immunity to the broader economic climate is at an end …
CNN:
After months of layoffs, hiring freezes and other cost-cutting measures, big tech companies are set to provide the most detailed look yet at just how bad things have gotten for their businesses amid fears of a looming recession.
Snapchat’s parent company, which tanked much of the tech sector in May with a warning about a worsening economy, is set to report third-quarter earnings on Thursday. Apple (AAPL), Amazon (AMZN), Facebook (FB)-parent Meta, Microsoft (MSFT), Twitter (TWTR) and Google-parent Alphabet (GOOGL) will each report earnings results the following week.
“People probably should be bracing themselves for these results,” said Scott Kessler, technology global sector lead at research firm Third Bridge Group.
Inflation has seen prices increase while most consumers have seen their spending power decrease as wages fail to keep pace. Higher interest rates make credit more expensive, and the record strength of the dollar is either pushing overseas prices higher or reducing earnings.
A stronger US dollar may also make hardware products from companies like Apple less affordable for foreign consumers, which, as Zino points out, is problematic given “most of these companies are generating more than half their revenue outside the United States.”
US companies are responding in different ways to currency movements. Apple is raising at least some prices in line with the strength of the dollar, resulting in price rises of around 20% on some products sold in Europe. Google, in contrast, is maintaining product prices but earning far less from overseas sales.
Analysts are expecting most tech companies to report reduced growth (or declines), along with even steeper drops in profits.
Apple has been weathering the storm better than most companies, and next week’s earnings report won’t factor in the effects of the latest price rises. Given apparent continuing strong demand, it looks unlikely that AAPL earnings will disappoint.
However, poor results for other tech companies could have a knock-on effect, as investors are scared by tech earnings more generally, and shift their money into other sectors.
Apple is set to report its fiscal Q4 2022 earnings on October 27. In line with previous quarters, the company has not offered any guidance, though CEO Tim Cook did say that he was “optimistic” about the quarter.
Earnings for July to September will include launch sales of three out of four of the iPhone 14 models, along with early sales of the Apple Watch Series 8, Apple Watch Ultra, and the latest-generation AirPods Pro.
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