Big Tech’s Q3 2022 performance is weak and Meta is having its worst week ever

News Summary:

  • This week’s third-quarter financial results were released against a backdrop of rising inflation, rising interest rates and the threat of recession. Apple bucked the trend by beating revenue and profit expectations. Shares posted their best day in more than two years on Friday.

  • Alphabet, Amazon, Meta and Microsoft have lost more than $350 billion in combined market capitalization after commenting on the third quarter and the rest of the year. Between slowing revenue growth – or a slump in Meta’s case – and efforts to control costs, the tech giants find themselves in an unfamiliar position after the unbridled growth of the past decade.

At the other end of the spectrum is Meta, whose stock price fell in 2022. Facebook’s parent company lamented a lack of revenue, posted its lowest average revenue per user in two years and said fourth-quarter revenue will likely fall for a third straight quarter.

Meta’s shares have had their worst week since the company went public in 2012, falling 24% in the past five days. Microsoft fell 2.6% this week after the company posted a 7.7% decline on Wednesday after issuing weak year-end guidance and missing its cloud revenue estimate.

“There’s so much going on in the economy and in the world that it’s hard to have a simple, ‘We’re going to do this one thing and that will solve all the problems,’” Meta CEO Mark Zuckerberg said Wednesday on the company’s earnings call.

Amazon is also looking grim, down 13%. The gloomy fourth quarter forecast combined with a sharp decline in the cloud computing segment was the main reason for the sell-off.

While Amazon Web Services saw a 27.5% slowdown in scaling from 33% in the prior period, Google’s cloud group, which is much smaller, accelerated to nearly 38% from about 36%. Google plans to continue investing in the cloud, even as it intends to curb overall employee growth over the next few quarters.

“We’re excited about this opportunity as enterprises and governments are still in the early stages,” said Ruth Porat, Alphabet’s chief financial officer. to leverage the public cloud, and we continue to invest accordingly. “We remain focused on the long-term path to profitability.”

The results of the rest of Google parent Alphabet, however, are less impressive. The company’s core advertising business grew only modestly, and YouTube’s ad revenue declined year-over-year. The opposite is true for Amazon, which is catching up to Google and Facebook in digital advertising. Amazon’s advertising business saw revenue growth rise from 21% to 30%, beating analysts’ estimates. “Advertisers are looking for effective advertising, and our ads are at the point where consumers are willing to spend money,” said Brian Olsavsky, the company’s chief financial officer. “We have a lot of advantages that we believe will benefit both our consumers and our partners like vendors and advertisers.”

Raymond James analyst Aaron Kessler lowered his price target on Amazon shares to $130 from $164 after the results. Still, he maintained his “buy” rating on the stock, saying the company’s “strong advertising growth” will likely help boost Amazon’s margins.