Big Tech’s earnings forecast in the second quarter was clear.
With a broad set of indicators pointing to a slowdown in the global economy, the highest inflation in four decades and a major jump in interest rates, there were reasons to expect that tech earnings could be another data point in our fragile economic situation. Is – dare I say recession?
For some companies in tech, it was a tough quarter. social media companies snap snap,
and meta meta,
Come to mind. Chipmaker Intel INTC,
Might be at its lowest level.
Others did much better. ibm ibm,
Started things off with relative strength. microsoft msft,
and the alphabet GOOG,
Missed estimates by a hair but largely reassured investors with its results. Amazon surpassed revenue numbers significantly, and Apple AAPL,
Top number across the board.
It was a mixed bag of results which probably left as many questions as answers. But in short, this quarter’s big wave of tech earnings made it abundantly clear. Based on a combination of the right products, the right market, and demand largely free of any global economic crisis, few companies are too critical to be disrupted by a recession.
The following four companies have elements that would make them too critical to fail and, therefore, remain outperformers in the long run – even if the tech business is unpopular.
After the big surprise first quarter, Amazon showed discipline and strength. The company was sized right for the post-pandemic cycle, but saw revenue pop, and guidance looked even better — especially after seeing the strength of July’s Prime Day event. Profits are still constrained by Rivian RIVN,
Investment. But the markets overtook him, and so did the company. Launched part of its Rivian fleet last month – Advancing sustainable ambitions, who continue to influence, The company also downplayed any “cloud growth woes” that might exist, as its Amazon Web Services business saw growth of 33% and reached a nearly $20 billion-per-quarter clip. Amazon was also fueled by strong growth in its advertising business, posting low double-digit growth but showing further signs of Amazon pulling off advertisers, with Alphabet taking precedence on Meta, but from its most important platforms. No.
Miss is miss, but Microsoft’s six cents-a-share miss was created by a combination of foreign exchange, China-related shutdowns and continued influence from Russia/Ukraine. Still creating $2.23 per share in EPS and double-digit growth compared to last year’s record results, Microsoft is exposed to both enterprise and consumer exposure, and its results indicate the company is ready to weather any impending economic storm. For more than confidence. Forty percent growth in Azure kept Microsoft as the fastest-growing public cloud company, and similar to AWS, it was only a little short of its last few quarters. The company also saw strong growth in its cloud ERP business, search and advertising, and even the Surface business — which was unaffected by the rapid decline in demand in the PC space.
The market was ready to throw the baby out with the bathwater after Snape stumbled. While Alphabet, like Microsoft, missed estimates, it was a near-miss that didn’t bother investors as the stock saw a rebound after crossing the wire — largely because Alphabet’s bread-and-butter. The advertising business showed strength. The slowdown in ad spend seems to have no match for Google Ads as the business grew double-digit year over year and showed a lot more resilience than its counterparts — Meta in particular. It immediately became clear that Google Ads and YouTube are fighting a better battle against the competition from Macro Trends and Tik Tok, which is proving to be formidable. Google’s cloud business also keeps pace with AWS and Azure, growing above 30% and further proving that cloud as an operating model has economic tailwinds that will remain strong in turbulent markets.
A new iPhone is always a good thing for Apple. and TSM of Taiwan Semi,
The earnings comments should be enough to indicate that Apple will do just fine. Weak iPad and Mac numbers align with a broader consumer and PC market pullback. However, with alarm bells raised by Apple due to China’s ongoing shutdown, Apple once again delivered. With higher-than-expected margins and services revenue now reaching nearly $20 billion this quarter, Apple is also showing its strengths not just in its devices. The service portfolio is brimming with its growing content business. And the guidance provided by CEO Tim Cook was in so many words “pedal to the metal” — that should have given investors something to smile about going into the next quarter.
Daniel Newman is Principal Analystexploring the future, which conducts or provides research, analysis, advice or consultancy to companies such as Nvidia, Intel, Qualcomm and dozens of other companies. Neither he nor his firm has any equity position in the companies cited. follow him on twitter@danielnewmanUV,