Big Tech wavers on Q3 2022 results as Meta has worst week ever

Except An appleit’s been a brutal earnings week for Big Tech.

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

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

At the opposite end of the spectrum was Meta, whose shares tumbled in 2022. Facebook’s parent company missed earnings, posted its lowest average revenue per user in two years and said fourth-quarter sales were likely to decline by a third consecutive period.

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

Meta shares had their worst week since the company’s 2012 IPO, plunging 24% over the past five days. Microsoft fell 2.6 percent for the week after a 7.7 percent drop on Wednesday after the company gave weak guidance for the year-end period and missed forecasts for cloud revenue.

Things were also gloomy at Amazon, which fell 13%. A gloomy forecast for the fourth quarter, along with a dramatic slowdown in the cloud computing unit, were largely to blame 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 to nearly 38% growth from around 36%. Google plans to keep spending on the cloud, even though it intends to limit overall headcount growth over the next few quarters.

“We’re excited about the opportunity, given that businesses and governments are still in the early days of public cloud adoption, and we’re continuing to invest accordingly,” Ruth Porath, Alphabet’s chief financial officer, said on a conference call with analysts on Tuesday. “We remain focused on the long-term path to profitability.”

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

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

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

As investors continue to move away from technology, they are finding money-making 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 straight weekly gain for the index. Prior to 2021, the Dow had underperformed the Nasdaq for five straight years.

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