“This week will go down in the history of financial results as one of the worst for ‘Big Tech’, even as a turning point”said analyst Dan Ives of Wedbush Securities on Thursday.
Alphabet, the parent company of Google, registered in the third quarter the lowest growth in its turnover since 2013, except for the time of the pandemic.
Microsoft, driven by cloud computing, posted strong quarterly results on Tuesday but issued a warning about the growth of its Azure platform for this sector.
Meanwhile, Meta (Facebook, Instagram, WhatsApp, Oculus) was a “disaster,” according to Ives. Its titles fell almost 25% this Thursday compared to the end of Wednesday, after which it published its quarterly results that accounted for profits divided by half (4.4 billion dollars, -52%) compared to the same quarter of 2021.
The immense deployment of resources to build a parallel universe -the “metaverse”- that is accessible via augmented and virtual reality, generates more and more skepticism among the firm’s observers, at a time when inflation and increases in interest rates to contain it, they increasingly erode companies’ margins.
“There is no information about the potential in terms of income that Meta could obtain from the metaverse. Nobody knows,” said Debra Aho Williamson, an analyst at Insider Intelligence.
“Google has a better chance of rebounding quickly, because its search engine has been a mainstay of the Internet for decades, both for consumers and for businesses. Its economic model is not broken,” he adds.
In the face of economic difficulties in the world, many advertisers cut their marketing budgets and that affects companies that derive the bulk of their income from Internet advertising.
Snapchat suffers in particular: despite the fact that the number of users is growing, the application is considered an experimental communication channel.
Meta for its part sold 17% more advertising space in the third quarter, but the average price fell 18% compared to the same period last year.
“We knew that advertising spending in the world would go down. But I think the worst is over,” said Tejas Dessai, an analyst at Global X ETFs.
Silicon Valley also suffers from the comparison effect with 2021, when the pandemic favored online business.
But one of the factors that hits the big platforms the hardest will not go away easily: the ultra-popular TikTok is gaining more and more ground.
In 2021, this entertainment app overtook Google as the most popular website in the world, according to Cloudflare.
Google and Meta copied the TikTok format with “shorts” and “reels”, respectively, but for now they are unable to turn their investments into profits in this section.
“More than 140 million reels run on Facebook and Instagram every day, 50% more than six months ago,” Facebook number one Mark Zuckerberg said however. “And we think we gained market shares in the past tense (versus apps) from competitors like TikTok,” he added.
“TikTok is a fearsome competitor, but in terms of ad revenue, there is no comparison,” says Debra Aho Williamson. Industry veterans are “still far ahead.”
In the area of electronic commerce, the American online commerce giant Amazon registered a 9% contraction of its net profits in the third quarter compared to the same period last year, as well as a lower turnover than expected by the market, according to its results published on Thursday that also shook the stock market.
The market reacted very poorly to these numbers, with Amazon stock down more than 19% in after-hours electronic trading.
For its part, Apple exceeded market expectations with 90,000 million dollars in revenue and 20,700 million net income in the third quarter, but sales of iPhone, its flagship product, disappointed.
In the fourth quarter of its fiscal year, the third of the year, the Californian group sold smartphones for 42.6 billion dollars, below the 43 billion expected by analysts.
Its shares dipped slightly in off-hours electronic trading on Wall Street to settle at $143.60, close to their closing price for the day.
Source: Ambito
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