No boom can last forever, even for the most prosperous companies in the technology industry. Investors punished the largest tech companies earlier this year, wiping out $2 trillion in market value over fears the industry would falter in the face of rising inflation and a slowing economy.
But this week, as the United States reported economic output fell for the second straight quarter, Microsoft, Alphabet, Amazon and Apple posted sales and profits that showed their companies have the dominance and diversity to face the economic woes that smaller companies are facing. hurts.
Microsoft and Amazon proved that their lucrative cloud businesses continued to grow even as the economy cools. Alphabet’s subsidiary, Google, showed that search ads continued to be in high demand from travel companies and retailers. And Apple has warded off a downturn in its device business by increasing sales of apps and subscription services.
Collectively, it was a sign that technology may have already bottomed out and are beginning to recover, said Dave Harden, the chief investment officer at Summit Global, a company near Salt Lake City with about $2 billion in investments that Apple has until its end. property counts.
“These guys still deliver,” Mr. Harden said. “They are acting responsibly and navigating a tumultuous period.”
The better-than-expected results lifted the companies’ stock prices and shocked the stock market, even as Alphabet and Microsoft fell short of Wall Street’s expectations.
The results made it clear that the companies are not immune to issues such as supply chain disruptions, rising costs and shifts in customer spending. But their giant companies are not as vulnerable to the various challenges that crisscross the economy as smaller companies like Twitter and Snap, the owner of Snapchat.
During conversations with analysts, the company’s CEOs warned investors about the coming months, using words like “challenges” and “uncertainty.” Concerns about the economy are leading some of them, including Alphabet, to slow the pace of hiring and take other precautions, but none have said they plan to layoffs.
Sundar Pichai, the CEO of Alphabet, tossed the slowing economy as an opportunity, saying the company would sharpen its focus and be “more disciplined as we go.” He added: “When you’re in grow mode it’s hard to always take the time to do all the adjustments you need to do and moments like this give us a chance.”
In what many investors interpreted as a testament to the industry’s optimism, Microsoft said it expects double-digit revenue growth for the coming year, and Amazon said it expected revenue to rise by at least 13 percent in the current quarter. .
Satya Nadella, Microsoft’s chief executive officer, said the company would invest over the course of the year to acquire stock and build its businesses, while Brian Olsavsky, Amazon’s chief financial officer, said it would stock more products. and would have faster deliveries.
“That’s not a recession forecast,” said Sean Stannard-Stockton, president of Ensemble Capital, a San Francisco-based investment firm with $1.3 billion under management. “If we avoid a severe recession, it is clear that many of these companies will pick up the pace of growth again.”
While Apple and Alphabet didn’t provide guidance, the companies bought back tens of billions of dollars in stock during the period. Apple’s $21.7 billion purchase and Alphabet’s $15.2 billion purchase testified to the companies’ belief that their businesses will continue to grow in the coming years.
Meta, the company formerly known as Facebook, was an outlier among the largest tech companies, reporting the first drop in quarterly revenue since it went public a decade ago. The woes came as a result of increasing competition from TikTok, which has thinned out users and advertisers, and challenges from privacy changes on iPhones implemented by Apple.
According to the market research firm GroupM, the advertising market is expected to grow by 8.4 percent this year and by 6.4 percent in 2023. Facebook’s revenue growth last year, when quarterly revenue rose 56 percent, made it “unbelievable to keep growing,” said Brian Wieser, president of Business Intelligence at GroupM.
Similar challenges have hit the e-commerce market. Convinced that an increase in online orders during the pandemic marked a fundamental change in the way people shopped, Amazon came up with an ambitious plan to open dozens of new warehouses. But now that sales have cooled — with just 1 percent more items sold in the most recent quarter — it has flipped and decided to close, postpone or cancel at least 35 warehouse openings.
Amazon’s smaller e-commerce rival, Shopify, said it would cut about 10 percent of its workforce. Harley Finkelstein, president of Shopify, said this year would be “a year of transition with e-commerce largely resetting” to the growth levels it recorded before Covid-19.
Apple’s biggest obstacle has been its reliance on China to manufacture most of its devices. In April, the company said it would lose about $4 billion in sales due to plant closures in Shanghai, where it manufactures iPads and Macs. But it still managed to increase iPhone sales by 3 percent in the period and set a quarterly record for the number of people swapping Android smartphones for iPhones.
Tim Cook, Apple’s CEO, said Apple saw “a cocktail of headwinds,” including supply restrictions, the strengthening dollar pushing the prices of devices abroad and the slowing global economy.
“If you think about the number of challenges in the quarter, we feel really good about the growth we’ve achieved,” said Mr. cook. He added that the company would invest during a downturn, but that it would be “deliberate to do so with environmental realities in mind.”