The latest quarterly results season generally did not go down well with investors
Thursday 05 May 2022 Author: Steven Frazer

Global investors had been hoping that big tech earnings would put the brakes on sliding stock markets, but it hasn’t quite worked out that way.

Now we’ve heard from marquee companies such as Alphabet (GOOG:NASDAQ), Amazon (AMZN:NASDAQ), Apple (AAPL:NASDAQ), Facebook-owner Meta Platforms (FB:NASDAQ) and Microsoft (MSFT:NASDAQ), it’s clear that even stock market superstars are dealing with a pandemic hangover.

This has been compounded by inflationary pressures and difficulties in getting all the right parts and products to do business smoothly, among other factors.

It was a point made firmly by Apple chief executive Tim Cook who said, ‘I want to acknowledge the challenges we are seeing from supply chain disruptions driven by both Covid and silicon shortages to the devastation from the war in Ukraine.’ He told analysts and investors on 28 April: ‘We are not immune to these challenges.’



SOFTENING GUIDANCE

The latest figures from Amazon, Apple, Microsoft and Google-parent Alphabet were poorly received by investors, even though some of them beat expectations on certain key metrics.


AMAZON

Amazon’s shares fell by 12% on 29 April after the company posted its first quarterly loss since 2015.

This was primarily caused by falling sales from its online retail business and a markdown in the value of its investment in electric truck maker Rivian (RIVN:NASDAQ) whose share price has fallen by 69% year-to-date.

Amazon’s operating cash flow collapsed by more than 40% and its AWS cloud platform saw growth fall behind Google and Microsoft.

Sales at the online retail colossus were in line with analyst expectations but chief executive Andy Jassy warned of testing times in the months ahead, unsurprising given the pressure on consumer spending from a higher cost of living.

This was an unpleasant cocktail for investors to swallow, and Amazon saw $177 billion wiped off its market value in a single day.

APPLE

On the same day, Apple’s shares fell 1% after it warned of a possible $8 billion hit from supply issues. That’s despite a positive past quarter where revenue rose 9% to $97.3 billion, delivering net profit of $14.4 billion.

Apple’s services arm which includes music and TV streaming saw an 17% increase in revenue to $19.8 billion with margins of 72.6%. Revenue from core hardware products including iPhones, iPads and Mac laptops rose but $14.26 billion of the $14.4 billion net group profit came from the services arm.

META PLATFORMS

Meta Platforms bucked the trend with a positive market reaction to its latest numbers, helping to make up for recent disappointments.

Three months ago, the Facebook parent reported its first sequential decline in daily active users and weaker-than-expected revenue guidance. That saw the share price fall 27% in a single day.

Active users rebounded slightly in the most recent quarter, yet expectations were so low that this was enough to convince investors that Facebook was not dead. Even though revenue missed expectations, the stock jumped 18%.

Meta has guided for $28 billion to $30 billion revenue in the second quarter. The low to middle points of that range would equate to a slight drop from the same period in 2021 when sales were $29.1 billion.

Total revenue for the first quarter was $27.9 billion, a 7% gain year-on-year which is the slowest pace of expansion in Meta’s 10-year history as a public company.

ALPHABET

Even Google’s parent Alphabet could not beat all the key forecasts. There was a hit at the revenue level as YouTube advertising income faced stiffer competition from TikTok and others.

Management announced a $70 billion share buyback that clearly went a long way in calming investor nerves that might otherwise have frayed.

MICROSOFT

Microsoft’s results were more encouraging. Its first quarter revenue and profit beat expectations, with earnings of $2.22 per share (forecast: $2.19) and revenue of $49.4 billion (forecast: $49.1 billion).

Chief executive Satya Nadella brushed aside macroeconomic concerns and said in an inflationary environment software is ‘the only deflationary thing’.

Cloud growth remains key with total revenue growth at Azure and other cloud services up 46%.

While Microsoft’s shares initially dipped on the results, they’ve since jumped by 5% from the low on 26 April.

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