By José Torres
For the fourth quarter, Apple, Amazon, and Alphabet all reported varied earnings and revenue numbers, but a rising concern about consumer weakness and the difficult economic environment was shared by all three digital giants.
Apple’s fourth quarter revenue declined 5% year-over-year (y/y), its first quarterly decline since 2019. Its profits fell even more, dropping 13% y/y. Its results were hurt by a strong U.S. dollar, production issues in China and a weakening economy. Apple Chief Financial Officer Luca Maestri said the company expects revenues in the current quarter will experience a similar decline, driven by weakening sales of its Mac, iPad and iPhone products. On a bright note, the company expects sales of its services, such as streaming music and Apple TV, to increase.
Unlike Apple, Amazon grew its fourth quarter revenue, but at only 9%, an anemic rate for the company as inflation put a dampener on consumer spending. Amazon expects its first quarter revenue to grow between 4% and 8% and the company is bracing for an economic slowdown. It recently announced that it is laying off 18,000 jobs, which followed other layoffs in November.
Alphabet also contributed to concerns about challenging business conditions when it reported flat revenue growth for the fourth quarter with advertisers curtailing spending. Alphabet’s Google division saw advertising revenues dropped 3.5% y/y. Like many other tech companies, Alphabet is cutting expenses, including reducing its real estate footprint and laying off 12,000 employees.
The disappointing reports come just after Meta announced better-than-expected fourth quarter results. Even though the company’s revenues declined and its profits tanked 55% in the fourth quarter, Meta’s results were better than expected by analysts.
Perhaps one encouraging factor that differentiates Meta from other big tech companies is the collective clout of scantily clad fitness gurus, cats appearing to fly across living rooms and home improvement experts demonstrating seemingly miraculous labor-saving tips can play in generating attention. Those types of entertainers and a wide variety of other attention grabbers on Meta’s Reels videos from Instagram generated twice the level of engagement in 2022 than in 2021. Facebook is now working on monetizing the engagement.
(Author is Senior Economist at Interactive Brokers)