Technology bellwethers Apple Inc., Amazon.com Inc. and Alphabet Inc. posted results Thursday that show an economic slowdown is throttling demand for everything from electronics and e-commerce to cloud computing and digital advertising.
(Bloomberg) — Technology bellwethers Apple Inc., Amazon.com Inc. and Alphabet Inc. posted results Thursday that show an economic slowdown is throttling demand for everything from electronics and e-commerce to cloud computing and digital advertising.
Apple’s sales fell more than analysts predicted during the holiday quarter, slammed by slack purchases of iPhones and Macs. Amazon’s revenue was trimmed by soft consumer demand for products sold online and slowing growth in a once-booming business that provides remote computing power to companies. Alphabet’s results missed estimates after customers curtailed orders for ads that appear alongside online search results.
“The war in Ukraine, inflationary pressures, economic uncertainty and macroeconomic headwinds kept the consumer sentiment weak in 2022 while smartphone users reduced the frequency of their purchases,” Harmeet Singh Walia, a senior analyst at Counterpoint Research, wrote in a report on Apple.
The tech industry is facing a harsh new reality after the flush years of the pandemic, during which electronics flew off the shelves and demand surged for more computing storage as people worked and went to school at home. Now, with the US Federal Reserve steadily raising interest rates to control inflation, combined with slowing economic growth, consumers and business are tapping the brakes.
Economic weakness also affected business demand for ads and cloud computing, said Mandeep Singh, technology lead at Bloomberg Intelligence. The sluggish economy was most evident at Alphabet “as they called out advertisers pulling back, echoing what other ad vendors have said,” he said in an interview. “Cloud consumption is coming down, though growth rates are still higher there.”
As the US markets opened Friday, Amazon shares fell 4.7% and Alphabet lost 3.7%. Apple was little changed. That helped send the Nasdaq 100 lower, reversing the Thursday rally led by Meta Platforms Inc., whose results emphasized cost cuts and tens of billions of dollars in share buybacks.
The three companies emphasized ways they’re working to move past the slump. Alphabet Chief Executive Officer Sundar Pichai leaned heavily into artificial intelligence as a way to improve search results and other products. Starting this year, DeepMind, a division focused on AI research, will be included in Alphabet’s corporate costs. That will show how the technology is being incorporated into other businesses — rather than just Alphabet’s “Other Bets” division — the company said.
“I’m excited by the AI-driven leaps we’re about to unveil in search and beyond,” Pichai said in a statement.
Part of Apple’s weakness last quarter was the result of supply-chain constraints, particularly in China, where Covid-related lockdowns impeded production while also keeping consumers out of stores. Apple CEO Tim Cook said a loosening of Covid rules in China — one of Apple’s biggest markets — is helping brighten his outlook.
“When you look at the opening that started happening in December, we saw a marked change in traffic in our stores as compared to November — and that followed through to demand as well,” Cook said on a conference call with analysts. Production “is now back where we want it to be,” he also said.
Amazon CEO Andy Jassy zeroed in on the company’s efforts to slash costs, reversing the massive ramp-up in hiring and spending prompted by the boom in online commerce that accompanied the pandemic.
“I think probably the No. 1 priority that I spend time on with the team is reducing our costs to serve in our operations network,” Jassy told analysts on a call.
Alphabet Chief Financial Officer Ruth Porat also told investors that the company will “meaningfully” slow the pace of hiring this year. Alphabet and Amazon have announced major layoffs in recent weeks.
(Updated with economic context in the fourth paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.