From the strong dollar to advertising to costs. There are some common points emerged from the Big Tech quarterly reports published this week and identified by Gabriel Debach, eToro market analyst.
First of all, the strong dollar which impacts on the accounts of technology companies. The strong appreciation of the US dollar is being felt on the accounts. More and more US companies are drawing investor attention to data that eliminates the negative impact of exchange rates. The words “constant currency” (constant-currency basis) are becoming more and more present in publications, in order to use a more “diplomatic” language to mitigate the negative effects on the accounts.
Second, the falling advertising: the worsening of the risks of an economic recession generally leads to a reduction in marketing expenses, the first expenses to be cut. Many American Techs are well aware of this, and find their business model in online advertising. To aggravate the context, the Crypto winter and the reduction in the expenses of the sector. This situation does not exempt YouTube, which has recorded the largest decline since the parent company started reporting the financial performance of the division in 2020. Advertising drops also featured for Meta’s social media, which recorded its second consecutive quarter of declining revenues and provided a gloomy outlook for the fourth quarter.
Third, the fact that even the big tech companies are not immune fromcurrent macroeconomic storm. The effects of a possible recession also affect large American companies. Amazon has revised growth downwards, due to the business cycle, as shoppers will cut their spending in the face of economic uncertainty. In Wednesday’s session, GAFAM shares underperformed the S&P 500 by 4. 94%, noting the second largest correction ever. The response of the markets to the readings of the financial statements for its Big is clear: only by counting 6 companies (Alphabet, Microsoft, Meta, Tesla, Amazon, Apple), from 19 October to 27 October about $ 284 billion of capitalization were burned, equal to approximately 44% of the overall capitalization of the FTSE Mib in Milan.
Precisely on the quarterly front, an interesting starting point – says the expert – comes from those of Enphase Energy. NASDAQ-listed US energy technology company that designs and manufactures software-based home energy solutions covering solar generation, home energy storage, web-based monitoring and control. The post-quarterly stock closed up by almost 10% (+ 65% from the beginning of the year) and reported in communications as follows: “Our revenues in Europe for the third quarter of 2022 increased by about 70% compared to the second quarter of 2022, as countries in the region are accelerating their efforts to address rising energy prices and dependence on fossil fuels ”. In the end, pay attention to costs. Businesses have been hit by inflation and the strong dollar, in addition to uncertain economic outlook, which worries consumers. The pressure on big tech companies to do more with less grew during this week’s disastrous series of earnings reports. Not only growth but also cost reduction, the needs of the markets grow over time.