Biggest tech companies learn about austerity, to investors’ relief

“You don’t need a lot of good news for stocks to outperform,” Mahaney said.

But shares of several of those companies fell in after-hours trading Thursday night after reporting disappointing results for the last quarter, making it clear that the technology’s business challenges remain.

On Thursday, Google reported its second ever drop in advertising. Amazon said its lucrative cloud computing business slowed and sales in its core e-commerce business declined. And Apple recorded its biggest drop in iPhone sales for the Christmas season since 2018.

Earlier today, Meta announced that its sales in the last three months of last year had fallen by 4%. Last week, Microsoft said spending on cloud computing was weakening.

The market’s reaction to weak tech earnings could be an indication of what’s to come for the economy as a whole. Economists are trying to assess whether the economy can avoid a deep recession and achieve what some call a soft landing. If tech, as the biggest industry to weaken last year, bottoms out and begins to rebound, it would be an illustration of the relative strength of the broader economy, Jason Furman said. economist at Harvard.

“Six months ago the economy was contracting and interest rates were rising, and there was a rebalancing away from the pandemic,” Furman said. “That perfect storm,” he added, “is no longer real.”

Alphabet, Amazon and Apple all released quarterly results on Thursday that fell well short of Wall Street expectations. Alphabet posted its fourth straight decline in profit as it grappled with a slowdown in digital advertising. Ad sales for YouTube, Google’s video platform, fell nearly 8% to $7.96 billion, below the $8.2 billion expected by analysts.

As Google’s sales slow, Pichai said, the company is making various efforts to rein in spending. These include improving the financial performance of its phones and other gadgets, trying to make its cloud division profitable and boosting YouTube’s business.