The anticipation of Big Tech’s second-quarter earnings was palpable.
With a broad set of indicators pointing to a slowdown in the global economy, the highest inflation in four decades, and a huge jump in interest rates, there was every reason to hope that tech gains could be another data point in our fragile economic state: dare I say recession?
For some tech companies, it was a tough quarter. Snap SNAP Social Media Companies,
it occurs to me. Intel Chipmaker INTC,
may be at its lowest point.
Others performed much better. ibm ibm,
got things off to a relatively strong start. microsoft MSFT,
and GOOG Alphabet,
missed the estimates by a hair, but largely left investors comfortable with its results. Amazon significantly outperformed the revenue figures and Apple AAPL,
top numbers across the board.
It was a mixed bag of results that left perhaps as many questions as answers. But in short, the big wave of tech gains this quarter made that abundantly clear. Based on a combination of the right products, the right markets, and unrestricted demand that far outweighs any global economic headwinds, certain companies are too big to be hampered by the slowdown.
The following four companies have the ingredients that will make them too big to fail, and therefore they should remain the best in the long run, even when technology trading is unpopular.
After the big surprise to the downside in the first quarter, Amazon showed discipline and strength. The company was right-sized for a post-pandemic cycle, but saw revenue rise and guidance looked even better, especially after seeing the strength of July’s Prime Day event. Profits still hampered by Rivian RIVN,
investment. But the markets looked beyond that, and the company even deployed part of its Rivian fleet last month — encourage sustainable ambitions, that continue to impress. The company also alleviated any “cloud growth woes” that might have existed, as its Amazon Web Services business saw 33% growth and hit a cut of almost $20 billion per quarter. Amazon was also buoyed by strong growth in its advertising business, with low double-digit growth but showing more signs of Amazon, along with Alphabet finding preference over Meta as advertisers pull back, but not from its most popular platforms. important.
A failure is a failure, but Microsoft’s six-cent-a-share failure was due precisely to a combination of foreign exchange-related closures and China and the ongoing impact of Russia/Ukraine. Still creating $2.23 per share in EPS and growing double digits over last year’s record results, Microsoft is exposed to both businesses and consumers, and its results indicate the company is more than certain to weather any impending economic storm. Forty percent growth in Azure kept Microsoft as the fastest-growing public cloud company and, like AWS, was down only slightly from recent quarters. The company also saw strong growth in its cloud ERP, search and advertising business, and even in the Surface business, which was unaffected by rapidly deteriorating demand in the PC space.
After Snap hesitated, the market was ready to throw the baby out with the bathwater. While Alphabet, like Microsoft, also missed estimates, it was a mistake that hardly worried investors as shares rallied after earnings crossed the line, largely because the ad business Alphabet core showed strength. The shrinking ad spend seemed to be no match for Google Advertising as the business grew double digits year over year and showed much greater resilience than its counterparts, especially Meta. What became immediately apparent is that Google and YouTube advertising are fighting better against macro trends and competition from Tik Tok, which is proving formidable. Google’s cloud business also kept pace with AWS and Azure, growing over 30% and further demonstrating that the cloud as an operating model has economic tailwinds that will remain strong in turbulent markets.
A new iPhone is always a good thing for Apple. And the Taiwan TSM Semi,
earnings comments should have been enough to indicate that Apple would do well. The weaker iPad and Mac numbers align with a broader pullback from the consumer and PC market. However, even with the alarms raised by Apple due to China’s ongoing shutdowns, Apple has, once again, delivered. With margins beating expectations and services revenue now reaching nearly $20 billion this quarter, Apple is also showing that its strength isn’t just in its devices. The service portfolio, along with its growing content business, is working. And the guidance provided by CEO Tim Cook was “full throttle” in so many words, which should have given investors something to smile about heading into the coming quarter.
Daniel Newman is the principal analyst atFuture Research, which provides or has provided research, analysis, advice or consulting to Nvidia, Intel, Qualcomm and dozens of other companies. Neither he nor his company hold capital positions in the aforementioned companies. Follow him on Twitter@danielnewmanUV.