High-flying tech giants not immune to turbulent times

SAN FRANCISCO

Tech giants that saw good times during the pandemic are dealing with a “hangover” compounded by inflation and the war in Ukraine, analysts have said after earnings released this week.

Amazon, Apple, Meta and Google-parent Alphabet released figures for the first quarter of this year that showed they are not impervious to turbulence roiling global markets.

“I want to acknowledge the challenges we are seeing from supply chain disruptions driven by both COVID and silicon shortages to the devastation from the war in Ukraine,” Apple chief executive Tim Cook said on an earnings call.

“We are not immune to these challenges,” he continued.

While the U.S. tech titans brought in billions of dollars and reported earnings in line with lowered expectations, some saw shares slip on forecasts that the troubles were not going away soon.

The firms may be feeling a bit of a “post-pandemic hangover,” according to eMarketer analyst Paul Verna.

Rapid growth seen during the pandemic was not sustainable, and tech firms should have better anticipated that, he added.

Amazon posted its first quarterly loss since 2015 and warned of continuing challenges in the months ahead.

The e-commerce giant said it lost $3.8 billion in the first three months of the year.

Chief executive Andy Jassy warned of testing times in the months ahead, citing pressure from the war, inflation, labor costs, and the pandemic.

Apple reported better-than-expected profits amid continued robust consumer demand, but warned that the China COVID lockdown and ongoing supply chain woes would dent June quarter results by $4 to $8 billion.

Executives said the difficulties of the pandemic have returned with a vengeance since the reporting period ended.

“Supply constraints caused by COVID-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products,” Chief Financial Officer Luca Maestri said.

The impact will depend on the speed of the ramp-up of production in the Shanghai area, where factories have recently begun to reopen after a lockdown, Cook said.

Alphabet and Facebook parent Meta rely on digital advertising, and their earnings reports showed that marketers are becoming more careful with their budgets.

Both Silicon Valley firms vowed to be more mindful of costs.

Alphabet and Meta are looking to ride the TikTok-led trend of streaming video snippets with similar offerings of their own, called respectively Shorts and Reels, but that format is tough to monetize.

Insider Intelligence principal analyst Andrew Lipsman said while Google’s search business remained a “bright spot” at the company, earnings at video-sharing website YouTube were “a big miss.”

“TikTok has become a significant competitive threat,” he said of the pressure on YouTube.