By Abby Wallace
Meta, Microsoft, and Google’s parent, Alphabet, Amazon all showed signs of resilience this week after a bruising period for the tech sector.
After many US tech firms laid off thousands of staff in response to low growth and inflationary pressures, each of these leading tech giants reported quarterly revenues and profits that beat analyst estimates, bumping their shares higher.
Meta’s chief executive Mark Zuckerberg said on Wednesday that AI had helped drum up ad sales by bringing more traffic to Facebook and Instagram. Its total revenue increased by 3 per cent to $28.6bn (£22.9bn) for the quarter – far higher than the company previously anticipated.
Microsoft also beat analyst forecasts, as revenues grew seven per cent to $52.9bn (£42.6bn) due to gains in its cloud services. Its shares — which rose almost nine per cent following the quarterly results — stayed high on Thursday even after the UK’s competition agency blocked its near $70bn deal to acquire Activision.
On the same day, Google’s parent Alphabet announced a $70bn (£56.3bn) share buyback after it reported revenues had exceeded forecasts off the back of growth in its cloud unit.
And late last night, Amazon also announced that profits had surpassed expectations.
But analysts said these firms still have a long way to go to recover to full health.
“The bar was fairly low,” said Michael Hewson, chief market analyst at CMC markets. “We can’t forget a lot of these companies saw really big declines last year. They are rallying off that fairly low base.”
“The guidance is slightly better, but does that mean they’re out of the woods? Not really,” he said.
Danni Hewson, head of financial analysis at AJ Bell, agreed.
“So far big tech has exceeded expectations when it comes to this quarter’s earnings updates, but that doesn’t mean things are all rosy in the sector, in fact it might have a lot to do with the fact that expectations had been set pretty low,” she said.
Beyond the top line figures, Amazon chief executive Andy Jassy revealed that the company would trim spending as companies are still spending more “cautiously” on cloud services.
Google also saw a modest decline in ad revenue.
And while job cuts may have helped Meta, AJ Bell’s Hewson noted that it was “still burning cash on things like its ongoing flirtation with the ‘metaverse’, which investors are deeply sceptical will ever deliver promised returns”.
It also remains unclear whether each of the firms’ respective major investments in artificial intelligence will pay off.
Hewson said these AI investments “could prove to be the next golden goose, but for some it could be a case of kitting the emperor out in new clothes.”
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