Big Tech quartet seek to balance innovation with efficiency in 2023

Mark Zuckerberg

The global markets are busy navigating their way through a flurry of big tech corporate results released on this week. Apple, Amazon and Alphabet (the owner of Google & YouTube) were looking at share price drops of 3-5% after disappointing investors. But Meta experienced a surprise bounce, with share price currently up more than 20%

Apple’s share price took a tumble after the company posted its first revenue decline since 2019. The company blamed supply chain disruption in China for a 5% slide in revenues in Q4, 2022 – down to a paltry $117.2bn. CEO Tim Cook acknowledged that the company is facing “a challenging environment” but sought to paint a positive picture on the results. “During the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base.” At the same time, Cook highlighted the fact that: “We set an all-time revenue record of $20.8 billion in our Services business.”

Alphabet, which recently announced plans to axe 12000 staff (6% of its workforce), also took a beating from the stock markets after reporting weaker than expected ad revenues. For Q4 2022, income dropped 34% year on year to $13.6bn. This was lower than analyst expectations of $15.3 billion. In terms of ad revenue, the company saw a year on year fall in Q4 from $61.2bn to $59bn. YouTube came under the spotlight after revenues dropped from $8.6bn in Q4, 2021 to $7.9bn in Q4 2022. Again, this failed to beat market expectations of around $8.2bn.

Echoing the story at Apple, Alphabet CEO Sundar Pichai attempted to steer the narrative towards more positive news – including plans to release new AI products and features. The company is aiming to release Lambda in the near future, the company’s rival to OpenAI’s headline-grabbing ChatGPT chatbot.

Amazon actually beats analyst estimates, increasing net sales by 9% to $149.2 billion in the fourth quarter, compared with $137.4 billion in fourth quarter 2021. Nevertheless, the company was punished for providing minimal guidance for the coming year and for slower than expected growth at Amazon Web Services.

Amazon CEO Andy Jassy said: “In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon. The vast majority of total market segment share in both Global Retail and IT still reside in physical stores and on-premises datacenters; and as this equation steadily flips, we believe our leading customer experiences in these areas along with the results of our continued hard work and invention, will lead to significant growth. When you also factor in our investments and innovation in several other broad customer experiences (e.g. streaming entertainment, customer-first healthcare, broadband satellite connectivity for more communities globally), there’s reason to feel optimistic about the future.”

Amazon took time out to praise the performance of its streaming division. The company singled out The Lord of the Rings: The Rings of Power for praise, saying it attracted “more than 100 million viewers worldwide to the first season, making it the most watched Amazon Original series in every region of the world. Amazon Studios also announced the all-female slate of directors for Season Two of The Lord of the Rings: The Rings of Power, which is currently in production in the UK.”

In addition to its live sports coverage and original productions, the company also pointed out that it “brought HBO back to Prime Video Channels in the US, after reaching an agreement with Warner Bros. Discovery. For $15.99pm, customers who subscribe to HBO Max have access to 15,000 hours of curated content.”

Over at Meta, the owner of Facebook, Instagram and WhatsApp, markets reacted positively to CEO Mark Zuckerberg’s assertion that 2023 would a “year of efficiency”. The company was also buoyed up by Q4 revenues of $32.2bn. While this is down 4% year on year, it is marginally above analysts’ expectations. If the share price rise sticks, then it will make up for a severe Q3 decline – when investors were anxious about the company’s expensive bet on the metaverse. Like Google, Meta is planning to showcase its AI capabilities in 2023 through the launch of new products.