Across the board earnings beats from the world’s largest tech companies have surprised analysts, as cloud computing and job cuts help bulwark against the bleak economic climate.
Mega cap tech stocks Amazon, Google, Microsoft and Facebook (now Meta) all exceeded Wall Street’s revenue expectations for the first quarter of 2023, driven by better-than-expected growth in cloud computing and resilience in ad sales.
The cloud market leader Amazon Web Services grew sales by 16% to $21.4 billion, while Microsoft’s Azure grew revenue by 27% to $28.5 billion. Even the lagging Google Cloud turned a profit for the first time since inception with sales growing 28% to $7.5 billion.
Tech companies have been expected to struggle to produce revenue growth over the past quarter as the Fed’s record pace of interest rate hikes put the brakes on advertising demand as consumers tightened their belts.
In last year’s fourth quarter results, analysts predicted that cloud revenue growth for AWS, Azure, and Google Cloud would slow, but this week’s results show these fears were not realised.
While ad sales growth contracted marginally for Alphabet, Google’s parent company, revenues still beat estimates as advertising spend retreated back to the market leaders, Meta and Google and away from smaller competitors such as Snapchat and Pinterest.
The boost in earnings comes after a period of much publicised layoffs at the begging of the year in which Amazon cut 18,000 jobs, Microsoft 10,000, Alphabet 12,000 and Meta 21,000. Investors have responded positively to the news of belt tightening, with all companies’ stock prices up between 21%-30% year to date.
Apple, which is regarded as a tech company but whose revenues streams more closely resemble those of a consumer discretionary company, is due to report next Thursday, with analysts expecting a decline in iPhone and Mac sales to result in negative revenue growth.
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