Over the next three days, investors will be bombarded with June quarter earnings reports from the biggest and most important players in the sector.
(stock ticker: MSFT) and
(GOOGL) will report the results. Wednesday,
(META) will be in the spotlight, but we’re also getting results from
) And the
(shop), among others. Thursday is getting faster, with results from
There are specific story lines for each of these companies, but that’s a quarter when the real focus is on the big picture. Here are some key issues to track for the next few days:
How bad is the online advertising environment? last week,
(SNAP) stock fell nearly 40% in a single day after Snapchat’s father simply posted Terrible June Quarter Results, while declining to provide any guidance at all for the September quarter. Those results raised new concerns For online advertising status only. There are actually three separate but intertwined issues here. Apple’s campaign to share information about the sites and apps that iPhone users visit continues to make targeting more difficult. Also, advertising budgets tend to shrink in economic downturns – and digital advertising is no exception. And third, competition for ad dollars is growing, particularly from TikTok, but also from Amazon and Apple, both of which have smaller but growing ad arms. Keep in mind that not all online businesses that rely on ads will be affected to the same degree: the consensus on the street is that ads displayed on Meta may be more susceptible to infection than Google search ads.
Will spending on the cloud hold up? The three largest public clouds include Microsoft Azure, Google Cloud, and Amazon Web Services. Until very recently, the thinking on the street was that these companies would just explode during a downturn, as companies in the midst of “digital transformations” shift more of their IT budgets to the cloud. But there is a risk here that cloud customers may cut back on their spending — or at least slow spending growth — as the economy slows. Among other things, these cloud companies serve social networks, video streaming sites, and e-commerce services, all of which have slowed their business. Any serious failure in this area – particularly by Azure and AWS – would not do well with investors.
What are the prospects for e-commerce? Shopify results could be available on Wednesday early peek on how badly Amazon’s e-commerce arm fared in the June quarter. The good news is that expectations are low — Amazon will almost certainly show a year after year decline in revenue from its online store. Comparisons with last year’s more robust online retail environment remain tricky. Retailers – both online and offline – will be looking for clues to the state of consumer demand in a race for higher interest rates, spiraling inflation, and spreading recession fears.
Great Dollar: One of the reasons why most Street estimates for the June quarter look so high is the significant appreciation of the US currency against the rest of the world’s currencies. Many companies were expecting the currency to be headwinds in the 2-4 percentage point range, but the impact of a stronger dollar would be much higher than it would for many.
International Business Machines
) was expecting a 3 to 4 point coin pull, for example, and reported hitting 6 percentage points. The backsliding that gets less attention is that European companies are getting a huge currency tailwind, as revenue received in dollars translates into more euros. For most companies, “constant currency” revenue is higher than the GAAP score; The opposite is true for European companies such as
(SAP) that received 8 percentage point increase on the June quarter earnings.
How bad is the demand for computers and smartphones? Recent data from market research firms such as IDC and
with comments from
(MU), indicates that sales of both computers and smartphones greatly diminishedAnd for a few reasons. Consumers have carried on new devices during the pandemic, which at this point do not need to be replaced. Concerns about recession, inflation and a somewhat tighter job market are worrying consumers and a more conservative approach to buying. We’ll get new data on this front from Microsoft, Intel, Qualcomm, Apple — and from the peripheral company
(LOGI), which announces results early Tuesday.
What about the IT demand in the enterprise? Both IBM and SAP said demand remains strong overall, although there are crosswinds and complications, including the industry’s withdrawal from the Russian market and ongoing currency issues. There should be some updates on this front from Microsoft’s results on Tuesday, with more data to follow on Wednesday from
(Currently). Shares of the cloud-based software provider sold off recently when CEO Bill McDermott appeared on CNBC and warned that it would take longer to close deals in Europe.
Some other things to watch:
) Announcing a deal? The ATM and point-of-sale terminal maker is studying strategic alternatives and is due to report on results on Wednesday. An announcement expected soon. The company can become private.
Will Meta Cut Spending? One way CEO Mark Zuckerberg could revive interest in the company he founded is by cutting his own aggressive spending plans for the metaverse. This may seem like the right moment to focus on core business.
Will Amazon CEO Andy Gacy appear on the company’s earnings call? CEOs of
IBM, Microsoft, Apple, Meta, Intel and Alphabet participate in the quarterly earnings call. But former Amazon CEO Jeff Bezos has skipped his company’s calls, and so far, new CEO Andy Gacy is following the same pattern. That would be a good quarter for him to turn up.
Write to Eric J. Savitz at [email protected]
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