Mega-Cap Tech Stocks Report Mixed Earnings in Q4 2022

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As the team's Capital Markets Analyst, Jacob conducts market and investment research and assists in the development of business strategy to serve our clients more effectively.
February 7, 2023

Last Thursday Apple, Amazon, and Google reported fourth quarter 2022 financial results. Broadly results came below estimates on weaker economic conditions yet not every mega cap tech company stock fell in value.

Apple reported negative year over year revenue growth for the first time in years on weaker iPhone sales. Apple in the fourth quarter struggled with lockdowns and worker strikes in China, which is where most of their iPhones are produced, coupled with weakening consumer spending.

The Chinese iPhone plant, Foxconn, reported 48% year over year revenue growth over the same period.

China’s reopening and cooldowns at Chinese plants overall bodes well for Apple’s near-term future.

Google reported 1% year over year revenue growth mainly because of the robust growth in Google’s Cloud and Google Play platforms.

Advertisers have had a hard time in 2022 as businesses pulled back on spending or shifted ad spending around.

Out of the three that reported on Thursday Google and Apple stock performed the best, with Apple being up on Friday.

Amazon reported a net loss of one billion dollars and warned of a period of reduced growth and signaled that the difficult economic environment is denting the performance of its cloud business.

Amazon has long relied on its cloud-computing arm, Amazon Web Services, as a driver of profit, especially when the retail operations are struggling. But AWS sales growth slowed to 20% in the most-recent quarter, the lowest growth rate since Amazon began to report the segment.

Of course, 20% growth rates are nothing to shy away from, the current market environment favors companies that have stability and certainty.

Shares in Amazon fell around 5% on Friday.

Overall, after 50% percent of companies have reported, earnings are coming in worse (as expected). Around 70% of companies reported earnings above estimates but by only 0.6%, versus the 77% and 8.6% averages, respectively.

As a result, the index is reporting lower earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. The blended earnings decline for the fourth quarter is -5.3%, compared to an earnings decline of -5.1% last week.

All in all, as long as companies are reporting within the scope of estimates, the markets should hold steady or rise in the coming year.

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