Big Tech results: Google, Microsoft disappoint and all eyes are on Meta in testing economy

Big Tech is in the spotlight this week as the four most valuable companies in the United States and Meta, will report how they have fared this quarter amid the global economic turmoil.

Google’s parent company Alphabet and Microsoft reported growth slowdowns on Tuesday but it isn’t all doom and gloom. Now all eyes are on Meta, formerly known as Facebook, which will release its results on Wednesday.

The social media giant is under pressure after a 50 per cent stock drop this year, meaning the company’s market cap has sunk below $500 billion (€492 billion), making the company worth less than Tesla.

Apple and Amazon wrap up the week when they release their results on Thursday.

Rising interest rates and inflation and recession fears have pounded the tech sector this year.

On Tuesday, Alphabet reported weaker-than-expected earnings and revenue for the second quarter. The company said adjusted earnings per share hit $1.21 (€1.19) during the second quarter, compared to the expected $1.32 (€1.30).

Google’s ad business

Revenue growth also slowed to 13 per cent in the quarter from 62 per cent a year earlier, when consumer spending was higher after COVID-19 lockdowns lifted.

But investors focused elsewhere, notably on Google’s ad business which beat targets, despite “uncertainty” in the economy, which Alphabet executives sounded cautioned on a call with investment analysts.

Alphabet reported second-quarter revenue of $69.69 billion (€68,66 billion), 81 per cent coming from Google’s ad business, and nearly in line with the average expectation of $69.88 billion among investment researchers tracked by Refinitiv.

By contrast, shares of Snap fell more than 25 per cent last week after the company missed sales expectations and warned of an ad market slowdown.

Alphabet executives said Google was not immune to the pullback, which has been brought on by clients facing product shortages, less demand and a variety of other factors.

Rising wages, as well as rising prices of fuel and other items, have forced some ad buyers this year to pare marketing.

Not so cloudy for Microsoft

Meanwhile, Microsoft reported its slowest revenue growth since 2020. The US tech giant reported a profit of $16.7 billion on revenue of $51.9 billion (€50 billion) for the quarter.

It blamed changing exchange rates and challenges in advertising as well as suffering personal computer sales due to production holdups in China and lower demand.

But Microsoft’s forecast revenue this fiscal year would grow by double digits, driven by demand for cloud computing services Azure.

The strong outlook shows Microsoft continues to benefit from the pandemic-led shift to hybrid work models and comes at a time when investors are bracing for an economic downturn, with inflation soaring and consumers cutting spending.