End of euphoria for social media and tech giants

In the series of quarterly results, only Amazon and Apple reassured the market a bit on Thursday with better-than-expected sales, thanks largely to the success of their flagship products. The e-commerce giant reported more than $121 billion in revenue in the second quarter, an increase of 7%. Its shares jumped more than 10% in e-commerce after the close.

“Although inflation drives up the price of fuel, energy and transportation, we are making progress on more controllable costs,” Amazon CEO Andy Jassy said in a statement Thursday. AWS, its cloud service, a world leader in remote computing, brought in $19.55 billion in revenue (+33% year-over-year), but its online sales dropped 4% to $50.9 billion. And its operating profit – a key indicator of profitability – stood at $3.3 billion, half of last year. “It wasn’t a golden quarter,” said Andrew Lipsman, an analyst at Insider Intelligence. “The e-commerce business is struggling to return to positive growth, and the AWS and advertising business is slowing.”

Read too: Amazon’s second-quarter earnings above expectations

The still popular iPhone

Apple on Thursday reported better-than-expected quarterly revenue (83 billion, up 2 percent), thanks to still strong demand for the iPhone. Sales of Mac computers, iPad tablets and connected objects, on the other hand, fell. The apple brand had warned in April that the closure of factories in China because of Covid and the shortage of silicone needed to make chips would deprive it of 4 to 8 billion dollars in revenue. But these logistical disruptions “were less significant than expected”, assured the head of the group, Tim Cook, during a conference call.

For the current quarter, Amazon and Apple have stronger sales figures despite the negative impact of exchange rate effects. Intel had a harder time weathering the turmoil. The US semiconductor giant saw its revenue drop 22% to $15.3 billion and largely revised its annual forecast downwards. At stake, according to the boss, Pat Gelsinger, “the sudden and rapid decline in economic activity”. He also mentioned “execution issues” during a conference call, particularly with regard to product design.

In just a few months, the economic environment of the tech giants has deteriorated radically. The health crisis and confinements have led to an explosion of online habits, from consumption to work and entertainment. Today the digital transition continues – most platforms are gaining new users – but at a slower pace, comparable to before the Covid-19 pandemic.

“Do more with less”

Added to this phenomenon are numerous macroeconomic restrictions, starting with inflation. Google, Meta (Facebook, Instagram), Snap and Twitter, which rely on advertising, therefore suffer from cuts in advertisers’ marketing budgets. Amazon and Apple are dealing with somewhat reduced demand for certain products and supply chain difficulties. The Seattle group, the second-largest employer in the United States behind Walmart, doubled its workforce from 2019 to 2021. It now has 1.52 million people, about 100,000 fewer than at the end of the first quarter.

Read too: Alphabet’s lower net income in the second quarter

Other tech companies have moved to slow the pace of hiring, such as Google, Microsoft and Snap. The e-commerce platform Shopify thanked 1,000 people, or 10% of the workforce. Netflix, which lost nearly a million subscribers between the end of March and the end of June, laid off more than 400 employees in the same period.

“We’re going to have to do more with less,” Meta boss Mark Zuckerberg said Wednesday after the social media giant saw its quarterly revenue drop for the first time in its history. “Meta is losing control of its huge audience,” said Insider intelligence analyst Debra Aho Williamson.

Read too: Meta’s quarterly revenue drops for the first time in its history

Social platforms are trying to stay ahead of stiff competition from the popular app for teens and young adults TikTok. Google has recorded the slowest revenue growth rate since the second quarter of 2020, when advertisers abruptly closed the floodgates at the start of the pandemic.

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