almost 2 years ago • 3 mins
What does this mean?
Amazon Web Services – the cloud segment that makes up around three-quarters of the company’s total operating profit – continued to steal the show last quarter, growing revenue by a better-than-expected 37% from the same time last year. If only the rest of its results could’ve matched up: the company’s ecommerce revenue climbed just 3%, while its overall sales forecast was hobbled by the prospect of high inflation. That worried investors, who initially sent its stock down 9%.
Apple, meanwhile, smashed it: sales of almost every product grew, while a record number of customers upgraded to a newer iPhone model. That meant the company had plenty of people to offer things like Apple Music and Apple TV, which might be why revenue from its services segment was up 17% – and why total revenue was up 9%. It threw in a $90 billion share buyback program too, and investors initially sent its stock up 2%.
Why should I care?
Zooming in: AWS FTW.
Amazon’s convinced that AWS has more room to grow, and it might be right: only between 5% and 15% of all corporate tech spending goes to the cloud right now, and the industry’s only becoming more important in a post-Covid world. Amazon, then, has said it’s prepared to strike “deals of all sizes” to build out the segment and keep making the most of the expanding market.
The bigger picture: Phones down, please.
Apple’s iPhone sales are all the more impressive when you consider data out last week, which showed that global smartphone shipments fell 11% last quarter from the same time the year before. That’s largely on the back of lockdowns in China, but Bloomberg analysts think global demand will be dented by inflation this year even if the country lays off its zero-Covid policy.
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Unilever reported better-than-expected results on Thursday, proving that it pays to do the right thing by your customers.
What does this mean?
All credit to Unilever, it’s been trying to keep prices down: it’s been substituting hard-to-come-by ingredients – like oils, whose supplies have been badly impacted by the war – with cheaper alternatives. But the company’s philanthropy could only go so far, and it felt obliged to raise its prices by over 8% last quarter to make up for higher energy, workforce, and transport costs. That boosted sales in its personal care, home care, and foods segments, and pushed up overall sales by an expectation-busting 7% last quarter. Unilever also projected full-year revenue growth at the higher end of its previous forecast, which investors appreciated: they sent its shares up on the news.
Why should I care?
The bigger picture: Unilever’s Catch-22.
Thing is, the uptick in Unilever’s revenue came from the price hikes alone, with its customers buying fewer products than at the same time in 2021. And even then, those price hikes only covered about two-thirds of its cost increases, which means the company had to absorb the rest to the detriment of its bottom line. That could leave Unilever in a Catch-22 if prices keep rising: absorb even more costs to keep customers, or hike prices again and risk losing them.
Zooming out: The US economy just shrank.
Unilever’s results suggest customers are so squeezed that they’re ditching must-haves, not just the nice-to-haves that usually get the chop in tight times. And that’s showing up in broader metrics, with surprising data out on Thursday showing that the US economy shrank last quarter for the first time since mid-2020. Higher prices and a spike in Covid cases at the start of the year impacted activity across the board: consumer spending grew by less than expected, businesses stocked up on fewer products, and government spending dried up.
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