Misery Loves Tech Companies

Big Tech birds of a feather sure do flock together: Apple, Amazon, and Alphabet all released lackluster results late on Thursday.

What does this mean?

Apple, for starters, reported that iPhone sales stumbled 8% from the same time last year, pinning the blame on the global slowdown and production issues in China. But there was one bright spot: Apple’s active devices hit 2 billion last quarter, validating the firm’s reach and helping its services segment outperform. Still, overall sales were down for the first time since 2019, and earnings missed estimates for the first time in nearly seven years. With that performance, Apple may have to join the Big Tech layoff club sooner rather than later.

Source: Reuters

Amazon didn’t fare much better: investors keep a keen eye on its highly profitable cloud business, so they were turned off when its revenue grew just 20% last quarter. Even a 7% jolt in its ecommerce business and impressive overall revenue couldn’t win them back, especially given Amazon’s rough outlook for this quarter. And not to be left out of the gang, Alphabet reported that its all-important ad business – which runs across platforms like Google and YouTube and makes up the bulk of the firm’s revenue – fell 4% last quarter due to a pullback in ad spending and increased competition from the likes of TikTok. Mix in a worse-than-expected jump in its cloud business, and you get disappointing overall revenue and profit. No happy endings here: investors initially sent the Big Tech trio's shares down after the news.

Why should I care?

Zooming in: Time to Prime.

Amazon Prime’s struggling to get new members in its home market, so it’s turning to new tactics to bring in the dough. It’s introducing fees for grocery orders under $150, and branching out into new areas too: the new “Buy with Prime” service lets other sites use its payment and delivery services for a fee. That won’t just bring in more revenue, it’ll also help fend off similar offerings from rival Shopify.

The bigger picture: Telephone bill.

European regulators are considering making tech giants pay for the internet traffic they generate, in a bid to help pay for the next generation of internet infrastructure. That would be a bummer for belt-tightening tech firms, but music to the ears of telecom companies like Telefonica and Deutsche Telekom.