Are the Q3 results of US tech giants sounding the alarm? The situation is not optimistic

According to the latest news, as the growth of digital activities driven by the epidemic is slowing and advertising sales are further declining, the third-quarter earnings of large US technology companies are expected to slow down, and companies are expected to report a sharp decline in revenue.

Combined revenue growth for the five largest U.S. tech companies — Alphabet, Amazon, Apple, Meta and Microsoft — is expected to slow to just under 10% in the third quarter, according to analyst estimates. That compares with 29% growth for all of last year, when their combined sales soared to $1.4 trillion.

Earnings from these tech giants are being closely watched as a barometer of the broader consumer economy, with online spending and digital ad spending expected to continue a trend that decelerated sharply in the first half of the year.

Shares of the social media company Snap fell 28% on Friday after it reported pressure on its advertising revenue, a potential sign of a broad pullback in spending. Most analysts blamed the disappointment on Snap’s own problems. But company executives also pointed to growing caution from brand advertisers, who have been pulling back on digital ad spending in response to signs of a slowing economy.

Like Snap, Meta has been hit hard by Apple's privacy changes, which have reduced the precision of its ad targeting, and its ad growth has stagnated after surging 37% in 2021.

If, as expected, Meta's third-quarter revenue slips 5%, it will add to concerns after its revenue fell for the first time ever in the three months prior.

In addition to slowing consumption, the latest earnings from big tech companies will be hurt by a surge in the dollar and comparisons to very strong results from a year ago.

Growth at Google parent Alphabet is expected to slow to 10% for all of 2021 from 41% for the full year, though the search business has held up better than other forms of advertising in previous slowdowns.

Amazon's growth slipped from 22% for all of 2021 to 7% in the first half of this year, but is expected to rebound slightly due to the addition of a second Prime Day in the third quarter to boost sales.

The end of Big Tech’s breakneck growth has forced some companies to cut spending and heightened Wall Street’s focus on the industry’s profit margins.

Meta said last month it was implementing a hiring freeze for "most jobs across the company," while Google has closed some underperforming divisions and slowed hiring since July.

Analysts at Boyaa Securities wrote in a note last week that Google’s cost cuts are likely to lag behind its revenue slowdown, causing parent company Alphabet’s reported operating profit margin to fall by more than 4% in the latest quarter.

Editor✎ Ashley/

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