The anticipation of second-quarter Big Tech earnings was palpable.
With a broad set of indicators pointing to a slowdown in the global economy, the highest inflation in four decades and a big jump in interest rates, there were many reasons to expect that tech earnings may be another data point of our fragile economic state — dare I say recession?
For some companies in tech, it was a rough quarter. Social-media companies Snap SNAP,
Others performed much better. IBM IBM,
It was a mixed bag of results that perhaps left as many questions as answers. But in short, this quarter’s big wave of tech earnings made it abundantly clear. Based on a combination of the right products, the right markets and unfettered demand that vastly outstrips any global economic distress, certain companies are too important to be hampered by the slowdown.
The following four companies have the ingredients that will make them too important to fail and, therefore, should remain long-term outperformers — even when the tech trade is unpopular.
Amazon
After the first quarter’s big surprise to the downside, Amazon showed discipline and strength. The company right-sized for a post-pandemic cycle but saw revenue pop, and guidance looked even better — especially after seeing the strength of July’s Prime Day event. Profits are still hampered by the Rivian RIVN,
Microsoft
A miss is a miss, but Microsoft’s six-cents-a-share miss was precisely made up of a combination of foreign exchange, China-related shutdowns and the continued impact of Russia/Ukraine. Still creating $2.23 per share in EPS and growing double digits over last year’s record results, Microsoft is exposed to both enterprise and consumer, and its results indicate that the company is more than confident to weather any impending economic storm. Forty percent growth in Azure kept Microsoft as the fastest growing public cloud company, and similar to AWS, it was just a smidge below its past few quarters. The company also saw robust growth in its cloud ERP business, search and advertising, and even Surface business — which was unscathed by the rapid deterioration of demand in the PC space.
Alphabet
After Snap faltered, the market was ready to throw out the baby with the bathwater. While Alphabet, like Microsoft, also missed estimates, it was a near-miss that didn’t bother investors as the stock saw a rebound after the results crossed the wire — largely because Alphabet’s bread-and-butter advertising business showed strength. Softening ad spend seemed to be no match for Google Advertising as the business grew double digits year over year and showed much greater resiliency than its counterparts — especially Meta. What was immediately apparent is that Google advertising and YouTube are putting up a better fight against the macro trends and the competition from Tik Tok, which is proving to be formidable. Google’s Cloud business also kept pace with AWS and Azure, growing above 30% and further proving that the cloud as an operating model has economic tailwinds that will remain strong in turbulent markets.
Apple
A new iPhone is always a good thing for Apple. And Taiwan Semi’s TSM,
Daniel Newman is the principal analyst at Futurum Research, which provides or has provided research, analysis, advising or consulting to Nvidia, Intel, Qualcomm and dozens of other companies. Neither he nor his firm holds any equity positions in companies cited. Follow him on Twitter @danielnewmanUV.
