The world’s leading technology companies have rebounded nicely this year after a challenging 2022, but now that earnings season is around, investors may be questioning whether their outperformance can be maintained.
Apple was the latest mega-cap tech company to release its earnings for the third quarter yesterday, with its share price inching up 2.1% following the announcement.
Despite a warm response from markets, the world’s largest company actually reported a 1% revenue decrease from the previous quarter of $81.8bn.
Although revenues were slightly down, it was above the sharper drop investors had forecast, hence the positive market reaction. However, Finalto Trading’s chief market analyst Neil Wilson said Apple is not out of the woods just yet.
“Earnings mostly exceeded expectations but failed to really impress investors that the current quarter is going to be much better than feared,” he explained.
“Fiscal fourth quarter earnings beat but the company reported a fourth consecutive period of revenue declines.”
Overall revenue may have beaten expectations, but Wilson noted that Apple’s sales in China “remain problematic” as revenues in the region dropped 2.5% over the quarter – $2bn below forecasts.
Nevertheless, the tech giant is on a high in 2023, with shares in the company soaring 42% since the start of the year.
Share price of Apple in 2023
Source: Google Finance
Slightly earlier in delivering its quarterly results was Amazon, which leapt 6.8% the day after its latest report. Shareholders such as Stonehage Fleming Global Best Ideas Equity manager Gerrit Smit were impressed by its 11% growth in revenue over the quarter.
He said: “It reported good momentum in growing both its profitability and free cash flow. Amazon seems well on its way to its previous record margin levels.”
Investors may be pleased with Amazon’s earnings for the time being, but Stephen Innes, managing partner at SPI Asset Management, warned that it may struggle to keep shareholders content by the fourth quarter.
“Earnings are acceptable, but acceptable hasn't been enough this quarter for anyone, really,” he said. “Between what could best be described as ‘ho-hum’ beats and the nod to slow fourth quarter growth, it wouldn't be terribly surprising to see investors balk at Amazon's report, especially as higher for longer remains in the driver seat.”
Amazon shares outshone Apple’s this year, climbing 60.9% in 2023. But trumping them both was Facebook owner Meta, which soared 149.2% throughout the year.
Share price of Meta and Amazon in 2023
Source: Google Finance
Shares dropped 3.7% after its latest financial statement (before recovering in the ensuing days), yet Meta revealed a sizable 23% increase in revenues to $34.1bn compared to last year.
Wilson noted that this “thumping earnings report” could not be any more different than that released by Google owner Alphabet the day prior.
Its share price dropped 9.5% following the release of its earnings report in its worst day of its worst day for more than three years. Despite this setback, it is still up 43.1% year to date.
Share price of Alphabet in 2023
Source: Google Finance
Last but not least, Alphabet’s share price may have been battered in the day following its third quarter results, but it reported an 11% increase in revenues over the past year of $76.7bn that pleased some investors.
Given this, a 28% growth in margins and 10% increase in advertising revenue, Smit said the latest report confirmed “a strong base for the business to continue its solid growth track”.