A deeper look behind the mounting malaise of once invincible tech giants

Amazon is the latest member of the tech family to emerge the worse for wear from a brutal quarter, with its share price tumbling a precipitous 20% after flashing red lights and klaxons in its latest earnings report sent investors running. With reported revenue of $127.1bn in the third quarter – below initial estimates of $127.5bn – chief executive officer Andy Jassy was forced to concede that the e-commerce juggernaut had entered “uncertain economic times.”

There remain concerns that the cost of living crisis will wreak havoc on the discretionary spend upon which Amazon depends. Early signs of this have already emerged, with predictions for $144bn in sales this quarter – way off the $155bn that had been expected.

Even Amazon’s privileged son, its flourishing web services division, could not dispel the gloom with growth of 28% – again underperforming expectations from happier times of 30%.

Amazon’s travails are far from unique, with Alphabet also finding itself adjusting to a new language of managed decline as opposed to rampant expansion. The search titan generated sales of just $69.1bn, below the $71bn haul that had been expected – shattering the myth of tech exceptionalism.

Seeking to explain away an underperformance, which has seen its stock price crash 33% since the start of the year, Sundar Pichai, Alphabet’s chief executive, said: “Financial results for the third quarter reflect healthy fundamental growth in search and momentum in cloud, while affected by foreign exchange. We’re working to realign resources to fuel our highest growth priorities.”

Such difficulties are broad-based, with YouTube also enduring a dismal third quarter as anxious advertisers slam their wallets shut in the face of an increasingly grim economic outlook. Over the period ad sales slipped 1.9% in the three months to September 30 to $1.7bn.

Joining the downturn club is Meta, the rebranded social network, which has been fueling fear in the minds of investors after dropping an unfathomable $100bn on its metaverse dream, a pet project of co-founder Mark Zuckerberg.

Far from opening doors to a bold new future, it has seen advertisers slam the door shut until they see evidence that the public at large will embrace the vision.

Warning of “near-term challenges,” Zuckerberg has set the scene for significant contraction in the year ahead as the social giant cuts its cloth to accommodate a shrinking sales environment – off 4% to $27.7bn.

This contributed to a halving of profits and has seen its stock price slump 23% since its ill-received earnings report.

Global headwinds in digital advertising growth have been fueled by an unholy cocktail of unsustainable pandemic-related growth, macroeconomic convulsions and recent privacy changes for Apple’s software, but it is the smartphone maker that has thus far emerged relatively unscathed from the carnage.

Apple has seen its stock rise above a sea of red after posting an 8% rise in revenue year-over-year to $90.1bn – above expectations of $88.9bn and setting a new September record in the process. This saw its shares remain broadly flat, down just 0.75% as investors welcomed a port of safe harbor to weather the growing storm.

In ebullient remarks, chief executive Tim Cook said: “We are deeply committed to protecting the environment, to securing user privacy, to strengthening accessibility and to creating products and services that can unlock humanity’s full creative potential.”

Not all is rosy in Apple’s verdant orchard, however, with mounting supply chain issues constraining sales of its headline iPhone product, capping revenues at $42.62bn versus an expected $43.2bn.

Snap’s results echoed its name and the fortunes of its peers with its stock price plunging 28%, although it has since clawed back most of those losses as investors ascribe its difficulties to macroeconomic factors beyond its control over any intrinsic failings of the company.

Chief exec Evan Spiegel has emerged as a vocal standard bearer of augmented reality (AR) over virtual reality (VR), slamming Meta’s obsession with the latter for lacking the real-world immersion that only AR can afford.

Undermining the entire foundation of the metaverse, Spiegel said: “The last thing I want to do when I get home from work [after] a long day is live inside of a computer.”

From Alphabet to Snap, the sharp turnaround in fortunes has tarnished the seemingly invincible nature of a sector that once seemed unstoppable – proving that even the biggest names on the planet cannot defy gravity forever.