🧑🔧💰 Big Tech Earnings Breakdown. What's Next?
Hello friends,
I’ve had a pretty slow weekend. I binge-watched the Last of Us last night, got caught up on the season, and enjoyed it a lot more than I thought I would.
How are your New Year’s resolutions going? This is about the time that most people have given up on their goals or new habits. Personally, I took a meditation class about 2 weeks ago and as of today am on a 13-day meditation streak! So far I am enjoying it and it is helping me be more aware of my thoughts throughout the day. Fun fact: I think about sushi a lot, hahaha.
What habits you’ve been up to this year? One great motivator to stick with a habit is to either reward yourself after you’ve completed said habit and/or track it somewhere visible. I’ve also heard of people giving themselves mini-rewards daily (for example rewarding themselves with a coffee after a workout), and then a bigger weekly reward (a new workout shirt) to keep the motivation going.
— Humphrey, Tim, and Rickie
Market Report
Fed raises rates… Again
The Federal Reserve has raised its benchmark interest rate by a quarter of a percentage point, bringing it to a range of 4.5-4.75%. This marks the eighth increase since March 2022 and is part of the Fed's efforts to bring down inflation that still remains elevated. The Fed's Chairman, Jerome Powell, has stated that while recent data shows a reduction in the pace of inflation, it is too soon to declare victory.
During the December FOMC meeting, members indicated that the terminal rate, or the point at which they believe the policy is restrictive enough, is 5.1%. However, the market believes this rate is closer to 4.75% and predicts that the Fed will begin reducing rates later in the year after one final quarter-point increase in March.
Big Tech Earnings!
Meta Platforms reported strong fourth-quarter sales, with revenue of $32.2 billion, beating Wall Street estimates. The company is focusing on becoming more efficient and has declared 2023 as the "Year of Efficiency". CEO Mark Zuckerberg also noted progress in the company's investments in artificial intelligence, specifically for improving video content on Facebook and Instagram.
Despite concerns about declining advertiser demand, the company boosted its stock buyback program by $40 billion and projected revenue for the first quarter to be in line with analyst expectations. The company is also expected to have lower expenses in 2023, which could ease investor concerns about overspending on virtual reality projects.
Alphabet, the parent company of Google, released its Q4 results which were below Wall Street's expectations due to a decrease in demand for search advertising. The company reported earnings per share of $1.05, compared to the estimated $1.20.
The disappointing results come as Google's advertising business is facing difficulties such as the potential split of its ad-technology division and a slowing economy. In response, Alphabet is focusing on increased efficiency and recently conducted its largest job cuts ever, reducing 6% of its worldwide workforce.
Amazon reported Q4 2022 revenue of $149.2 billion, exceeding the expected $145.42 billion. Despite this, the company's guidance for the first quarter did not meet expectations. Amazon Web Services generated $21.4 billion in sales, lower than the estimated $21.87 billion. The growth of AWS was 20% in the quarter, which was lower than the expected 27.5% growth from Q3. Similar to other technology companies, Amazon is reducing expenses due to an overabundance of warehouses and employees resulting from their rapid expansion during the pandemic.
Apple reported lower revenue and earnings than expected for Q1 2023, with revenue of $117.2 billion compared to projections of $121.1 billion and earnings per share of $1.88 compared to an estimated $1.94. The reasons for the decline were cited as a strong dollar, supply issues in China affecting certain iPhone models, and the overall macroeconomic environment.
Despite the miss, Apple reported a strong active device base, with iPad sales growing nearly 30% YoY and 6% growth in its services business. Apple is working on cost-cutting measures and hiring more slowly but has not yet announced any layoffs.
Forecast Ahead
Employers added 517,000 jobs in January — nearly double the prior month’s advance and above all estimates in a Bloomberg survey. The unemployment rate also unexpectedly retreated to 3.4%, the lowest since 1969, according to Labor Department data released Friday.