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Economy: Big Techs’ earnings drop over consumers’ decreasing purchasing power

*Earnings of technology giants Meta, Alphabet and Snap dwindling due to competition for advert Dollars amid challenges facing the global economy

Gbenga Kayode | ConsumerConnect

As the global economy slows, two discernible trends emerging from Big Tech earnings released recently further strengthened the perspective that consumers of technology services across the world are tightening the purse strings to deal with economic slowdown.

ConsumerConnect learnt among other factors, companies are cutting down their marketing budgets as reflected in the Fourth Quarter (Q4) 2022 quarter earnings of global tech giants Meta, Alphabet and Snap.

“They took a beating as advertising revenues make a chunk of their topline,” report quoting Reuters said.

Big Tech cloud business

As the global economic headwind blows, causing a slowdown, Microsoft and Amazon, which dominate the cloud services market, reported their slowest growth since they started declaring revenue breakup for this segment way back in 2015.

Net sales at Amazon Web Services (AWS), for instance, grew 20 percent in the three-month period ended December 31 at $21.4 billion.

Microsoft’s revenue in its cloud business that includes Azure rose 18 percent year-on-year during the quarter whereas the growth was around 50 percent in its cloud-computing business that it reported in every quarter of calendar year 2020.

Big techs’ earnings decreasing

In connection with ads break, while Google parent Alphabet reported a slight fall in quarterly ad revenue, missing Wall Street expectations, Facebook owner Meta also posted revenue decline for the third consecutive quarter (year-on-year), according to report.

Snap Incorporated, meanwhile, said it expected current quarter revenue to decline as much as 10 percent due to competition for ad Dollars amid challenges facing the economy.

Evan Spiegel, Chief Executive Officer (CEO) of Snap, said during the company’s earnings call, that “(advertisers) are managing their spend very cautiously so they can react quickly to any changes in the environment.”

As regards lies ahead in the sector, experts said even as the cloud gets darker, “there’s a silver lining.”

The runaway success of OpenAI’s ChatGPT, and the follow-up play by others in the space, could set off the next boom for cloud computing revenues, report noted.

Advert revenue earners’ in cautious optimism

Ad revenue earners, on the other hand, would remain cautious.

Meta Chief Financial Officer Susan Li said the broader economy continues to be “pretty volatile” and it was too early to tell what the year would look like.

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