4 things to watch in tech earnings
The next few weeks will feature a blur of tech company earnings calls, as everyone from Tesla to Twilio report their financial performance for the first three months of the year.
Wall Street will be focused on headline numbers like revenue and earnings per share, as well as any surprises, like Meta’s $50 billion dividend last quarter. It’s easy to get lost in the blizzard of numbers. But oftentimes, there’s one particular item in the report that speaks to the overall health and prospects of the business. Here are a few areas that I’ll be keeping an eye on as the Big Tech earnings season kicks off:
Alphabet: Search advertising may be Google’s big moneymaker, but growth in that business has stalled in the single digits in recent years. The rise of generative AI threatens to further dent the search business—it’s not at all clear whether ads will play as central a role in a world where people get their information by conversing with an AI chatbot. What kind of near-term and medium-term growth prospects does Alphabet’s management foresee for the company’s foundational search business?
Meta: Last quarter, Facebook parent company Meta revealed that China accounted for 10% of its ad revenue as a result of marketing blitzes by big Chinese firms like Shein and Temu. That’s something of a mixed blessing: At a time of heightened trade tensions between China and the U.S., Meta is running a risk by relying on too much Chinese wind in its ad sails. And with the fate of TikTok in the U.S. up in the air, a fresh surge of Chinese advertisers could be on the horizon for Meta.
Microsoft: How much lift can AI give Microsoft’s cloud? Microsoft’s Azure business grew 30% year on year in the final quarter of 2023. Six percentage points of that growth came from demand for AI, the company said, noting that it was double the rate in the previous quarter. The AI boost likely won’t double again to reach 12% this quarter—but it will be interesting to see if AI continues to juice customer cloud demand or if last quarter’s 6% pop was just a blip that levels out this quarter.
Apple: After four consecutive quarters of declining revenue, Apple finally returned to growth in the last three months of 2023. But there was one notable soft spot: China. Sales in China fell 13% year over year, with the company pointing to a slight dip in iPhone sales as one of the reasons. The situation appears to have gotten worse since then. Research firm Counterpoint estimates that iPhone sales in China fell as much as 19% in the first quarter, while Chinese rival Huawei grew a whopping 69.7%.
And with that, here’s what else is happening in tech today.
Alexei Oreskovic
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This story was originally featured on Fortune.com
