Big Tech slumps as earnings sound alarm

Oct 26 (Reuters) – Dismal results from Alphabet Inc and Microsoft Corp stoked fears of a global economic slowdown and dampened a fragile stock market recovery ahead of earnings other tech megacaps.

Shares of Google’s parent company and Microsoft fell about 6% in premarket trading. Meta Platforms Inc (META.O), which is expected to report after markets close on Wednesday, was trading down 4%.

Amazon.com Inc (AMZN.O) and Apple Inc (AAPL.O), both due to report on Thursday, fell about 4% and 1%, respectively.

Nasdaq futures fell 1% after hitting a nearly three-week high on Tuesday, as the latest results underscored the challenges facing the broader tech sector – from high inflation and rapidly rising interest rates to falling demand and a towering dollar.

While most Big Tech stocks have edged higher in recent weeks, overall it’s been a dismal year for the sector. Netflix, Meta, Amazon, Microsoft, Alphabet and Apple have already lost a combined $2.5 trillion market value so far this year.

“Earnings from big tech companies were seen as a key driver of market sentiment heading into the U.S. third-quarter reporting season and Microsoft and Alphabet gave investors reason to be concerned,” Laith said. Khalaf, head of investment analysis at AJ Bell.

Alphabet missed Wall Street’s third-quarter revenue growth target as ad sales remained weak, while inflation and a strong dollar led Microsoft to its slowest growth in five years. Read more

Nearly a dozen analysts cut their price target on Alphabet, cutting it down to $30, while six analysts lowered their targets on Microsoft.

Like Google, Meta relies on ads for the majority of its revenue, and analysts expect ad budgets to decline as decades-high inflation pinches stock markets.

“Investors will prepare for the Meta results with some trepidation, with the common thought being that if Google is in trouble, the rest of the tech pack faces a marathon ascent,” said Hargreaves Lansdown analyst Sophie Lund-Yates.

More worrying was the slowing growth of Azure, Microsoft’s cloud platform and one of its most successful lines of business, a cautionary tale for Amazon’s cloud business.

Shares of Spotify Technology (SPOT.N) also fell after the company flagged pressure from falling ad sales on Tuesday.

The European technology index (.SX8P) fell 1.5% to drive sector losses in the region. Read more

Reporting by Yuvraj Malik and Akash Sriram in Bengaluru; Editing by Saumyadeb Chakrabarty

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