From Apple to Microsoft, Big Tech Results Spotlight Breadth of Economic Upheaval

Sagging consumer appetite for goods amid soaring inflation, the strong dollar and supply-chain disruptions were only some of the factors that left their imprint on this quarter’s results for the big tech companies that have shown resilience to some prior market upheaval. Tech companies are seeing the effects in everything from lower online retail activity and slumping sales of wearable devices, to small businesses investing more cautiously in their IT.

“We are in a very difficult macroeconomic state,” Amazon’s Chief Financial Officer

Brian Olsavsky

said Thursday, though the online-retail juggernaut delivered 7.2% sales growth. “We are cognizant that things can change quickly and we will see and monitor,” he said on a call with analysts and investors.

Intel CFO

David Zinsner

also signaled his concern about the wider economic backdrop after the company cut its full-year sales outlook by as much as $11 billion. “We expect macroeconomic conditions to continue to soften with the potential for a recessionary scenario to materialize,” he said on a call.

Both the sale of goods and services are being negatively affected. Intel said it expects the PC market to shrink 10% from 2021, and Microsoft reported a sales drop in videogames. Google parent

Alphabet Inc.

said advertisers are pulling back spending only to be trumped by comments from Meta Chief Executive

Mark Zuckerberg,

who warned of “an economic downturn that will have a broad impact on the digital-advertising business.”

There were a few pockets of business that largely escaped the upheaval.

Apple Inc.

AAPL 3.39%

posted better iPhone sales than Wall Street had expected. Apple CEO

Tim Cook

said there was no obvious evidence that iPhone sales were affected by what is going on in the wider economy, aside from currency effects.

More broadly, though, executives had to parry analysts’ questions about weaknesses in their business, even as they went out of their way to talk up long-term prospects for their respective products and services. Combined, Apple, Microsoft, Alphabet, Amazon and Meta still reported higher quarterly sales than in the year-earlier period, but they were more than 1% lower than in the year’s first quarter.

Robert Cantwell, portfolio manager of the tech-heavy Compound Kings exchange-traded fund at Upholdings Group LLC, said he believes the tech companies might have hit bottom. “It is more likely than not that these are the worst growth rates you’re going to see from these companies for the next few years,” he said.

Shares in the tech-heavy Nasdaq are down around 15% since the second quarter kicked off through Thursday.

For many tech companies, the past quarter wasn’t just difficult, it was more challenging than the market conditions earlier in the year. Meta said the average price for an ad fell 14% in the most recent quarter, after declining 8% in the first quarter of the year. “The situation seems worse than it did a quarter ago,” Mr. Zuckerberg said.

Mobile-phone chip supplier

Qualcomm Inc.

lowered its forecast for the shipment of 5G handsets this year to 650 million to 700 million units from an expectation of more than 750 million units three months ago.

The globe-spanning corporate behemoths also felt the sting from the rapidly strengthening dollar that erodes returns of many of their sales booked abroad. Microsoft, which had issued a profit warning in June to reflect the greenback’s strength, this week said that by the time the quarter had finished, the situation had deteriorated further. Apple indicated it expects a slightly bigger exchange rate-related earnings impact this quarter than in the three-months just finished.

Next week could shed more light on another sector of tech, the gig economy.

Uber Technologies Inc.,

Airbnb Inc.

and

DoorDash Inc.

are among those scheduled to report results and detail how they are faring with consumer wallets being squeezed by high inflation.

Despite all the tumult, tech companies have shown signs that their size built up over years, and particularly during the pandemic, means they might be better-positioned than many other businesses to withstand the economic shock.

Meta’s quarterly results retreated, but they were still the fourth-highest on record for the company. Amazon’s cloud-computing business, known as AWS, grew by 33%. And Microsoft this week said it still expected to post a double-digit revenue increase in the year through June, largely on the strength of its cloud operations.

Even so, the big tech companies are becoming more careful in how they handle their money. Meta this week said it expected its total expenses for 2022 to be between $85 billion and $88 billion, down from an earlier outlook of $87 billion to $92 billion, while Intel slashed about $4 billion from its capital-investment budget for the year. Microsoft said it would depreciate its servers and network equipment more slowly, securing a $3.7 billion operating income fillip for the current fiscal year.

Many of the tech companies are reacting to the turmoil of recent weeks by streamlining their operations. Intel said it shed some nonessential businesses. Meta said it would reduce head count over the next year, with some teams shrinking as the company adjusts priorities. Google said earlier this month that it would slow hiring for the rest of the year.

“As a company, when you’re in growth mode, it’s tough to always take the time to do all the readjustments you need to do,” Google and Alphabet CEO

Sundar Pichai

said on an earnings call. “Moments like this give us a chance,” he added.

Write to Meghan Bobrowsky at [email protected]