Meta Platforms below expectations, what will Apple and Amazon show?

Meta Platforms (META.US) - commentary on results

Meta Platforms' results came in well below analysts' expectations, with the company reporting its first year-over-year revenue decline. The report contributed to a decline in sentiment around technology companies, although some of the problems seem to be specific to Meta Platforms alone. The company's shares are already losing nearly 5% in pre-session trading:

Revenue: $28.8 billion vs. $28.9 billion forecast

EPS: $2.46 vs. $2.54 forecast

Number of users: 1.97 billion vs. 1.95 billion forecast

Q3 revenue forecast $26 to $28.5 billion vs. $30.32 billion forecasts

• The company is attempting to undergo a deep and costly transformation from a social platform leader to a company focused on VR/AR technology experiences as part of the Metaverse trend;

• The company's results confirmed that the digital advertising sector is experiencing a significant slowdown.  The environment of rising cost of capital, interest rates and inflation is forcing companies to scale back their spending from which Meta Platforms' business model is suffering. The company reported that the average price per ad fell 14% year over year. In addition, the privacy feature in iOS prevents Meta's apps from accurately monitoring in-app and web activity, which complicates the company's ability to provide advertisers with data on user behavior;

• The forecast of a significant slowdown in the second half of the year and a 36% year-on-year decline in net income were particularly painful for investors. The forecast shouldn't come as a surprise, however; Mark Zuckerberg mentioned at a conference cited by Reuters that he expects a massive slowdown; 

• The Federal Trade Commission (FTC) is halting Meta's attempt to acquire Within Unlimited, owner of the popular VR app Supernatural, amid fears of a monopolization of the VR market which further halts the company's monetization of its involvement in the 'Metaverse' trend. The FTC is pursuing an antitrust campaign against Meta Platforms;

• The 3% increase in users to 1.97 billion is one of the few positives in the report, but still very important - it confirms that the apps and portals built by Meta Platforms are growing in popularity. However, the monthly number of active Facebook users dropped by 2 million, Mark Zuckerberg indicated that the reason is the blockades related to the war in Ukraine. At the same time, the number of users of the company's apps WhatsApp and Instagram, among others, increased across the board.

Apple (AAPL.PL) - results 28.07 after the session

The third quarter of Apple's fiscal year is typically the worst for the company in terms of sales revenue. The quarter is in the first "dead" half of the iPhone's annual production cycle, as investors begin to look forward to the release of a new model that boosts revenue starting in late September or October.

This year, analysts and investors will be keeping a close eye on Apple's earnings in the face of a number of new macroeconomic trends, including declining consumer confidence, rising interest rates and decades of persistent inflation.

• Analysts surveyed by FactSet expect Apple to report sales of $82.8 billion, which would represent an increase of less than 2% compared to the same quarter last year and the lowest quarterly growth since the start of the pandemic.

• Analysts surveyed by FactSet predict that Apple's sales in China will be about $13.79 billion, which would be down from $14.56 billion in sales a year ago.

• Analysts also expect EPS of $1.16, which would represent a 10.7% year-over-year decline. 

• Gross margin will also shrink from 43.7% last quarter - a historic high for Apple - to between 42% and 43%, the company reported in April.

 Amazon (AMZN.US) - results 28.07 after the session

 Analysts expect the e-commerce giant's revenue growth to slow:

Revenue: $119.6 billion vs. $113.08 billion in Q2 2021 and $116.44 billion in Q1 2022

EPS: $0.14 vs. $0.75 in Q2 2021

• Analysts estimate that revenue growth will slow to just 5.3% y/y in the second quarter of the year. This would mark the lowest growth in nearly 4.5 years. However, Wall Street still assumes that revenue in the current quarter will be higher than the previous quarter; 

• The company has had record quarters of profits through which it may lose momentum as a result of the 'high base'. During the coronavirus pandemic, Amazon benefited from the growing popularity of online sales and surged margins; 

• Now revenue growth is slowing sharply. The primary reasons are the economic slowdown, inflation and an extensive fulfillment network, which exposes the company to supply chain risks;

• Weak forecasts from one of WalMart's largest retailers have contributed to a recent downturn in Wall Street sentiment and may prove to be a harbinger of trouble for the Amazon store chain. WalMart has signaled that consumers are clearly losing interest in merchandise and leaning toward groceries while merchandise sales are still the core of Amazon's business;

• Analysts and investors alike will turn their attention to the revenues of Amazon Web Services (AWS), the global leader in high-margin cloud computing services. To date, AWS still accounts for a small share of revenue but generates a sizable portion of operating income;

• According to analysts, AWS's revenue, which generates a substantial net margin, will grow at a faster rate than the company's other revenues, making the growth rate of cloud services particularly important to Amazon's growth prospects in the coming years.