Big Tech Q3 results rattle markets and raise fears for wider TMT sector

After a week of generally lacklustre results from TMT firms, Q3, 2022 reports from Alphabet, Meta and Microsoft confirmed that the global economy is on a rocky road.

Microsoft reported revenues of $50.1bn for the quarter. Although this was up 11% year on year, the financial markets reacted badly because it is Microsoft’s slowest level of growth in five years. A slowdown in growth at Microsoft’s cloud business Azure led to fears that Amazon may also experience similar challenges with its own cloud business.

Over at Google parent Alphabet, a combination of weak ad sales, a strong dollar and rampant inflation also dented topline revenues. A 6% rise to $69 billion was generally interpreted by the market as a poor performance. It was also interpreted as a worry for other smaller media companies that are also reliant on ad revenues.

Sundar Pichai, CEO of Alphabet and Google, said: “We’re sharpening our focus on a clear set of product and business priorities. Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetise YouTube Shorts. We are focused on both investing responsibly for the long term.”

Facebook CEO, Mark Zuckerberg

Meta released its results later than its peers, but didn’t inspire much confidence either. A 4% decline in Q3 revenues to $27.7bn sent the company’s share price down. Investors also continue to be anxious about the company’s speculative investment in the Metaverse. Meta CEO Mark Zuckerberg is playing a long game, but another $3.67bn loss from its VR division this quarter has spooked the markets. In an earnings call, Zuckerberg said: “There’s still a long road ahead to build the next computing platform. It is a massive undertaking and it’s going to take a few versions of each product before they become mainstream. I think our work is going to be of historic importance and create the foundation for a new way that we will interact with each other and blend technology into our lives, as well as the long term foundation for our business.”