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The big technology companies launch to cut costs after evaporating 77,000 million profits


Apple, Microsoft, Alphabet, Meta and Amazon earned $243 billion in 2022, 24% less than the previous year

Mark Zuckerberg has baptized 2023 as "the year of efficiency".

The founder and boss of Meta is not alone.

In earnings presentations and conference calls with analysts from the Big Five US technology companies, there has been talk this week of austerity and cost cuts.

They are not companies that are doing badly.

Apple, Microsoft, Alphabet (Google), Meta (Facebook) and Amazon earned in 2022 a total of 243,000 million dollars (about 224,000 million euros).

That figure, however, is 24% lower than that of 2021. From one year to the next, 77,000 million dollars (70,800 million euros) of profit have evaporated.

Massive staff cuts have been the measure that, with the exception of Apple, they have all implemented.

The other four companies have announced 51,000 layoffs after a hiring binge in previous years.

In addition, companies are holding back on investment, rationalizing office space, canceling unprofitable projects, and taking other measures.

The round of presentation of results has left a trail of bad news.

Meta experienced the first annual drop in revenue in its history in 2022.

Amazon, which had not suffered a loss since 2014, has returned to the red after years of unstoppable profit growth.

Alphabet has seen its ad revenue fall for the second time in its history (the first being in the lockdown quarter).

Apple has had supply problems due to stoppages in Chinese factories and has ended its streak of record profits.

Microsoft has reduced its earnings after growing in the last stretch of 2022 at the slowest pace since 2016.

All of them have also suffered a major setback due to the strength of the dollar.

They are global companies, operating all over the world and earning a large part of their income and profits abroad.

With the appreciation of the US currency, billings and earnings in other currencies translate into fewer dollars, the currency in which they formulate their accounts.

In all cases, the growth rate of costs has been higher than that of turnover.

Uncertainty about the global economy (which is expected to grow less in 2023) and the risk of a recession in the United States due to interest rate hikes by the Federal Reserve threaten to further slow revenues.

Therefore, it is time to tighten the belt.

Meta executes the largest staff cut

Meta Platforms was the first of the five to announce massive layoffs and the one that has launched, proportionally, a larger workforce cut (11,000 employees, 13% of the total).

It is also the one that has convinced investors the most with its message of austerity.

On Thursday, it shot up 23% on the stock market after announcing a share repurchase plan and lowering its estimate of costs for this year by 5,000 million and that of investments, by another 4,000 more.

The company closed 2022 with a drop in revenue of 1% and profits of 41%, up to 23,200 million, after two years of record profits.

The company has been hurt by the deteriorating market for digital advertising, stricter privacy rules imposed by Apple and competition from TikTok.

Added to this is his unsuccessful commitment to the metaverse, which has generated multimillion-dollar losses and provisions for restructuring expenses.

Alphabet, the owner of Google, had four consecutive years of record profits, up to 76,033 million dollars in 2021. In 2022 it earned 21% less, despite raising its revenues by nearly 10%, to a new maximum of 282,000 million of dollars.

Alphabet has suffered from the fall in advertising and a sharp slowdown in growth in the last part of the year, in addition to the currency impact.

The CEO, Sundar Pichai, and the CFO, Ruth Porat, referred to the review of the “cost structure” when presenting the results.

Alphabet has announced 12,000 layoffs this year, the equivalent of 6% of its workforce of 190,000 employees, but after adding 33,734 positions in 2022 and 71,000 in the last three years.

In Amazon's return to losses, what has influenced the most is the collapse in the valuation of Rivian, the electric car manufacturer in which it has 17%.

A loss of 12.7 billion dollars has been noted, compared to the revaluation of 11.8 billion in 2021 that allowed it to achieve record profits for the fourth consecutive year.

But that's not the e-commerce giant's only problem.

Its operating result sank due to the losses of the international business and the lower profitability in the United States.

Add to that that Amazon Web Services, its profitable cloud computing division, has begun to slow down.

The company has significantly reduced its workforce last year, beyond the 18,000 announced layoffs.

Simultaneous drop in profits

Microsoft and Apple are the ones that have best defended their income statement, although they have not emerged unscathed from the sector's problems.

Microsoft recovers the position of the second company in the United States by benefits that Alphabet had taken from it the previous year.

In the four quarters of 2022, it added earnings of 67,449 million dollars, 5% less than in the previous 12 months.

The fall is mainly due to the strength of the dollar and the indemnities for the downsizing that will entail the dismissal of some 10,000 employees, around 5% of the workforce.

However, the drop in profit has accelerated in the second half of the 2022 calendar year (first semester of its 2023 financial year) due to the slowdown in revenue growth.

Apple remains the undisputed leader in profits, but it has gone from more to less during the year and in the last quarter of 2022 (the first quarter of its new fiscal year) it has suffered its first drop in revenue in three and a half years.

Apple has seen its sales weighed down by the harsh restrictions in China to prevent a new outbreak of the coronavirus epidemic.

That affected the distribution of its flagship product, the iPhone, in the middle of the Christmas season.

With this, its income fell 5%, to 117,154 million, and benefits, 13.4%, to 29,998 million.

After that puncture in the key quarter, in the whole 12 months of 2022, sales grew only 2.4% and profit fell 5%.

With this, the five big US technology companies simultaneously worsened profits in 2022, something that is unprecedented at least in the last decade.

Each of the companies had had a weaker year, but due to their own adjustments or problems.

This time it is the entire industry that is saying goodbye to a golden age of growth in sales and profits.

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Source: elparis

All business articles on 2023-02-04

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