GAFA’S Q4 2022 earnings release are much weaker results than in the same period a year ago. While that’s still a lot of money, the earnings reports of tech giants reflect the much weaker condition of the global economy. What does this mean, and what can an investor get?
Last week (January 30 – February 3) was the week of GAFA’S Q4 2022 earnings release. The most prominent American tech companies announced their full financial results. We learned about the reports for the last quarter of 2022 from companies such as Apple, Amazon, Google, and Meta Platforms. All companies showed a decline in profits, so the economy is not doing well. Remember that these companies sell their products and services mainly outside the USA. Their financial results, therefore, reflect the economic situation around the world. And it doesn’t look good:
In the Amazon (AMZN.US) case, the net profit has practically disappeared and is 98% lower than a year ago. Amazon earned under $300 million in the last quarter of last year, compared to last year’s profit of $14 billion. Google earned ⅓ less than in the same period last year, and Facebook’s profit fell by 55% (from $10 billion to less than $5 billion).
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Operating Costs of GAFA Companies Growing Faster Than Revenues
With Facebook’s leading position, all GAFA companies experienced a decreased operating margin. Meta Platforms’ (META.US) margin was over 37% a year ago, which fell to 20% in the last quarter. In addition, Facebook, Amazon, and Apple also saw a 20% drop in operating cash flow. This is due, among other things, to the fact that the operating costs of these companies are growing much faster than their revenues.
These results disappointed investors, whose expectations were noticeably higher. GAFA has accustomed its shareholders too much better-looking financial reports.
How Did the Markets React to GAFA’s Q4 2022 Earnings Report?
How did the markets react to GAFA’S Q4 2022 earnings release? Amazon and Google (GOOG.US) stocks are down. In the case of the first of these companies, it was as much as minus 8%, which is not surprising considering the 98% drop in profits mentioned above. Financial results were poor, so the shares became cheaper.
In the Apple (AAPL.US) case, Friday’s session declined after reporting financial results on Thursday (2.02). Still, the company made up for losses and even turned slightly positive at the session’s close.
How Facebook is Combatting Stock Turbulence
The most interesting, however, was in the case of Meta Platforms’ earnings, which were announced on Wednesday, February 1. The day after the poor results (a decrease in revenues of 4% and a decrease in net profit by 55%), the company’s shares went up by 23%. Yes, up. Why?
First, Facebook’s stock has already fallen more than 50% over the past year, so the fact that the company is going through a tough time has already been factored into the share price.
Secondly, the report shows that the number of users of Meta Platforms (Facebook, Instagram, WhatsApp) is growing. Slowly but surely, it is growing to 2 billion a day.
Third, and most importantly, Meta Platform has also announced that it will spend $40 billion to buy back its shares from the market. Compared to last year, Meta Platforms spent less on all its investments combined – $32 billion. Such an amount could not fail to impress. Especially while buying shares from the market is a practice known by Apple or Google, it is a novelty in the case of Meta Platform. And this novelty effect has had an impact on investors.
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What Can Investors Learn from GAFA’s Q4 2022 Earnings Report?
Conclusion? The situation with Facebook shows what matters regarding US stock price movements and what investors should pay close attention to. If a company wants to maintain its share price despite weaker results, it should announce that it will spend a lot of money to buy shares from the market. And, of course, this only applies to companies that can afford it.
