With accelerated interest rates fuelled by central banks’ all-out effort to contain inflation, headwinds have developed for tech companies in short order; the complex macroeconomic environment due to supply-chain issues and geopolitical tensions creates additional headwinds. The knock-on effect of a stronger American dollar, Chisani says, is another headache for mega-cap tech companies.
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But he sees silver linings. Rather than total gloom and doom, he says some companies have shown mixed results over the past earnings week, with some tech names displaying resilience.
“Meta’s top-line revenue has not been terrible, but the business is in restructuring mode as it makes a long-term bet on the metaverse. Their revenue has also taken a hit from the newly introduced privacy rules on Apple devices,” Chisani says. “The top-line results for Alphabet, Google’s parent company, haven’t been good. The underlying business model is in much better shape, though they’ve suffered from a reduction in advertising revenue.”
Apple has been a bright spot in the tech space, he says, as it’s managed to maintain an impressive 43% profit margin throughout all the recent challenges. Still, much of that profit margin hinges on the success of the iPhone 14, which has yet to be proven, and models outside of Apple’s higher-end offerings are using the same processor as they did last year, which could make them less desirable for consumers looking to upgrade.
