The earthquake continues in the technology sector: a large drop in revenue is expected
As the tech giants struggled with high inflation and recession concerns, they began to grapple with declining profitability as well as the contractionary decision they made.
Revenue growth for these companies has weakened sharply in recent years as sales accelerated due to the pandemic. Higher costs also suppressed profits. In the past few days, Google, Facebook, Microsoft and Twitter have laid off tens of thousands of people. On the other hand, the tech-heavy Nasdaq 100 Index fell 33 percent last year.
According to data compiled by the research unit of the US financial agency Bloomberg; Wall Street lowered its earnings forecasts for the technology sector for the fourth quarter. But the real danger for investors is that demand for tech products will collapse as the economy cools.
PROFITS WILL FALL HARD
Fourth-quarter profit for technology companies is expected to fall 9.2 percent on-year. This means that the industry will experience the hardest loss in the last 7 years. On the other hand, profitability estimates are constantly revised downwards. Just three months ago, Wall Street expected earnings to hold steady.
“The technology sector is driving much of the overall earnings downturn in the stock markets,” said Michael Casper, an equity strategist at Bloomberg Intelligence. “Depending on how bad this downturn is, there are definitely some risks of negative reviews for the industry.”
DESIGNS ARE SPREADING
On the other hand, one of the biggest agendas in the sector are layoffs. Microsoft announced last week that it would lay off 10,000 jobs, about 5 percent of its workforce. Microsoft laid off about 1,000 employees last year. The contraction will continue until the end of the third quarter of 2023.
Microsoft is not the only company that has decided to lay off. Earlier this month, Amazon announced plans to lay off 18,000 employees and Salesforce said it would cut 10 percent.
The situation is not much different with Google; Alphabet laid off 12,000 employees worldwide. E-commerce giant Amazon is also bracing for the biggest wave of layoffs in the company’s history. The company will lay off more than 18,000 employees worldwide.
According to data from Layoffs.fyi, which digitally tracks layoffs, 1,018 tech companies around the world laid off 153,678,000 people in 2022.