US companies from tech giants Alphabet and Microsoft to GE and toymaker Mattel on Tuesday reported big slowdowns in growth or warned things were going to get worse, fanning recession fears and driving down stocks.
The rash of disappointing results points to a host of problems plaguing the American economy. A strong dollar has hurt the overseas profits of large firms, while soaring inflation has prompted interest rate hikes and companies to raise product prices, even as consumers have been forced to cut spending.
US consumer confidence ebbed in October, data showed Tuesday, after two straight monthly increases amid heightened inflation concerns and worries of a possible recession next year.
After years of turbo-charged growth, Microsoft posted its slowest rise in sales in five years and Google parent Alphabet grew just 6 percent last quarter at its slowest pace since September 2013 barring a small quarterly decline in 2020.
Google, which many had expected to be more resilient because of its status as the world’s largest digital advertising platform by market share, shocked the market with weaker-than-estimated advertising revenue as customers in the insurance, mortgages and cryptocurrencies industries tightened their ad budgets.
“Despite being seen as one of the most insulated companies in the advertising space relative to peers, Google’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” said Jesse Cohen, senior analyst at Investing.com.
Google’s results bode ill for Facebook parent Meta Platforms, which is especially reliant on advertising and reports results on Wednesday. Last week, its smaller rival Snap Inc forecast no revenue growth for the holiday quarter, setting off warning bells in the social media industry.
Alphabet said it plans to cut hiring by more than half.
Conglomerate GE, which is in the process of breaking up into three companies, said it will reduce global headcount by a fifth at its onshore wind unit, which has been battling higher raw material costs due to inflation and supply-chain pressures.
Shares in Alphabet slumped 7 percent in trading after the bell. Microsoft fell 2 percent and chipmaker Texas Instruments, which forecast quarterly revenue and profit below estimates, was down 5 percent. Shares in Spotify, which also warned on slow advertising growth, slid 4 percent. Meta shares fell 4 percent.
A lack of demand for personal computers and laptops was evident in Microsoft’s past quarter as its Windows business slumped 15 percent, a sharp turnaround after months of pandemic-fueled sales thanks to people working and studying from home.
Texas Instruments (TI) echoed the sentiment, backing up similar predictions from fellow chipmakers Samsung Electronics Co Ltd and Advanced Micro Devices Inc earlier this month.
