The world’s most important tech companies all reported their quarterly results this past week, and, in each case, the damage from a slowing global economy was in stark evidence. The witch’s brew of rising interest rates, higher fuel costs, the Russian assault on Ukraine, lingering supply-chain issues, and the U.S. dollar’s surge is infecting every tech business. “We’ll all go together when we go,” as the great Tom Lehrer once sang. Financial calamity is the great equalizer.
But last week’s batch of earnings reports also made clear that every item on that familiar list of economic woes will eventually recede, leaving behind individual corporate stories, some stronger than others.
Are we in a recession? It sure seems that way, but it won’t last forever. Some other issues are already fading. Fuel prices have been receding, for instance. And in the chip industry, worries about shortages have been replaced by fears of excess supply.
This earnings season has already had its share of disasters, but what it has provided most of all is clarity about where value lies—and where danger lurks. Here are a few takeaways on the outlook for the tech leaders.
There’s no recession in the cloud: As regular readers will recall, I’ve been consistently bullish about the power of cloud computing. Last week, I wrote a lengthy feature about
Amazon.com
(ticker: AMZN) focused on the long-term charms of Amazon Web Services, which I continue to view as the world’s best enterprise software business. That said, heading into the quarter, there were worries that broader economic weakness might slow cloud growth. But the bears had it wrong; AWS grew 33%, in line with estimates.
Microsoft
’s
(MSFT) Azure cloud business expanded 46% adjusted for currency. And Alphabet’s (GOOGL) Google Cloud revenue jumped 36%, to $6.3 billion. Not coincidentally, I’d argue that Amazon, Microsoft, and Alphabet are the most appealing of the tech giants for long-term investors.
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