The trend: Tech’s recession isn’t as dire for corporations as Wall Street says when put into perspective.
- Although the industry’s pandemic-era growth fell sharply this year, Big Tech’s profits are still robust.
- Compared with the average tech company that makes $182 in profit per second, Meta generates $924 in profits per second, according to a Tipalti study, per CNBC.
- Google parent Alphabet earns $1,277 in profits per second, Microsoft $1,404, and Apple $1,820.
Tech workers are bearing the brunt of tech companies’ failure to meet investor’s expectations, with over 85,000 US tech sector workers laid off in 2022 as of late November, per Crunchbase.
Things are looking up: Economic signals indicate that tech’s outlook might not be as bad as previously forecast.
- The US Federal Reserve’s interest rate hikes have played a central role in the industry’s upheaval and stock market volatility as it tries to rein in inflation.
- Yet consumer price growth has fallen over the past two months—a sign that the worst may be over in terms of interest rate hikes.
- Economists anticipate that consumer price indices will drop to the normal 3% to 3.5% range by the end of 2023, per Bloomberg.
Tech also has reason to be hopeful based on Black Friday and Cyber Monday sales performance, sending Amazon’s shares up 0.6%, per Reuters. And Meta’s shares were up 18% in November, despite having the worst year on its record, per The Wall Street Journal.
- Consumers set a record, spending $9.12 billion online on Black Friday, up 12% YoY.
- Sales that day were boosted by consumer electronics, which jumped 221% online over the October average, per CNBC. Video games, consoles, drones, and Apple MacBooks performed well.
- Similarly, Cyber Monday generated $11.3 billion in online sales, up 5.8% YoY, driven by deep discounts on electronics with video games, consoles, Apple Watches, drones, and digital cameras some of the top products.
What’s the catch? With the war in Ukraine still raging and ongoing supply chain pain from chaos in China’s manufacturing sector, cascading effects could blunt tech’s recovery.
- Companies like Apple will likely be forced to diversify production outside of China, which will take time and result in revenue disruption.
- We’ll likely see another year without swashbuckling innovative endeavors—with AI a notable exception—as companies stick to tried-and-true revenue generators and abandon money pits.
- It could also mean more layoff announcements in Q4 and Q1, which might exacerbate the industry’s labor relations, making it more difficult to build revenue-generating mechanisms.