The Stock Market Bleeds Red Following A Disappointing Quarter Three for America’s Largest Companies

Staff Writer: Julian Cassady

Email: jcassady@umassd.edu

The biggest week for company earnings reports just wrapped up.

All the data released by these companies reflect their performances during Q3 (Quarter 3) of this year.

Microsoft, Alphabet (Google), Meta (Facebook), Ford, Apple, Amazon, Intel, and McDonald’s are a few of the largest companies that reported earnings data between October 24th and October 28th, 2022.

(https://www.earningswhispers.com/calendar)

Wall St. and retail investors had their attention set mostly on the performance of the big tech companies.

On Tuesday after the market closed both Microsoft and Alphabet reported their earnings.

Microsoft narrowly beat expectations for Q3. Total quarterly revenue was reported as $50.1 billion versus the expected $49.6 billion. Earnings-per-share (EPS) was $2.35, dodging the estimates of $2.29.

Microsoft saw growth in all its revenue streams. User growth continued this quarter for Microsoft cloud and Office 365 software services. Hardware sales also rose. Consumers and businesses are still buying plenty of Microsoft computers.

Microsoft shares fell 2.8% following the earnings report but rebounded the next trading day.

On the same day, Alphabet fared far worse than Microsoft after reporting its earnings.

Revenue fell short by $1 billion dollars, and EPS was a measly $1.06 compared to the expected $1.25.

Search engine advertisement revenue was only $11.83 billion instead of the $12.38 billion that analysts predicted. YouTube advertisement revenue missed by a mile, coming out to only $7.07 billion when $7.42 billion was the initial expectation.

Despite these revenue pitfalls, Alphabet’s cloud services continued to gain traction, beating estimates by roughly $300 million.

Alphabet attributed these revenue blunders to advertisers paring down spending amid ongoing macroeconomic concerns like inflation.

Alphabet stock fell from $105 per share on October 25th to $96 on October 26th following the release of its earnings report. Shares have been declining since and have yet to recover.

After market close on Wednesday, Meta reported an atrocious Q3. The company reported revenue of $27.71 billion, topping estimates of $27.4 billion.

Unfortunately, Meta fell short on earnings-per-share. The reported EPS was a disappointing $1.64, instead of the expected $1.89.

Another nail in the coffin for Meta’s Q3 is their research and development (R&D) spending for the year so far, which came out to a staggering $10 billion.

The R&D costs come after Mark Zuckerberg’s heavy focus on the “Metaverse,” a virtual world pioneered and hosted by Meta. Many investors claim that Meta’s spending is frivolous and risky. That the company is putting all its eggs in one basket.

During the Meta earnings call, shares of the company dropped from $130 per share to $99. Meta lost nearly 25% of its company valuation as a result.

In September 2021 Meta was valued at more than $1 trillion, but it is now down more than 70% to $268 billion as of November 1st, 2022.

(https://finance.yahoo.com/quote/META/?fr=sycsrp_catchall)

Apple released its earnings report after market close on October 28th.

Apple crushed its earnings, beating expectations on almost every metric aside from Mac and Apple Watch revenue.

Revenue for Q3 was a whopping $83 billion, as opposed to the analysts’ guess of $82.81 billion. EPS was $1.20 versus the $1.16 expected.

Apple’s share price was incredibly volatile following its earnings release. Investors didn’t know how to react to Apple’s stellar earnings following the tech stock bloodbath earlier in the week.

The following day Apple’s share price rose and carried the entire stock market on its back.

Investors are now turning their attention towards the Federal Open Market Committee meeting set to begin November 2nd at 2PM. This meeting with Federal Reserve officials determines whether or not the stock market continues its decline or rebounds into a bull run.

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