A notable week for some of tech's biggest names, chip-makers weigh in on semi shortage outlook, and payments companies address inflation and rate hikes.
Alphabet (-4.66% Since Close) Dips on YouTube Ad & Direct Response Revenue Miss: “YouTube advertising revenues of $6.9 billion were up 14%, reflecting ongoing strong growth in brand and more modest growth in direct response. The deceleration in the year-on-year growth rate primarily reflects lapping of the exceptional performance of direct response that we called out in the first quarter of 2021.”
Apple (-4% Since Close) Warns of Potential $8B Sales Hit Due to Supply Constraints: “We believe our year-over-year revenue performance during the June quarter will be impacted by a number of factors. Supply constraints caused by COVID-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products. We expect these constraints to be in the range of $4 billion to $8 billion, which is substantially larger than what we experienced during the March quarter. The COVID-related disruptions are also having some impact on customer demand in China.”
Amazon’s (-9.3% Since Close) Operating Expenses Outpace Sales: “We have worked to protect and enhance the customer experience despite a sharp increase in costs, particularly over the past 3 quarters. We've seen a large cost to keep up with demand these past 2 years. During this period, we doubled the size of our operations and nearly doubled our workforce to 1.6 million employees. Labor and physical space are no longer the bottlenecks they were throughout much of 2020 and 2021. However, we continue to face a variety of cost pressures in our Consumer business… For example, the cost to ship in overseas containers more than doubled compared to pre-pandemic rates. And the cost of fuel is approximately 1.5x higher than it was even a year ago. Combined with the year-over-year increases in wage inflation, these inflationary pressures have added approximately $2 billion of incremental costs when compared to last year. While we will continue to look for ways to mitigate these costs, we expect they will be around for some time.”
Amazon Also Incurs $7.6B Loss from Stake in Rivian: “We reported an overall net loss of $3.8 billion in the first quarter. While we primarily focus our comments on operating income, I'd point out that this net loss includes a pretax valuation loss of $7.6 billion included in nonoperating expense from our common stock investment in Rivian Automotive.”
Microsoft +5.24% Since Close Led by Strong Cross-Segment Performance, Particularly in Azure: “Overall, we are seeing larger, more strategic Azure commitments from industry leaders, including Boeing, Kraft Heinz, U.S. Bank and Westpac, who all chose our cloud to accelerate their digital transformations. The number of $100 million-plus Azure deals more than doubled year-over-year, and we are seeing consumption growth across every industry, customer segment and geography.”
Meta Reversed 4Q21’s First Ever Instance of DAU/MAU Declines: “Facebook daily active users were 1.96 billion, up 4% or 82 million compared to last year… MAUs grew by 83 million or 3% compared to last year.”
Meta, Seemingly in Direct Response to TikTok, Doubles Down on Investment in Reels and Short-Form Video: “Now with that, I want to dive deeper on what we're seeing in 3 of our main investment priorities that I expect to drive this growth: Reels, Ads and the Metaverse. So let's start with Reels. There are 2 key trends that we're seeing here. First, the increasing popularity of short-form video; and second, the advancement of AI recommendations driving more of our feeds rather than just social content. On the first point, since I started Facebook 18 years ago, we've seen multiple shifts in the media types that people use. And we started as a website primarily with text, then people got phones with cameras and the main format became images on mobile apps.”
That Said, Uncertainty Still Lingers for Meta’s Top Management: “Other challenges are broader macro trends, like the softness in e-commerce after the acceleration we saw during the pandemic. The war on Ukraine, which is a real tragedy on a humanitarian level, has also had an impact on our business. We've been blocked in Russia and we decided to stop accepting ads from Russian advertisers globally. And we've also seen effects on business globally following the start of the war.”
Intel: “In our PC business, we continue to see strong commercial demand, offset by low-end consumer and education softness and the impact of no longer shipping to customers in Russia and Belarus. Further, component supply constraints continue to be a challenge with the most recent COVID lockdowns in Shanghai, further increasing supply chain risks and contributing to inflationary pressures that are having a negative impact on PC TAM for the year.”
Texas Instruments: “For the second quarter, we expect TI revenue in the range of $4.2 billion to $4.8 billion and earnings per share to be in the range of $1.84 to $2.26. This outlook comprehends an impact due to reduced demand from COVID-19 restrictions in China which are affecting our customers' manufacturing operations.”
“In consumer IoT, Android tablets are becoming collaboration tools and increasingly, demand is shifting from entry-level commodity tablets to premium connected computing devices, a clear validation of the conversions of mobile and PC.”
“Handset revenues of $6.3 billion increased 56% versus a year ago quarter. The upside relative to guidance was driven by increased volume in premium tier and improved supply.”
“Semiconductors are the fuel of innovation and transformation across a wide range of industries. In the supply chain, lockdowns in Shanghai and the war in Ukraine have demonstrated more than ever that the world needs more resilient and more geographically-balanced semiconductor manufacturing. The chip shortage cost the U.S. economy $240 billion last year and we expect the industry will continue to see challenges until at least 2024 in areas like foundry capacity and tool availability.”
PayPal Makes Adjustments Based on the Macro Landscape, Lowers FY Guidance: “It is clear that relative to early February, the macro environment has deteriorated. Russia, Ukraine and China are contributing to increased global uncertainty and incremental inflationary and supply chain pressures. And more specific to PayPal, forecasting normalized consumer e-commerce spending, as we come out of the pandemic, is exceedingly complex. As a result, we believe it is prudent to lower our 2022 guidance and reevaluate our medium-term outlook.”
PayPal Levels Expectations & Withdraws Medium-Term Outlook - The Street Responds Positively (+5% Since Close): “I would like to discuss our medium-term outlook that was provided at our Investor Day in February of 2021. We have reassessed the feasibility of achieving our revenue and earnings targets. These targets relied on several baseline assumptions, relating to both e-commerce penetration and macroeconomic factors that are no longer on the trajectory that we forecasted. As a result, we're withdrawing our medium-term outlook. We will continue to guide revenue and earnings on both a quarter and full year basis and continue to update you on how we are thinking about our business over the long term. Make no mistake, we have strong conviction in the growth potential of our business and our ability to sustainably create value for our shareholders. However, we recognize the need to level-set expectations in what remains a dynamic environment. We know the scale of our 2-sided platform is truly differentiated and gives us a strong competitive advantage. We believe the secular tailwinds from the digitization of payments and e-commerce growth are persistent. And we believe that we are uniquely positioned to bring more merchants and consumers together globally than any other company and help them connect and transact safely.”
Visa on Impacts YTD: “In terms of the big picture, after the short 4- to 5-week impact of Omicron in December and January in the United States and many other parts of the world, the recovery continues to be robust. At this stage, in terms of volumes, we have seen no noticeable impact due to inflation, supply chain issues, or the war in Ukraine.”
Visa FY Outlook: “Our outlook for the second half assumes that these trends are sustained. While there are uncertainties created by high inflation, supply chain disruptions, rising interest rates and the invasion of Ukraine, there is no evident impact on our global payments volumes. E-commerce spend, both domestic and cross-border, has remained strong and stable relative to 2019 at well above the pre-COVID trend line, even as pandemic effects fade, and we are assuming this will continue.”
Mastercard’s Strong Start to 2022 Attributed to Growth in Cross-Border Travel: “Even in the context of this challenging geopolitical environment, we're off to a strong start in 2022. We delivered robust revenue and earnings growth with further improvement in our underlying operating metrics, notably in cross-border travel… In terms of cross-border, where the growth was particularly strong, the recovery continued this quarter led by travel. Cross-border travel reached 2019 levels as of March for the first time since the pandemic began. Geographically, the cross-border recovery has been broad-based with improvement across all regions. Cross-border card-not-present ex travel continues to be strong.”
Discover Financial on Energy Inflation Impacts: “Year-over-year Card sales were up 23% with improvement in all categories. There's been a lot of discussion about the impact of energy price inflation on consumer spending. We believe that higher prices at the pump were a relatively small contributor to sales volume, adding approximately 200 basis points to our first quarter volume growth.”
Discover Says Recession Not Likely: “The war in Ukraine and the resulting sanctions against Russia have also raised concerns about the risk of recession globally and domestically. We don't see any evidence of this across our consumer lending portfolio. Our credit metrics remain good, and there is nothing we're seeing in terms of consumer spending or borrowing behavior that suggests that a broader downturn is imminent.”
Robinhood (-11.1% Since Close) Sees Lower Trading Volume and MAUs: “We faced a challenging macro environment, one most of our customers have never experienced in their lifetimes. While we were pleased to see strong net deposits and our lowest level of churn in years, we also saw decreased trading volumes, monthly active users and assets under custody, and our financial results reflect this.”
Rising Inflation and Interest Rates are Uncharted Territory for Most of Robinhood’s User Base: “Now, at the top of the call, I mentioned the challenges presented by the macro environment. For most of our history, Robinhood has operated in a period of low interest rates, low inflation and rising markets. Our customers are now experiencing all three of these trends going in the opposite direction, perhaps for the first time in their lives. As a result, some are engaging with us less regularly and reducing their trading activities.”
Most Notable Decline Comes from Small-Dollar Traders: “But the total numbers have come down a bit with MAUs falling to 15.9 million in March. When we look a level deeper, our larger customers are still remaining active, but we are seeing more pronounced declines from those that have lower balances. With the uncertainty in the market, our customers became more cautious with their portfolios, trading less frequently and in smaller amounts across all asset classes.”
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