02 February 2024
If you are covering financial results from Meta, Amazon and Apple, please find below a comment from Ben Barringer, technology analyst at Quilter Cheviot:
“Meta has caught its competitors on the hop and surprised the market by announcing its intentions to pay a dividend – something that is rare in the tech world. This is a symbolic moment and indicates what a turnaround story Meta has been on since its struggles in 2022. Mark Zuckerberg is showing that he wants to bring shareholders along with him and is highlighting that Meta is now a mature, grown-up business.
“Its results show this success too with fantastic monetisation and engagement results from users, and its optimisation programme working well. Profit margins have doubled and the core advertising part of the business is working well.
“Meta is also a closet AI winner. While its AI capabilities aren’t on show quite as much as some of the other tech players, its AI will be better servicing advertisers and making the ads themselves more relevant for users. With Reels and Instagram also doing well, Meta is set up for a good future and will seize on the buoyant digital advertising market we are seeing.
“Amazon has also shown it can shake off any concerns around the economic environment and retail spending with a solid set of numbers. Growth has been driven predominantly from the US retail business, and Amazon is also showing that optimisation is working in the tech world. Its fulfilment centres have become more efficient and are cutting delivery times, which will keep Amazon at the top of preferred retailers for customers.
“It is also seeing spending cuts on cloud computing from business abate as confidence returns to the global economy. With Amazon’s AI capabilities it should see demand supported going forward too. Like the rest of the tech industry, capital expenditure is growing as the likes of Amazon look to take advantage of the tailwinds they have. We are yet to see the impact of the new pricing model of Amazon Prime, so that will also be one to watch going forward, particularly given Netflix and Disney+ have gone in hard on an ad version too.
“While Amazon and Meta surge ahead, Apple is becoming the laggard of big tech. The business delivered disappointing results, with lacklustre sales of its iPads and Macs. Services growth has also slowed too, while Apple is suffering from weaker demand in China, as well as stronger competition. There is hope the new iPhone later this year will have lots of AI built into it, but we have to wait until September for that so it will be a slight muddle through until then.
“It does have its Vision Pro headset coming, but again history is not kind to wearables on the face. This product of course may be different, but it remains to be seen exactly what demand there is for these sorts of products.
“Finally, Apple has major headwinds in the shape of regulation. The EU is thoroughly probing its actions with the App Store and this could result in future fines or changes in business direction. While the rest of big tech performs, Apple is providing low growth and will need to ride out this period until its next growth drivers kick in.”
