© Stocksak. FILE PHOTO – Smartphone seen in front the Microsoft logo in this illustration taken on July 26, 2021. REUTERS/Dado Ruvic/Illustration
(Stocksak) – Grim results of Alphabet (NASDAQ) Inc and Microsoft Corp (NASDAQ: ) stoked fear of a global downturn and slammed brakes on a fragile recovery for stock markets ahead of earnings by other tech megacaps.
Premarket trading saw shares of Microsoft and Google-parent drop by about 6%. Meta Platforms Inc was trading 4% lower, and is due to report on Wednesday after markets close.
Amazon.com Inc (NASDAQ) and Apple Inc. (NASDAQ:), which are due to report on Thursday morning, were both down approximately 4% and 11%, respectively.
Nasdaq futures fell 1% on Tuesday after hitting a close to three-week high. The latest results highlight the challenges facing the wider tech sector, from high inflation and rapidly rising interest rates to waning consumer demand and a dominating dollar.
Although most Big Tech stocks have seen a slight upward trend over the past few weeks it has been a difficult year overall. Netflix (NASDAQ:), Meta and Alphabet have lost $2.5 trillion so far this year.
“The results from the major technology firms were seen to be a key determining factor for market sentiment going into U.S. third-quarter reporting season, and both Microsoft and Alphabet gave investors reason to worry,” Laith Khalaf of AJ Bell’s investment analysis said.
Wall Street’s revenue growth target for Alphabet was missed in the third quarter. Ad sales were weaker than expected, and Microsoft reported its slowest topline growth rate in five years due to inflation and a strong dollar.
Nearly 12 analysts reduced their price targets on Alphabet, cutting it by as high as $30. Six analysts, however, decreased their targets on Microsoft.
Meta is dependent on ads for the majority of its revenue, just like Google. Analysts predict a decrease in advertising budgets due to decades-high inflation.
“Investors will be watching Meta’s results with some anxiety, with a common thought being, if Google’s struggling then the rest of the tech pack faces an uphill climb,” stated Sophie Lund-Yates, an analyst with Hargreaves Lansdown.
Worse still, Azure, Microsoft’s cloud platform and one its most successful business lines is slowing. This is a warning sign for Amazon’s Cloud Business.
Spotify (NYSE: Technology) shares also fell after the company complained about falling ad sales Tuesday.
Europe’s tech index dropped 1.5% to lead sectoral losses.