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Opinion: The technological earnings boom is coming to an end, as Apple and Amazon face the same problems as everyone else.


Tech’s continued financial dominance during the Covid-1 pandemic epidemic was a big part of Wall Street’s geopolitics, but it appears that supply-chain problems affecting other industries will not avoid Big Tech.

Amazon.com Inc. AMZN
And Apple Inc. AAPL
Deficiencies related to the global supply chain in the upcoming earnings season are prominent examples of technology companies expected to experience or forecast. The overall fall in expectations means that the second quarter of 2021 will see the highest peak of revenue growth in the core IT sector this year – including computers, hardware, storage, semiconductors, software, IT services and communications equipment – as well as part of consumer considerations that include Amazon.

Information technology company of S&P 500 SPX
According to Factset, the third quarter is forecast to report a two percent earnings growth of 29% and revenue growth of 19%, a recession from the second quarter, while earnings increased 48% over the previous year and revenue increased 22%. Most of the sustained gains came from the sub-sector, with many problems, semiconductor, which is expected to show the biggest growth again (excluding Intel Corporation. INTC)
).

Others, including Apple, may suffer from a lack of chips, which have reportedly reduced the iPhone 13’s production targets due to the semiconductor and material crisis. While some analysts believe that any iPhone sales missed will only be seen in the next quarter, analysts are still cutting back on Apple’s estimates for the school and holiday shopping season.

More from Theresa: Apple’s iPhone 13 upgrade is annoying, but they’ll still sell

“There are parts of IT – the technology sector – that will do really well, and others that won’t do well,” said Brendan Connagton, founder and managing partner of Catalyst Private Wealth in San Francisco. “Technology as a whole will grow a little faster than the market.”

Amazon, which with its dominant online-shopping and cloud-computing business appears to be perfectly positioned for the epidemic, saw its sales growth slower than expected in the second quarter. Factset senior earnings analyst John Butters noted that analysts’ average earnings estimates for Amazon earnings in the third quarter rose from $ 12.89 a share to $ 8.92 per share, leading to the biggest decline in earnings expectations for 11 sectors of the S&P 500 over time, – 7.6. %. Expectations have dropped to .. 8.90 per share since Amazon earned শেয়ার 12.3 a share in the third quarter of 2020.

Even with that drop in expectations, some analysts predict that Amazon may be surprised in a negative way, after rising costs that could affect its profits. The company is investing heavily in its logistics build-out and spending billions on its delivery network and increasing staff costs, adding to other problems.

In a recent note, Coin & Co. analyst John Blacklage said about Amazon, “Continued supply-chain problems, which could probably extend well into 2022, could pose a risk to our forecast.”

Amazon’s highly profitable growth engine, AWS is also declining somewhat. Everco’s ISI analysts said they are looking for a 34% increase in AWS revenue on a year-over-year basis compared to a 37% increase in the recent second quarter.

Referring to the cloud-computing market in general, Maribel Lopez, chief analyst at Lopez Research, said, “Clouds will grow but not at the rate at which they are growing.” “Obviously those who needed the cloud have started it, but will humans still grow at a rate of 40%?”

See also: Why Amazon and Microsoft won’t last forever for cloud computing

One of the biggest bursts of technical costs during the epidemic has already shown a recession, and is related to supply-chain struggles and semiconductor deficits. During the epidemic, many consumers and businesses upgraded their computers for remote work and teleconferencing, leading to a huge upsurge in the PC industry.

But that boom seems to be over for now.

“I think the numbers will be tough but it won’t show the indicative growth we’ve shown in the last few quarters,” Lopez said. “People around the world are moving forward and running with what they need. The next one is bigger [purchasing] The wave will not last another six months. ”

Opinion: The PC boom is volatile as the most important time of the year

Market-research firm Gartner and IDC said global PC unit growth returned to lower single digits in the third quarter, Gartner reporting unit shipments grew 1% and IDC projected PC growth of 3.9% in the third quarter. HP Inc.
Get all the components needed to make a PC.

Jitesh Ubrani, an analyst at IDC, said in a statement, “The PC industry is being hampered by supply and demand-related challenges and unfortunately in recent months these issues have not improved much.”

HP is going to be the toughest company. According to Factset, analysts are forecasting a 1.32% growth rate for revenue in its fiscal fourth quarter, which will end in October. That almost flat growth followed a fantastic increase of 27.3% in revenue in the July quarter, driven by consumer PC sales and printing.

The news is not bad for technology. The chip deficit is expected to pay off again for semiconductor firms – as a group, Semis and Semiconductor Equipment are forecasting 38.5% revenue growth in the third quarter, with revenue growing at an average of 22.9%.

Bernstein research analyst Stacey Rasgon recently said that these trends are “giving themselves a bright feeling from semiconductor companies, many of which are calling for deficits and strong order patterns to better maintain next year” and added that the current inbox may be flooded. It asks questions from investors.

Don’t miss out: Big Tech is heading for its biggest year yet, and it’s not even close

“Investors continue to worry that the peak is coming and there is considerable uncertainty about how real the current demand environment is, keeping in mind the normal behavior of the customer in times of scarcity in the hope of getting enough spare parts to order.” ”

The only chip maker that expects no growth in the third quarter is chip giant Intel, which was under the cloud after some chip delays last year and is under big pressure to spend more on contract production. Analysts expect to see third-quarter earnings and almost flat revenue, equivalent to the same period last year, while Advanced Micro Devices Inc. (AMD)
And NVIDIA Corporation NVDA
Expected revenue growth of 46% and 44%, respectively.

In addition to semiconductors, the tech-related sector that seems to be the strongest is the communications service, which includes Facebook Inc. FB.,
Alphabet Inc. GOOGL

GOOG
And Netflix Inc. NFLX.
Although expected 23% revenue growth and 19.8% sales growth are still down compared to the first half of the year, when companies were making laptops at the beginning of the epidemic, it destroyed any quarterly numbers from 2020 onwards.

Facebook is expected to grow revenue by 37% in the third quarter, which shows the ability to bounce from one debate to the next without paying for any of them in recent months. Threats to social media powerhouses, as well as to Google and other big tech companies, come from lawmakers with 230 protections that content platform companies enjoy, along with other legal and regulatory concerns যদি if not other concerns along the way.

“I think there are enough fish to fry in Washington, DC,” Connanton said. “Perhaps they won’t use the technology for another six months.”

What happens on the regulatory front is not likely to have an immediate effect on the financial reports we see in the coming weeks. Lack of rolled supply chain and semiconductor, however, would require at least one pound of meat.



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