With the fears of a global economic recession very much in play interspersed with supply chain issues and rising costs, any sense of immunity there may have been within the tech community would have quicky evaporated. The latest quarterly numbers don’t make for pleasant reading for any of the tech giants, though it may still not be time to hit the panic button. A gentle course correction may be the need of the hour, something Apple’s chief executive officer Tim Cook and Google CEO Sundar Pichai have hinted separatelyThis week has given us a better sense of why the way they do business needs to change. The need to be “deliberate” with spendings, something Cook alluded to while speaking with Bloomberg after the earnings call, will dictate Apple’s investments and expenses over the next few quarters, at least. “We believe in investing through downturns – we’ve always done that. We’ve always found out that it made us stronger on the other side. Obviously we’re being deliberate in our decisions of where to invest,” he said.
The quarterly numbers were a mixed bag for Apple. Overall sales and revenue are up (with caveats), yet operating expenses have increased. Analyze closely, and while overall product sales have a slight upward curve, that’s because of an incremental increase in iPhone sales and services (these include Apple Music, iCloud, Apple TV+ and App Store). Yet, expenses have gone up — $12.8 billion for the quarter compared with $11.1 billion in the same period last year.Some markets have helped more than the others to absorb the complicated economic situation and consumption trends. “June quarter revenue records in developed and emerging markets with double digit growth in Brazil, Indonesia and Vietnam, and a near doubling of revenue in India,” Cook said.
At the same time, Mac sales are down significantly, and so are iPad sales (2% lesser than in 2021). Wearables, Home, and Accessories (this category is down 8%), the category that includes Apple Watch, HomePod, and Apple TV, also clocked lesser sales in this quarter compared with the same period last year. The fact that Apple still managed a June quarter revenue record of $83 billion proves that the company’s long-term strategy of investing in the services was well thought-out.It was in June that Apple ushered in the return of the upgraded MacBook Pro 13, alongside the Mac Studio desktop and the Studio Display. Clearly, these didn’t do enough to even keep Mac sales at par with last year’s numbers. It may have been too late in the day for the latest generation MacBook Air, released earlier this month, to have a decisive impact on the quarterly numbers. The iPad line-up too added the M1 chip powered iPad Air, in June, after the annual Worldwide Developers Conference (WWDC).
China’s draconian Zero Covid policy has resulted in tech manufacturing hubs working in a stop-start manner, including restrictions on factory floor access, which has hurt global production.Google has also reported its slowest quarter in two years, with the biggest hit coming from the advertising revenues. The global economic uncertainties and the supply chain slowdown which has thrown product launch cycles off track, have forced potential advertisers to hold on to the cash. YouTube’s the worst hit since it relies heavily on ads (premium subscriptions are a drop in the ocean). This is the second quarter in a row when Google has reported lower profits – $16 billion profits compared with $18.5 billion in the same period in 2021, even though revenue’s higher at $69.7 billion compared with $61.9
Even before these quarterly numbers were published, Sundar Pichai had spoken about the uncertain economic outlook, in an internal memo. Internal consolidation is the need of the hour. “In some cases, that means consolidating where investments overlap and streamlining processes. In other cases, that means pausing development and re-deploying resources to higher priority areas,” Pichai wrote.
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