Big Tech to Report Quarterly Results, Following Netflix Disappointment

Tech in a Tough Spot

The tech sector is in a tough spot this year amidst surging inflation, higher US bond yields and aggressive expectations around the Fed's tightening path, which is seen raising interest rates as early as March.

The sector is particularly vulnerable to such forces and NAS100 loses around 10% this month (at the time of writing), which is generally considered as correction territory, following a blowout performance in 2021.

Netflix was the first major tech firm and the first of the coveted FAANG group to report its financial results, as the earnings season picks up speed.

The results for the fourth quarter, were released on Thursday after US close and were pretty much in line with the streaming giant's own projections, as Revenue rose to 7.709 billion in Q4 and the firm added 8.28 million paid subscribers, bringing the total to 221.84 million. [1]

However, the forward guidance disappointed investors and weighed on broader market sentiment, since the firm projects the addition of only 2.5 million new users in Q1 2022, compared to roughly 4 million in the year ago quarter.

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Focus next week will shift to more tech juggernauts, such as Tesla, Microsoft, Intel and Apple, which is the second of the FAANGs to report.

Caution is needed around earnings reports, since they have the potential to create volatility and produce out-sized moves.

Microsoft

Microsoft kicks things off next week, since it reports its financial results for Q2 FY 2022 on Tuesday January 25, after US markets close.

The previous quarterly results that had been announced in October were solid, as they showed Revenue of $45.3 billion. The Intelligent Cloud segment was the biggest contributor with $17.0 billion, and a 31% year-over-year growth, largely driven by Azure and other cloud services. [2]

For the to-be-reported quarter, the company had projected total Revenue of $50.15 billion to $51.05 billion. [3]

Microsoft has generally stayed below the regulatory radar, compared to other tech giants, but its $19.7 acquisition of Nuance drew scrutiny. The European Commission approved the deal [4] last month, but it is under investigation by UK's Competition and Markets Authority (CMA) [5]. The company now expects the deal to close by the end of Q2 or early Q3, as per the last earnings call.

Microsoft continues its buying spree this year, announcing on Tuesday that it will acquire gaming publisher and developer Activision Blizzard, for a massive $68.7 billion [6]. Activision's catalogue includes highly popular titles such as Call of Duty and the deal could change the videogames market and mean trouble for rivals, such as Sony. The deal will also play "a key role in the development of metaverse platforms", as per Microsoft's chairman and CEO, Satya Nadella.

Given the current regulatory landscape, especially in the United States where the Federal Trade Commission announced a review of corporate merger policies [7], the Microsoft-Activision deal may be up for a rocky road to completion.

MSFT.us registered an around 50% rally in 2021 that culminated to November's record highs (350.01). This year however is bad, as the broader tech sector suffers, losing around 10% since the start of the year until Thursday's close.


Past Performance: Past Performance is not an indicator of future results.

Intel

Intel takes up the baton, announcing its Q4 2021 results on Wednesday January 26, after market close.

The last report was lukewarm, as Revenue of $18.1 billion in Q3 2021 was 5% up year-over-year, but marginally lower than Q2 2021, failing to impress markets [8].

The main disappointment had come from the Client Computing Group (CCG), which was down 2% year-over-year, because of "lower notebook volumes due to industry-wide component shortages".

The chip maker had then forecasted Revenue of $18.3 billion for Q4 2021 and Earnings of $0.90/share, compared to $1.71 in Q3 2021 and $1.52 in Q4 2020.

During this year's Consumer Electronics Show (CES), Intel announced the 12th Gen Intel Core mobile processors that are up to 40 percent faster than the previous generation, and the fastest in the world, according the relevant press release. [9]

Last month, the firm had announced plans to take Mobileye public in the United Sates in mid-2022, via an initial public offering (IPO), while maintaining majority ownership of the company [10].

Mobileye, which specializes in the increasingly popular market of self-driving and advanced driver-assistance systems (ADAS), was acquired by Intel in 2017.

Furthermore, Intel's CEO Pat Gelsinger, is to host a webcast today, regarding the latest plans for investment in manufacturing leadership.

INTC.us rose nearly 4% during the past year but it went on a lackluster path following April's 2021 highs (68.55), ending the fourth quarter with more that 3% loss. The new year got off to a good start, but runs a mixed month, as it has given up those gains.


Past Performance: Past Performance is not an indicator of future results.

Apple

Apple rounds things up for the tech sector, releasing its financial results for the first quarter of FY2022 on Thursday January 27, after market close.

During the previously reported period, the company had registered year-over-year growth on every product category, although overall record Revenue of $83.36 billion, missed market expectations, despite 29% year-over-year increase. [11]

Apple is forecasted to report Revenue of 118.49 billion and Earnings of $1.89/share for Q1 FY2022, as per data retrieved on January 20th from the earnings calendar of investing.com. [12]

During the reported period, the firm hosted its October Event [13], during which it unveiled the latest airpods, new MacBook Pros and the M1 Pro and M1 Max processors - the most powerful chips Apple has ever built [14].

AAPL.us comes from a very good 2021 and strength fourth quarter during which its posted gains of around 25%. This led to fresh record highs at the start of the new year, but it lost steam after that and has a negative month.


Past Performance: Past Performance is not an indicator of future results.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 21 Jan 2022 https://s22.q4cdn.com/959853165/files/doc_financials/2021/q4/FINAL-Q4-21-Shareholder-Letter.pdf

2

Retrieved 21 Jan 2022 https://www.microsoft.com/en-us/Investor/earnings/FY-2022-Q1/press-release-webcast

3

Retrieved 21 Jan 2022 https://view.officeapps.live.com/op/view.aspx

4

Retrieved 21 Jan 2022 https://ec.europa.eu/commission/presscorner/detail/en/IP_21_7067

5

Retrieved 21 Jan 2022 https://www.gov.uk/cma-cases/microsoft-corporation-slash-nuance-communications-inc-merger-inquiry#full-publication-update-history

6

Retrieved 21 Jan 2022 https://news.microsoft.com/2022/01/18/microsoft-to-acquire-activision-blizzard-to-bring-the-joy-and-community-of-gaming-to-everyone-across-every-device/

7

Retrieved 21 Jan 2022 https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers

8

Retrieved 21 Jan 2022 https://d1io3yog0oux5.cloudfront.net/_70c9d2fd38c5f7b44a66a64602d57a67/intel/news/2021-10-21_Intel_Reports_Third_Quarter_2021_Financial_1505.pdf

9

Retrieved 21 Jan 2022 https://www.intc.com/news-events/press-releases/detail/1517/intel-engineers-fastest-mobile-processor-ever-with-12th-gen

10

Retrieved 21 Jan 2022 https://www.intc.com/news-events/press-releases/detail/1509/intel-announces-intent-to-take-mobileye-public

11

Retrieved 21 Jan 2022 https://www.apple.com/newsroom/pdfs/FY21_Q4_Consolidated_Financial_Statements.pdf

12

Retrieved 21 Jan 2022 https://www.investing.com/equities/apple-computer-inc-earnings

13

Retrieved 21 Jan 2022 https://www.apple.com/apple-events/october-2021/

14

Retrieved 20 May 2022 https://www.apple.com/newsroom/2021/10/introducing-m1-pro-and-m1-max-the-most-powerful-chips-apple-has-ever-built/

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