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Apple, Alphabet and Amazon are suffering from an economic downturn that is squeezing demand

(Bloomberg) — Apple Inc., Inc. and Alphabet Inc., leading technology companies with a combined market value of nearly $5 trillion, released results on Thursday showing that an economic slowdown is hurting demand for electronics, E-commerce and cloud computing throttles and digital advertising – mainstays of the global tech economy.

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Apple’s sales fell more than analysts had predicted during the holiday quarter, offset by weak buying of iPhones and Macs. Amazon’s revenue has been slashed by weak consumer demand for products sold online and slowing growth in a once-booming business that provides remote computing power to businesses. Alphabet’s results missed Wall Street estimates after customers cut orders for ads that appear alongside online search results.

“The war in Ukraine, inflationary pressures, economic uncertainty and macroeconomic headwinds kept consumer sentiment weak in 2022, while smartphone users reduced the frequency of their purchases,” wrote Harmeet Singh Walia, a senior analyst at Counterpoint Research, in a report on Apple.

The economic weakness also impacted business demand for displays and cloud computing, said Mandeep Singh, chief technology officer at Bloomberg Intelligence. The sluggish economy was most evident at Alphabet, “when they asked advertisers to pull back on what other advertisers were saying,” he said in an interview. “Cloud consumption is declining, although growth rates are still higher there.”

Shares of all three companies slid in after-hours trading, with Amazon down 6.6% and Alphabet down 6.4%. Apple slipped as much as 5.6%. Nasdaq 100 futures were also lower, suggesting a possible reversal of Thursday’s rally led by Meta Platforms Inc., whose results highlighted tens of billions of dollars in cost cutting and share buybacks.

Each of the big tech companies reporting Thursday also underscored the ways they are working to weather the slump. Alphabet’s chief executive officer Sundar Pichai relied heavily on artificial intelligence to improve search results and other products. Beginning this year, DeepMind, a division focused on AI research, will be included in Alphabet’s corporate expenses. That will show how the technology will be integrated into other companies — and not just Alphabet’s “Other Bets” division — the company said.

“I’m excited about the AI-driven jumps we’re going to be unveiling on the quest and beyond,” Pichai said in a statement.

Part of Apple’s weakness last quarter was the result of supply chain constraints, particularly in China, where Covid-related lockdowns hampered production while keeping consumers away from stores. Apple CEO Tim Cook said an easing of Covid rules in China – one of Apple’s biggest markets – is helping brighten his outlook.

“If you look at the opening, which started in December, compared to November, we saw a significant change in traffic levels at our stores — and that’s impacted demand, too,” Cook said on a conference call with analysts. Production “is back where we want it to be now,” he also said.

Amazon CEO Andy Jassy focused on the company’s efforts to cut costs and reverse the massive surge in hiring and spending sparked by the online retail boom that has accompanied the pandemic.

“I think the #1 priority I spend time with the team on is probably reducing our cost of serving our operations network,” Jassy told analysts on a call.

Alphabet’s chief financial officer, Ruth Porat, also told investors that the company will “sensibly” slow the pace of hiring this year. Both companies have also announced major layoffs in recent weeks.

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