Big Tech companies, which have helped drive the US stock markets as well as the economy, are also bearing the brunt of the slowdown and like many other tech companies, Alphabet has also announced a two-week hiring freeze.
All the FAANG companies have either cut back on hiring or announced layoffs. Netflix has resorted to layoffs amid a slowing growth as the company has lost almost 1.2 million subscribers in the first half of 2022.
The second quarter subscriber loss was however half of its forecast of 2 million and Netflix said that it would add 1 million subscribers in the third quarter. Netflix stock gained over 7% yesterday as markets gave a thumbs up to its earnings. It nonetheless remains the worst performing FAANG stock of the year. Over the next week, we’ll get earnings from the remaining FAANGs including Alphabet.
Amazon also announced during its first-quarter earnings call that the company has started to lower its headcount as it finds itself overstaffed. Apple, which is the best-performing FAANG stock of the year is also going slow on hiring. Meta Platforms has also cut back on hiring as the company is battling with a peaking user count and the revenue loss post Apple iPhone’s new piracy rules.
Alphabet has added around 10,000 employees in the second quarter but is now taking a relook at its hiring. A spokesperson told TechCrunch “As Sundar announced, we are slowing hiring for the rest of the year. In line with that, we’re pausing most new offers for two weeks to enable teams to prioritize their roles and hiring plans for the rest of the year.”
Layoffs Mount at Tech Companies
Alphabet is not alone in cutting back on hiring and other tech companies have also been impacted. Uber’s CEO Dara Khosrowshahi said in an internal email earlier this year that it would treat hiring as a “privilege.” Rival Lyft has also laid off some workers. Tesla has also slashed its employed workforce but is adding more salaried workers. Microsoft is also laid off some of its employees.
Mortgage companies have also resorted to layoffs amid the slump in the industry. Multi-year high mortgage rates have taken a toll on mortgage originations as well as refinancing. The US economy continues to add jobs though, and the nonfarm payroll came in at 372,000 in June, ahead of estimates.
The Fed has raised rates thrice this year and its hikes are much steeper than other countries. US dollar has strengthened as a result which is taking a toll on earnings of US companies that get a significant share of revenues from international markets. IBM took a hit on its earnings due to the stronger dollar. It also cut its full-year cash flow guidance citing the stronger dollar and the decision to exit Russia.
While the Fed has raised rates, the Federal government is continuing with its expansive fiscal policy. Congress is now taking up the $52 billion CHIPS (Creating Helpful Incentives to Produce Semiconductors for America) Act which would help increase chip production in the country.
Alphabet to Release Second Quarter Earnings
Alphabet would release its second-quarter earnings next week and analysts expect the company’s revenues to rise 13.3% to $70.1 billion. The company had missed revenue expectations in the first quarter on lower-than-expected YouTube revenues. Alphabet’s EPS in the quarter is expected to fall 4.5% to $1.30.
Meanwhile, while there has been a sell-off in tech stocks this year, and even the once-formidable FAANG stocks have also fallen, analysts see companies like Alphabet as a buy for long-term investors.
The company recently completed its 20-for-one stock split which has made the stock much more affordable for retail investors. While the split does not change anything fundamentally, they help in increasing the liquidity.
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