Ep.63: The Best & Worst Of The Mega-Cap Tech Earnings This Week

Okay, hello and welcome to episode 63 of the Market Maker podcast, where I'm joined by co-founder and head of trading Piers Curran to talk about what's been going on in markets this week. But to start the episode, quick heads up, we're going to give you the breakdown of the mega-cap earnings reports. So the likes of Apple, Amazon, Meta, Alphabet, Microsoft— we'll delve into those numbers in a moment. But I've kind of made a promise repacked with myself that I wouldn't mention that guy on Twitter's name. What, guys, this week?

What guy?

Yeah, you know, you know, that guy. He, he's been tweeting like a maniac, like normal, so it's hard to avoid him. But yeah, not going to say his name, but yeah, there's been so much to unpack for the week, I thought we'd be here all long bank holiday weekend to get through it all. So I thought what's more prudent is Couple of things I just want to say about the AmplifyMe community, a couple of shoutouts, some really cool stories that I've received even in the last hour that I would just want to quickly mention. And then we'll go straight into the juicy stuff on the market side. So first off, had some really great feedback from the interview that I did with the Chief Investment Officer at Barclays, Will Hobbs, earlier this week. So thank you for the comments and the likes and the shares and stuff like that. Super appreciate that. Uh, Will's such an accommodating guy, and I'm sure, as you said at the end of the podcast, he's absolutely happy to have people connect with him on LinkedIn. Just drop in that you listen to the Amplify Me podcast, and yeah, there you go, a CIO in your network. Doesn't get better than that. So look, I encourage you to take advantage of that seriously because, um, you know, he might not be able to apply to everyone and immediately, but You know, if you— it's always great to open up a perspective comment to someone with a hook. You've got the hook now, you know, the podcast. So yeah, hopefully that helps. Then quick shout out to Elliot Rumble, a physics student at Manchester Uni. So physics student who did the Finance Accelerator, performed very well. Got fast-tracked to our partner Morgan Stanley, and today they just called him and they've hired him.

Nice.

So he's going to be joining the sales and trading division in summer of 2023. So a lot of pre-planning there, of course, on behalf of our partners, but always very vigilant in that regard. But yeah, what an amazing, uh, thing to achieve for Elliot as an individual. But for us, I mean, that is exactly The Mission, um, and a physics student. That's amazing. So, you know, great to see. So well done, Elliot. Then also a quick shout out to William Hunter, did our Summer Analyst Programme last year. He's landed an internship with Market Access. Uh, Shreya Anil and James Daly, who both Will and I had met up with individually this week, they've just celebrated their first year at Capital Group and Morgan Stanley respectively. So Yeah, well done, guys. But look, let's jump straight in then into this mega-cap conversation. And to kick it off, I know you're a stats man, um, Piers, so I've got some good, good, um, figures, or as I should say, comparables that you might enjoy here. So first off, I was trying to remember what was the acronym that you used to describe the, the techs. I think it was FATMAN, wasn't it? FATMAN. So the one that I read today was Uh, Mac Man. So close, because what they're doing is they're throwing in a few more here. So we've got Microsoft, Apple, Amazon, Tesla, Meta, Alphabet, Nvidia is the other one. Nvidia being actually a very large company these days.

My Fat Man, my Fat Man was before Facebook changed their name to Meta.

Okay, so, so you are then the, uh, the oracle really for these things when it comes to So the first figure, if the map man has shed almost $2.1 trillion of equity value since the start of the year. So just the start of the year, it's just over $2 trillion. However, to put this in a bit of perspective, Apple alone is still worth 9 times Coca-Cola, 14 times Nike, 25 times Target and 42 times Uber. Let's look at one of the other big names. Meta has lost the approximate value of JP Morgan or 8 Twitters just this year. And then Tesla, you know, it's been— well, it got whacked, and no surprise because that guy who was dumping some of his Tesla shares, like you said last week, to finance his new deal, um, he started selling.

Yeah.

Yeah, well, yeah, he announced the deal, sold the next day. But anyhow, Tesla remains, uh, remains more valuable than the next 15 automakers in the world combined, even with the fact that they got hammered, um, this week.

Yeah, fast. Hang on, say that again. What, include Tesla's still more valuable than the 15 next biggest? Yeah, including like Volkswagen and Yeah.

Wow.

Okay. Well, the bubble, whilst it's burst, the deflation has only just begun. Well, actually, well, you've been reading about margin calls for Elon— oh God, I said it, didn't I— for that man's financing deal.

Yeah.

He's having to put up some of his Tesla shares, not selling them to raise cash, which is what he's doing, but also other shares that he's not going to sell. He's putting those up as collateral for part of the financing loan. But if the share price drops below $550, I think it is, then it triggers a margin call. Those shares won't be valuable enough anymore to have sufficient cap— to be sufficient collateral for that part of the deal.

Yeah. Yeah, I got the memo from Bill Gates. He was circulating it to us saying, right, you're going to join the short. Michael Burry was on that. There was Bill Gates. We had a Zoom call. And I was like, look, my 50 quid is not going to help support your short position. Well, look, let's go straight in and talk about Amazon first because they got an almighty whack. Aftermarket last night. They were down about 10%, and that was mainly down to the fact that, uh, for Q2, net sales forecast missed. And this was one of the headlines I ran with, with one of the posts I did on LinkedIn, which was, company sees Q2 net sales of $116 to $121 billion, but that's below expectations of $125 billion. So we're living in a world where take $120 billion in a quarter, it ain't good enough anymore. But yeah, what were your initial thoughts when you saw the Amazon numbers hit?

Well, I mean, first of all, this is a problem for a lot of these tech firms. It's the comps, right? Because obviously, we're always looking at revenue and we're looking at profit and we're thinking about how fast is it growing. So what was revenue like this time last year? What was profit like this time last year? It's always, right, what's it like compared to 12 months ago? And the issue that the likes of Amazon have is that 12 months ago, I mean, everything was just through the roof because we were all locked down. And obviously companies like Amazon hugely benefit from that particular quite unique situation. So 12 months on when we're not locked down, well, I should say, we're not locked down in, let's say, the West. Obviously, China is locked down, but perhaps that lockdown came in more in April, actually. So it didn't particularly impact Q1, which is what these earnings were about. But yeah, the comps— I mean, on the one hand, their revenue did still go up like 7% year on year, right? And half of me thinks, well, that's That's quite remarkable in itself, given where we were 12 months ago. But of course, it's about revenue growth rates, and their revenue, whilst it went up 7%, that's much slower growth than we're used to from these just phenomenal companies. And the other thing I'd say is, it's quite— they've got a couple of— I mean, I guess one of the big headlines was that the company recorded a $3.8 billion net loss. In the quarter. And you're, you know, the word loss is definitely not associated with these big giant FANGs. And, um, you know, when you start getting lost, like with, with Meta, you know, the loss, or Netflix, the loss of subscribers, you know, or here in, in Amazon's case, you know, quarterly, um, net loss is kind of, wow, that's just, that shouldn't happen. And the issue they've got is that their share prices are so high that the only thing that can sustain the price they're at or the continued upside trajectory is just phenomenal off-the-scale numbers every single time. And when they don't have phenomenal off-the-scale numbers, then right, well, the share price isn't justified. And so you're getting some pretty sharp downside. One thing that was kind of sneaked in the kind of detail here with Amazon, and really the reason for their loss was because they They had a one-off item where they wrote down their Rivian shareholding. Rivian's still alive? They took a $7.6 billion loss write-down on their Rivian investment. So that's basically— that's their net quarterly loss right there, and then some. So there's little things in there, but obviously it's their the retail side, yeah, fine. Obviously, the comp for year on year was tricky. But when you look at things like AWS, then actually it was phenomenal. It's just that AWS only has a revenue— it clocked in at $18.4 billion for the quarter. So obviously, when you sit that alongside, it's just mega retail arm. $18.4 billion gets lost. But if AWS was its own company, let's say, they would— but we'd be kind of shouting and screaming, this is amazing. The AWS share price, if such a thing existed, would have been through the roof because that $18.4 billion, that's up 37% year on year. So actually, if you took AWS out, this earnings report would have looked way worse. Um, and so yeah, AWS is still, still nice and strong.

Can they not do that, like, uh, the restructuring that Facebook has gone through, or is going through now that Facebook reports like the Reality Labs figures, they report like Facebook figures?

Yeah.

Can Amazon not engineer something to just detract their attention towards more where they want it on AWS? Well, they do.

I mean It's, it's Facebook that was slow on that. Amazon do split out their numbers and they do report their AWS numbers as a kind of its own category, right? It's just that we're used to that with Amazon. That's what they've always done. I'm just saying, if AWS happened to have been its own separate entity in terms of a, a company listed, you know, then obviously the focus is all on the amazing growth that that side's bringing. But look, overall, Amazon, they're overstaffed. They invested an insane amount of money through the pandemic to take advantage of that incredibly unique lockdown situation. They invested hugely in warehousing. They invested hugely in the number of employees. It peaked at 1.7 million. That's the number of employees, which is just an insane figure. So then now they're having to reduce it. And actually, they're already down. In quarter 1, they axed 100,000 people. So they took it from 1.7 million down to 1.6 million. So they're just having to row back on some of that kind of mega expansion strategy that they implemented in when COVID was around the world. And now they're just having to— I guess it's incredibly difficult to try and— running a business of this size is incredibly difficult. And certainly from the strategy point of view, these are massive kind of oil tankers, if you like. And to change direction, it's not like companies like, let's say, Amplify. We're really small. Certainly, relatively. And it just means that we're much more nimble. And if we see a kind of speed bump coming up, well then, right, we can quickly— we're nimble and we can dart around and change direction and change up strategy. But when you're Amazon, I mean, think about it. If you want to set about firing 100,000 people, that in itself is an absolute monster exercise. It's easier to fire them, by the way, than it is to hire them. Imagine having to hire 100,000 people. This is one of the issues they've had on the costs side, because they were having to— obviously there's a shortage of labor. Companies can't find staff, and they were having to pay, I think it was $1,000 sign-on bonuses just to get the people in through the door. Yeah, they're just so big that strategy is difficult. When you get something like COVID, which has been almost impossible to kind of predict, right? Um, it's just a bit of a COVID hangover, and that's what these quarterly figures show.

Okay, well, let's, um, let's move on then to the next candidate, Alphabet. Their shares were down initially 5% after they— I'm talking about the aftermarket, the immediate aftermath, if you like, of the numbers hitting, uh, missing on top and bottom lines and a big miss on their YouTube revenues. I mean, the YouTube thing, I don't know the exact details, but it makes— the YouTube thing kind of makes sense. Yeah, because COVID restrictions in their key, let's say, markets, North America namely, but even in Western Europe, are radically different. And so the consumption— I would say I'd like to see a stat on the average active user's time consumption on YouTube. I would have thought has gone Gone down and so less marketing opportunity. Oh, you're going to prove me wrong now.

Well, I've got a stat to throw back in your face on that last one.

All right. Okay.

Because this is something they pointed out in their earnings call. They said, actually, really quite surprising. It was a way of them to try and say, guys, don't worry. I know YouTube revenues— I mean, by the way, again, YouTube revenues rose 14%. Year on year. And remember, this is a year-on-year comp that's phenomenally difficult to beat given where we were 12 months ago. They still grew at 14%, clocking in at $6.9 billion. It's just the problem was that was a lot lower than the $7.5 billion that analysts had expected. But the way they tried to spin it was actually they said YouTube has more than 2 billion monthly users. And apparently, they were spending more time on the platform even as people have returned to in-person activities. So apparently, their user usage time's gone up.

Which I'd like to see the official submission of that paper, please.

Hey, I'm just—

I'm just a messenger.

But yeah, I mean, like, companies— certainly like Google. I mean, Amazon— They always sail close to the wind. What I mean by that is their margins are pretty tight, OK? Because the nature of their business is a logistics business, and it's incredibly— there's a huge amount of cost that goes with having physical warehouses and delivering physical products and all the rest of it. Obviously, companies like Google don't have all of that infrastructure. That's so insanely expensive. Amazon's always sailed a bit close to the wind. When Amazon report a loss, it's like, okay. But when Google miss on the top line and the bottom line, I can't— I honestly— have you got a stat? When did that last happen?

Yeah, I can't remember.

Has it ever happened? I mean, it's quite insane. That's why it's so surprising. They're like, wow, okay. But when you think about the macro environment, you know, I mean, we'll talk, maybe touch on some GDP figures in a minute, but look, we are heading for a slowdown surely, right? And when it comes to companies looking to cut costs, then one of the first items on the list is marketing spend because it's easy to cut that cost. You know, we talk about staff and laying staff off. Well, that takes a long time and it's expensive, right? But you can turn your marketing off immediately. It literally takes you 1 second, right? I've gone to Google AdWords, bang, turn the campaign off, right? So it's often one of the first items that kind of— that gets reduced. So Amazon, particularly with their YouTube revenues, are particularly vulnerable to the macro climate. So I don't think it's too much of a surprise.

Um, let's, let's slip in quickly that GDP print. Yeah, okay. Because we want to keep it on this, on these tech companies focus. So the GDP number came out earlier this week and it was a surprise because it was expected at plus, so positive 1% growth, and what we got was a negative 1.4% print, which was much lower than even the most pessimistic estimate on the street. What I mean by that is of all the surveyed big investment banks who submit then their estimate of what they think, which generates then this kind of expectation, even the most pessimistic one got it— wasn't pessimistic enough, basically. So this was a surprise. There was some detail about reflecting growing trade imbalances and weaker inventory growth, which perhaps you could explain what that is. First before we go into it more.

Yeah, so this is the US Q1 GDP figure and bang, it's negative. And everyone immediately— the immediate reaction is, um, what? Okay, wow, it's happening sooner than we thought, right? That this whole kind of recession risk and it's already here. And that's the initial reaction. But actually, if you step back and look under the bonnet of this, then you can explain it away, and it's most likely not going to be the case that Q2 is also going to be negative. So here's why. So it's actually down to inventory— well, so it's down to the trade deficit, okay, which is looking at measuring the, uh, the value of goods that you import versus the value of goods that you export. Okay, and if you've got a deficit, then you're importing more. And obviously a company like— sorry, a country like the US, hugely rich, massive, the biggest rich economy on the planet, they're obviously importing way more than they export, right? And because we've come out of the pandemic in the US, let's say in quarter one, then companies are restocking, right? They're building back up their inventory levels. Because they're expecting sales to go up because lockdown's over, right? And people are coming out and spend, and the labor market's really strong and so on, right? So they have a temporary increase in orders in order to build up their inventory and stock to meet what they think is going to be new demand. Now, most of this is actually imported goods. So what we had was probably a temporary widening of the trade gap, of the trade deficit, more imports. And actually exports dropped, and exports dropped for two reasons. Number one, well, in other countries, certainly in China, right? Well, there's lockdowns, and so the demand side isn't as strong. But also, I don't know if you notice, and I don't know if we'll have time this time around, but the dollar has been rampant. I mean, my Lord. Some of the FX moves, some of the levels we're seeing on some of these FX markets are crazy. So the dollar's been really strong, which makes US exports more expensive. Right? So the overall effect is that actually that's a negative impact on GDP. Because if your trade deficit widens, think about it. If you're buying a product, but that money is going to an international company based in China or based in Europe, then actually that money is leaving the country. So it has less of a GDP positive impact than— so it's only got one half of the deal, if you like. That's the buying part, but then the money leaves. So if you buy a product from a domestic company, then obviously the money stays inside the economy and the person who's selling receives that money. And then they might take that money and go buy something else that's in the domestic economy. And so you have that effect. So there's been a temp— probably a temporary widening of the trade deficit, which has had this technical negative impact on GDP that's most likely not going to be sustained into Q2. Now, later in the year may be different as the headwinds like inflation and interest rates going up, and who knows about the Russia-Ukraine thing, probably ongoing, right? So maybe those headwinds will start to become strong enough to actually create a proper recession. But most likely what we have right now isn't a recession and probably won't be.

Okay, thank you for the thorough as ever explanation. Absolutely crystal. But, um, the link then between that and Alphabet and then leading us into Apple putting us back on track was buybacks. Oh yes, so Alphabet is to buy back an additional $70 billion— $70, I said, 7-0— in Class A and C shares. And then Apple's authorized $90 billion buyback. So perhaps you could just quickly just have a comment on the buybacks, the rationale, and then we can get into the numbers with Apple.

Um, this is a This is a key strategy amongst big tech. It's across all of them. It's not just Apple and Amazon either. I mean, even Meta, given how badly they're doing, even they're kind of— I got a full-blown share buyback program. And there's kind of two main reasons you would do it, I would say broadly. Number one is if you're quite a cash-generative business, And obviously these tech giants are— they've got insane amounts of cash. And whilst the business kind of 101 is, well, if you've got excess cash, well, obviously great. Well, right, reinvest it in growing your business, right? But these tech firms have got so much cash, they just don't know what to do with it. So they're buying back shares, or they're increasing dividends, which Apple did as well, by the way. And so this is returning some of that cash to their owners, that's the shareholders. OK? So one reason is they got so much, they're not quite sure— there isn't enough kind of growth strategies for them to kind of spend it on, right? Number 2, it is incredibly— it's a very positive thing for your earnings report. And that's because when we value businesses, there's so many different valuation multiples, but perhaps the most— the one everyone knows about is the P/E ratio. That's price to earnings, okay? And it's based on the number of shares, so we're looking at profit per share, okay? So one way of engineering, uh, a kind of nice steady upward trajectory where your profit per share is always increasing, which looks amazing and what a great business— well, actually A lot of it is engineered by reducing the number of shares. So even if your profit stays the same, if your number of shares is consistently reducing, then your earnings per share is steadily increasing, right? So it's a kind of clever kind of accounting engineering trick to massage up the, the look and feel of your earnings year on year. And I would say for the likes of Apple especially, they are becoming— because they've got the biggest program of all on the share buyback and on the dividend side. And they really are becoming— and if becoming, maybe they have become the best safe haven out there because they're such a huge company and so well established with phenomenal products and amazing kind of global reach, but also if you own their shares, you're going to get loads of money because their dividends are pretty much guaranteed now and they're guaranteed to increase. So that's income for you. And as they're buying back shares, well, great, you're steadily actually owning a greater percentage of the business. So this is one of the things, factors that's underpinning phenomenal performance of these FAANGs. It's not just the tech and the growth rates, and it's actually also the amount of cash they generate and their preparedness to give it back to the shareholders.

Yeah. One line I saw from them I thought was surprising was their fastest growing region. I mean, I guess that makes sense in the context of what's happening in China, but in the Americas, their sales rose 20%. In the quarter in America. That's a pretty decent jump. That, that alone in that region was just over $50 billion. Yeah, the wearables, home accessory categories including the Watch, Apple TV, HomePod Mini, AirPods, these sorts of things, that did miss though. But their services revenue grew 17%, which was actually slightly above projections. So I thought they were some of the more granular details that were quite interesting. But the big thing that— I mean, I look at this stuff as it hits the tape and I follow the aftermarket when it breaks. And their shares initially popped because you were like, wow, big beat, 9% revenue increase, authorizes buyback. Shares actually spiked about 2%, 3%. And then they came out shortly after and said, actually, we predict that supply constraints would cost between 4% on the low end to $8 billion in revenue during the current quarter, the one that will report next. And that was what sent them into a bit of a tailspin in aftermarket trade. But I mean, the commonality here between these is talking about just what's been happening in the environment just globally at the moment, because Amazon were the same on the, on the conference call. Jassy said the pandemic and the subsequent war in Ukraine has brought unusual growth and challenges. But that is definitely true. But do you think they lean on that a little bit? Because they're— I mean, certainly the growth one, maybe not, but the Ukraine one, you can kind of say, well, look, that's a disruptive factor now. You'd only say this, of course, when you've got bad numbers.

Yeah, absolutely.

Yeah.

I mean, you find every excuse you can possibly get, right, to explain this stuff without being I should row back on that comment. Without being stupid, obviously you want investors to trust in your ability to manage and run your business. So you don't want to find ridiculous excuses to try and explain away and justify performance. But obviously the Russia-Ukraine thing, yeah, genuinely has had a negative impact, and especially for these advertisers.

right?

These— and people like Meta, I mean, Putin switched off Facebook, literally. And Facebook themselves took the decision to not allow any Russian entities to pay for any marketing on their platform. So I mean, that's a very direct negative— immediate negative impact, right? So I mean, absolutely. That has played a role here in some of these figures. And certainly for Apple, yeah, I mean, the supply chain constraints, I mean, it's perhaps more to do with China than necessarily Russia-Ukraine. But yeah, the fact that they, I think they lost $6 billion in the December quarter, so that's Q4 of 2021. Obviously it's impacted them then in Q1 here, but as you say now, yeah, they're coming out with potentially an $8 billion hit in April, May, June of 2022. I mean, these are— that's a lot of money, right? Even for a giant, um, the size of Apple. Um, but yeah, I mean, geographically, as you said, it was interesting. I mean, American sales jumped. I mean, obviously America came out of lockdown and everyone's kind of, woohoo, let's go and, um, get out there. And I don't know buy a new iPhone or whatever it might be. But yeah, Europe rose at 4.6%. So the US rose 19% to 20%, right? Europe only 4.6%. China only grew at 3.5%. But actually, weirdly, even though that's the lowest, people were quite surprised at how good that was, given the kind of zero tolerance on lockdown that's still going on out there. Japan Well, actually, Japan didn't grow at all, stayed at 7.7 billion.

I know one thing, like anecdotally, that my family being based in Hong Kong in China, that the iPhone and Apple's product is seen as quite a status symbol. It's very different to say here, you'd gladly pay a premium. So probably the affluency of the consumer that would purchase in China is probably not as impacted, say, on that level where to be able to spend. Perhaps, um, one thing I was going to say is Tim Cook did actually say on the call that they had a record level of upgraders during the quarter, and we, we grew switches, uh, right, strong double digits as well. So there's a couple things going on there in the background as well.

I find it interesting, like, even Mac's grew at 15%, Mac sales, which is pretty impressive. The one outlier that actually disappointed on the sales side is the iPad.

And those things still around?

Right. Well, that's my immediate reaction. It's like, who the hell's buying iPads anyway? But apparently people are, albeit revenues went down. So the iPad revenue dropped by 2%. But do you know how much they made from iPad sales?

Well, I do know, and it's a lot of money.

$7.7 billion.

Yeah.

From a product that— hang on, does anybody buy those? Well, yep. They buy a lot of them. Yeah. So yeah.

But it's like enterprise packages for schools or something like that, or like for businesses.

Yeah, yeah, good point. But yeah, Apple on their share buyback, $90 billion they've announced, um, for this year ahead. Um, and then on their— I think their dividends, they've increased their dividends, or they're increasing their dividends for— by 5%, which is the 10th straight annual increase. So do you know what's going to happen next year? Going to raise it again. Year after that, going to raise it again. It's a banker. If you want income from share ownership, then literally there's probably no better place to go. Actually, there's some analysis done. They've got so much cash that these share buybacks, they reckon that Apple can continue with this policy until at least 2035. Wow. Unless something extraordinary, which is we can't foresee at this point, happens. 2035, another decade and a bit of just continuing to smash the kind of share buybacks and tick up those dividend payments.

Wow.

Amazing.

Well, let's move on. I'm just a bit conscious of time. So Meta. They actually performed the best. Never thought I'd say that, but their daily active users, their DAUs, which we talked about at length when their shares got hammered the last earnings call, they actually moved back into growth territory after the shocking decline that they had seen for the first time on record. But context, again, as I was writing about the time, was their stock is down almost 50% on the year. So you've got to take it in context, I think.

Yeah, I mean, this is it. I think a lot of investors perhaps who don't spend as much time as others on due diligence or properly understanding a business and understanding its direction and therefore then thinking about its growth potential and all the rest of it. If they're mainly just looking at price, where you get onto the Facebook chart and you go, my Lord, that has collapsed. It's got to be cheap. It's got to be cheap. So you're getting people buying just from what you'd call a relative price sort of mindset. Which is perhaps why any hint of a slightly good bit of news from Facebook, people kind of jump in to buy because, hang on, I'm buying a 50% discount. 50% discount from an incredibly overvalued price 6 months ago, but they don't often quite see it like that. So I think you're always going to get— you're going to get some heightened volatility in Facebook shares. Now that their share price has dropped so radically, volatility is going to go up, I'd say, especially around earnings reports, as you get, you know, inevitably some good news in, in the mix, and people might decide to kind of jump on that and you get these big spikes. But, but I think, yeah, longer, medium term, you know, Facebook's still where it was before this earnings report, and that's, you know, an incredibly challenging moment in its history and trying to reinvent itself literally. Um, and, you know, that I guess from the, from the big advertisers out of these techs, so obviously Facebook and obviously, um, Google generate most of their revenue from advertising, but the problem Facebook have is they're reliant on other businesses like Apple to actually generate their eyeballs to see their adverts that people are paying for. The thing about Google is other than— well, the thing about Google is that their advertising revenue is direct traffic to the Google site. Facebook's advertising revenue relies on going through a third-party product like an iPhone. And obviously this is one of the big things that's impacted them in the last few months where Apple's privacy settings have been tweaked, um, meaning less eyeballs on Facebook ads. Yeah.

And then the, the final of the, the big five, as they are, is Microsoft. And I remember many episodes ago we did our kind of pitch, stock pitch, on who we'd go for. Yeah, and, uh, yeah, the gray man in the room continues to just go about his business. But I thought an interesting connection to what you said earlier was about if you were to segregate out the AWS part of the logistics business, so to speak, of Amazon, and that margin situation and the margin differentials between Amazon in those two divisions is, is massive. But for Microsoft Well, Microsoft, um, quarterly sales earnings tops analyst projections, robust growth in cloud services demand. Shares are up around 7% after market. A good quote I saw from Satya Nadella, who's the chief executive, he said, in an inflationary environment, the only deflationary thing is software.

Hmm, yes indeed.

Just thought it was a great, great quote. And actually, he said he predicted that tech spending would remain strong even if economic growth slowed, as customers try to counter inflation by investing in systems to increase productivity and automate more of their operations.

Yeah, and it's— what's great about Microsoft is a lot of it's B2B subscription. —so right, it's businesses subscribing to, you know, Office, Microsoft Office, right? And the problem, it's not like advertising revenue, which you can just dial up and down. You know, your business can't function if you don't have Office, right? So it's not something you can switch off and on. And so there, I'd say their revenue their big revenue driver, which is through things like Windows and Office, um, are more stable than something like an advertising revenue stream, um, like the Googles and the Facebooks have.

Yeah. And then some other noteworthy mentions I, I thought were Intel, the chipmaker. They issued a downbeat revenue and earnings forecast for the current quarter. Coronavirus pandemic lockdowns in China, the war in Ukraine, combined to hit the outlook for PC sales. And Texas Instruments, one of the most diversified large chipmakers, trimmed its growth forecast this week on concern that some Chinese customers would be forced to suspend operations. So everyone's watching China, it seems.

Yeah, well, quite rightly. I mean, I, I know that, um, uh, we've got staff over in Shanghai, so I know that it's actually early signs they're slightly now relaxing some of the, you know, the major lockdowns, like you're allowed to walk outside of your building, not beyond the boundary of your building's kind of garden or whatever, but at least it's a step in the right direction. However, apparently now Beijing is starting to see some more restrictions being put into place. So yeah, we're not— it's still pretty dire out there. And it's going to have a— yeah, it's definitely having a major impact, of course, on the Chinese economy, but absolutely on the whole supply chain problem globally and the inflation nightmare. So yeah, and you're seeing it in markets. If you look at the big indices now, I mean, they are— I think we were talking a few weeks ago and saying, well, look, this isn't really getting priced in properly, and there's got to be more downside for these big indices. And you are seeing that now. I mean, the NASDAQ's trading right down on its lowest point for the year. Not a new— well, it did set a new low for the year actually this week, just dropping just below the mid-March low, which was the low that came off the back of the beginning of the Russia-Ukraine situation. But the NASDAQ's down 20%. And I don't think that's the bottom.

Actually, one thing I don't think you would have seen this, it came out in the overnight session, um, and not many people talked about it, to be honest. But the, um, South China Morning Post put out a piece citing sources overnight that suggested that China is ending its regulatory storm over big tech, and actually they're now pivoting and giving the sector technology a bigger role in boosting the slowing economy. What? Yeah, yeah, bumps, bumps. Well, I mean, look, we're looking at the charts, we're recording this right at the end of the day on Friday, but actually overnight in Asia, obviously they were loving it. Yeah, wow. So yeah, look, when needs must, Piers.

Xi Jinping admitting he's made a wrong decision and doing a U-turn.

Well, careful, careful what you say. Xi is not Elon. He's a much bigger fish. But, um, we'll end it there. Um, so that we haven't had time to cover a lot of stuff, just, just so much going on. We have not even mentioned the French elections. Macron obviously won as well. And there's lots of other things. Archegos back in the news, uh, our friend Bill landing in some hot water again. Seems he was even more of a naughty boy than what we thought. But look, we'll end it there for this week's episode. As I started this episode, please do send in any of your positive stories and so forth, whether you've landed a role or, you know, just something cool that you want to share and I can shout out from the community side. And also as a favor, if you ever kind of enjoy anything that you hear in any of the podcast episodes, please do share it. Um, whether that's on LinkedIn or whatever channels that you use, we'd hugely appreciate it. And you know, the more people that listen, hopefully the more people we can help educate. And also, yeah, and don't forget, we're still running those Finance Accelerators, they're still happening. If you haven't done one, we'd love to have you on board. So with that, if you're in the UK, have a lovely long weekend. Piers, thank you as ever. Cheers, have a good one. Take care, everyone.