Microsoft reported a slew of tech earnings earlier this week, reporting mostly solid numbers that might soon be considered a tech stock if it weren’t for cautious guidance from CEO Satya Nadella. overall victory. Investors speculated that even after an impressive rebound in January, the tech sector could be broadly battered.
And Microsoft MSFT,
A growth leader over the past few years, it, along with its FAANG compatriots including Amazon.com AMZN,
and Alphabet GOOGL,
are closely watched. Recession headlines and a hawkish Federal Reserve have been a headwind for the tech sector and delayed its recovery. The wave of layoffs has also raised questions about the near-term strength of tech stocks. Not surprisingly, the market is trying to determine whether a bottom has been reached, and a return to growth companies is a real option.
This could be an opportunistic moment for tech companies to position themselves for a growth cycle. Technology will return and we are seeing positive signs now. While Devices, Peripherals, and Semiconductors look like they have a longer way to go, some big names have stood out this earnings season so far — and the market has had a mixed reaction. Here are some to look out for:
Beat and raise with full strength in the fourth quarter. It’s been a while since I called this and nothing has changed. ServiceNow CEO Bill McDermott’s confidence in the company in the medium to long term remains evident in the results and guidance.
I spoke with McDermott at the company’s earnings day. He firmly believes that even if the US economy slows down, companies will not stop investing in technology. With hiring and revenue growth constrained, they’ll be looking to do more with technology. Automation, analytics, artificial intelligence, and the cloud are critical to efficient execution, and ServiceNow addresses them all effectively.
IBM’s stock hit an all-time high. IBM is another name I’ve been bullish on over the past few quarters because of its strong ties to businesses and key capabilities that allow businesses to do more with their current technology. CEO Arvind Krishna recently publicly stated that technology will grow 2%-4% faster than GDP for some time to come, and that IT will be the most protected item in any business budget.
This sentiment makes sense because in the current period of cost-cutting measures not only in technology but in most industries, the deflationary nature of technology will squeeze material costs out of other businesses, allowing technology to compensate for this. insufficient. For example, corporate investment in hybrid cloud and artificial intelligence, IBM’s key focus areas, is gaining momentum. In a conversation with Chief Financial Officer Jim Kavanagh, he shared that in the fourth quarter of 2022, IBM’s margins improved and foreign exchange challenges eased, albeit marginally, at the end of the day. Importantly, income has increased.
International Trade Commission
There is no shortage of skeptics about Intel’s prospects, and the market reiterated its view on Intel’s fourth-quarter results. This week I had a short chat with CEO Pat Gelsinger, both good and bad for the company, noting that the second half of 2023 is most likely to see a positive turnaround.
Most investors know that the fourth quarter of 2022 will be tough for Intel. The disaster of its latest data center server chip (Sapphire Rapids) is a hopeful footnote, but as the numbers show, it will take more time to fully affect Intel’s prospects. The company is in the midst of a multi-year turnaround to regain the technological leadership and market share it has ceded to competitors, including AMD AMD,
and the poor.
Still, Intel is said to be on track to deliver on its promise to deliver its next four processes within three years, a huge promise Gelsinger has made since becoming CEO. Additionally, the company’s foundry business is gaining momentum, a bright spot in the overall rough earnings results. Intel could be a big beneficiary as policymakers push to manufacture more semiconductors in the United States.
Investors’ recent love for tech stocks still doesn’t seem to really reflect the mid- to long-term direction of tech stocks — I strongly believe it’s going up. Prices for many tech companies have fallen from their 2021 highs, rewarding stock buyers handsomely. Patience is key however. The usefulness and importance of technology stocks is clear, but it will take time for investors to return to these stocks, and there is evidence that a tumultuous 18 months for technology and growth stocks is coming to an end.
Daniel Newman is lead analystfuture research, provides or has provided research, analysis, advice, or consulting to ServiceNow, IBM, Nvidia, Meta Platforms, Oracle, MongoDB, Cisco, Juniper, and other technology companies. Neither he nor his company owns any equity in the aforementioned companies.follow him on twitter@danielnewmanUV.
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