What to expect from Big Tech earnings
Good morning! It’s earnings time, and you might be thinking, “Oh, I know what that’s going to look like.” But as ever, there’s good news and bad news, and a few things in particular to watch out for.
It’s only getting more brutal out there
My colleague Joe Williams compared upcoming tech earnings to Captain Hook walking a prisoner down the plank. A frightening image, I know, but how else would you describe it?
There’s good news and bad news with earnings. The good news is that as bad as tech earnings are expected to be, most big vendors have customers locked in to longer-term contracts and are protected against any immediate impact from swings in IT spend.
- But we’ve seen Big Tech take lots of cost-cutting measures in the past few weeks, between hiring pauses at Google and Uber and plans to cut dead weight at Meta, all in an effort to shield against an uncertain economic future.
- Joe said this is just the start. When customers need to figure out their own spending priorities at the end of 2022, we’re going to find out who’s really struggling.
- “There are so many companies at risk for downgrade revisions,” RBC Capital Markets’ Rishi Jaluria told Joe.
It may be best to look at earnings on a topic-by-topic basis. Here are some of the biggest things to keep an eye on.
- Customer demand: Earnings reports will spell out which companies were only given a short-term boost by big pandemic-era spending, and which can weather the storm long term.
- Foreign exchange rates: Lots of tech vendors don’t operate here. If the U.S. dollar fares better than other currencies, overseas revenue and cash flows might take a hit.
- Consumption-based pricing: Look out for AWS, Google and Microsoft here, along with emerging giants like Snowflake. IT vendors may not make as much cash this quarter from customers who pay for what they use.
- Product-led growth: Driving growth from end users buying products online with the click of a button, outside of the central IT team, is much more difficult during economic hard times.
- ISVs: There’s likely going to be concern about whether independent software vendors (think Asana) can get by on their own or need to consolidate to survive.
Read Joe's full earnings preview here.
— Sarah Roach
When a company buys its audit
Yesterday, Meta released its first human rights audit, which assesses the company’s approach to managing human rights risks. It was commissioned by Meta from law firm Foley Hoag, but as often happens when companies commission their own audits, it glossed over major controversies.
What the audit didn’t include was a full assessment of its impact in India, its largest market globally — an omission that drew criticism from some digital rights advocates.
- Meta instead released a “summary assessment” of Foley Hoag’s findings in India, which noted “the potential for Meta's platforms to be connected to salient human rights risks caused by third parties including … advocacy of hatred that incites hostility, discrimination, or violence,” but divulged few details and didn’t release the firm’s recommendations.
- The company was previously accused of overlooking online abuse and allowing content to fuel violence in India. Human rights groups had demanded the release of the assessment.
- Meta's human rights director, Miranda Sissons, told Reuters that "the format of the reporting can be influenced by a variety of factors, including security reasons."
It’s not uncommon for ugly details to be omitted from company audits such as this one.
- A recent probe of AWS conducted by Oppenheimer Investigations Group and commissioned by Amazon found no evidence to substantiate claims of discrimination and harassment, even though many employees said it hides in plain sight. Amazon has also long been resistant to an independent audit of warehouse working conditions, convincing shareholders to vote against the probe.
- Despite a litany of allegations of harassment and discrimination, Activision Blizzard’s investigation of itself found no evidence of systemic misconduct.
“These reports are PR, not fact, and should be treated as such,” The Real Facebook Oversight Board, a watchdog organization run by The Citizens, wrote in a blog post. While it's understandable that companies often want to add their own spin to these kinds of issues, confronting the problems head on may actually play better with the public and employees alike.
— Nat Rubio-Licht
A MESSAGE FROM GOOGLE PLAY
Google Play keeps more people safe than any other app store. Our security service–Google Play Protect–scans the Play Store for insecure and malicious apps. This lets more than 2.5 billion people worldwide download and enjoy apps and games with peace of mind.
People are talking
Matthew Ball said people should think of the metaverse as changing the devices we use:
- “We'll keep using smartphones, keyboards … It's supplements and complements, doesn't replace everything.”
Jeff Lawson said Twilio is applying some hard lessons from its start during the 2008 financial crisis:
- "Frugality is one of our principles."
OpenSea cut 20% of its staff because of an “unprecedented combination of crypto winter and broad macroeconomic instability.”
Chris Rantamaki is TMB’s new SVP of original programming. Rantamaki previously held similar roles at Paramount and Discovery.
Jim Esposito and Akash Garg joined MoonPay as COO and CTO, respectively. Esposito was Cash App’s operations lead, and Garg was Block’s VP of engineering.
Jessica Rivera and Maurice Slade joined SoundCloud as global SVP and head of marketing, respectively. Rivera comes from Mass Appeal, and Slade last led marketing at Epic Records.
Shon Manasco is Palantir’s new senior counselor focused on air, space and international government work. Manasco’s a former acting undersecretary of the Air Force.
Sam George is retiring from Microsoft. George held a couple of leadership positions for Azure over the years and was most recently corporate VP.
Marty Chavez joined Google's board. Chavez is a former CFO for Goldman Sachs.
In other news
The SEC asked Elon Musk why he didn't update his filing last month to show he wanted to ditch the Twitter deal. Musk never responded.
Here's everything you should know about the crypto crash, which we'll update as the sector takes more turns.
Fridays aren't for the office anymore. About 30% of workers swiped in on that day in June, compared to about half of employees on Tuesdays.
The DOJ is probably going to reject Alphabet’s concessions to its antitrust lawsuit, in which the company didn’t suggest selling off its massive advertising unit.
The House passed the Active Shooter Alert Act, which allows law enforcement to send out Amber-style notifications when there’s an active shooter in the area.
Stripe slashed the internal value of its shares by 28%, down to $29.
GM is planning to build a network of 2,000 fast EV chargers nationwide at Pilot and Flying J truck stops.
Facebook is testing letting users have up to five profiles at once, used for different purposes, such as one for friends and another for co-workers.
We couldn’t use Twitter for an hour yesterday, which was the worst thing ever and the best thing ever.
Automate your how-tos
Does your workplace still use thick binders for its office manual? It might be time to digitize. Protocol Workplace reporter Lizzy Lawrence wrote about Scribe and Tango, tools that create step-by-step guides from screen recordings of workplace processes. These tools have become helpful in tech, where high turnover has made it more likely that workplace guides are written by people who’ve since left the company.
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Google Play scans more than 125 billion apps each day, helping our users live safe and secure digital lives. By identifying and removing insecure and malicious apps, Google Play helps more than 2.5 billion people worldwide safely discover apps and games they love.
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Update: This newsletter was updated to correct Jim Esposito's title at Cash App.