Amazon And Wider Tech Earnings Disappoint, Business Confidence Improves

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  • Amazon unnerves investors with cloud uncertainty, despite an overall beat for the quarter
  • US futures ease on slate of weaker tech earnings
  • FTSE 100 loses further ground
  • Business confidence at its highest level since May last year, a survey by Lloyds Bank shows

Amazon Signals Cloud Growth Is Slowing, Inc. (NASDAQ:AMZN) disappointed investors last night as it signaled cloud growth is slowing this quarter, as corporations trim spending. The recent slew of positive noise around cloud growth from Amazon’s tech peers make comparisons particularly tricky, and the commentary meant the group gave up the impressive gains initially sparked by the results, with the shares settling 2% down in after-hours trading.

Amazon’s cloud offering is more exposed to the infrastructure side of things, whereas the app side is more limited, making it more exposed to a pullback in spending. There was a stark deceleration in AWS revenue from the previous quarter, with growth falling back to about 16% from 20%.

There were bright spots, including a strong showing from the fast-growing advertising business. Sentiment was saved from falling further thanks to an overall beat compared to expectations on the revenue front.

The launch pad for further share price growth has been dented, and momentum will be difficult to find for as long as corporate belt-tightening is going on. That could get worse before it gets better, given the weaker-than-expected reading of the US economy this week.

Tech Earnings Falter

US futures lost some of their spark after the close, driven by further earnings announcements which highlighted a very mixed bag. Snap Inc (NYSE:SNAP), the owner of filter-app favorite, snapchat, fell 18% as it announced its first ever decline in quarterly revenue.

Changes to ad tools have hit the group hard, at a time when it’s already peddling very hard to compete with eyeballs over the likes of TikTok and Instagram. There was also a disappointing showing from Pinterest, which posted accelerating restructuring costs and a worse-than-expected profit.

On the more positive side of things was Intel Corporation (NASDAQ:INTC), which has come under huge pressure lately. But the market rewarded the stock after it signaled a recovery in the second half, and, crucially, seems to be paving the way to improved gross margin.

That said, Intel still faces an uphill battle – it reported its largest quarterly loss in its history as revenue dropped 36%. Flailing chip demand is the source of the downturn, as the consumer landscape continues to weaken, and the ongoing glut of chip supply compounds the issue.

FTSE 100 Loses Further Ground

The FTSE 100 may well lose some further ground to round off the week, after losing 21 points on Thursday, as investors try to wade through the often contradictory earnings and economic data coming thick and fast.

All eyes are now on the ECB, and the outcome of the impending interest rate decision. The widely held belief is that there will be another 25 basis-point increase, and any deviation from that will be a catalyst for moves on both the UK and European markets.

Business Confidence Reaches Higher Levels

Business confidence has reached its highest level in almost a year, according to a survey by Lloyds Bank. Economic optimism has risen 5 points to 28%, fueled by lower wholesale gas prices, better-than-expected consumer spending and brighter economic forecasts.

On the consumer side, it looks as though further price hikes are to be expected, with the majority of businesses surveyed saying they plan to raise their prices. This comes as overall cost bases are still swollen, meaning at least some of this will be passed to paying customers.

The data also suggests an intent to recruit in the short-term, but the extent of this will likely be held back by red-hot wage inflation and the tight labor market.