Earnings Season Is BACK & Big Tech. Just Reported Earnings...

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In Today’s (11th) Edition of “Element, by Arsh“ -

• Earnings Season Is Back! Big Tech. Reported Last Week…

• Companies Are Being Brutally Punished By The Chinese Consumer…

EARNINGS SEASON

Earnings Season Is Back On! Here Are This Week’s Updates…

1. Waste Management Inc. reported earnings on Monday. The company beat expectations on both Revenue & EPS. Read More

2. Google reported earnings on Tuesday. The company beat expectations on both Revenue & EPS. The biggest piece of news from their earnings report was Google Cloud’s growth of 35%. Read More

3. Microsoft reported earnings on Wednesday. The company beat expectations on both Revenue & EPS. The growth of their cloud business (Azure) slowed this quarter. Therefore, the stock is down after earnings. Read More

4. Meta reported earnings on Wednesday. The company beat expectations on both Revenue & EPS. While Meta beat expectations, its user growth and “overspending“ in AI panicked investors enough to push the stock down. Read More

5. Apple reported earnings on Thursday. The company beat expectations on both Revenue & EPS. While revenue rose 6% this past quarter, the concern of the company’s future growth potential pulled the stock back. Additionally, Warren Buffet (yet again) decided to sell almost 100M Apple shares. Read More

6. Amazon reported earnings on Thursday. The company beat expectations on both Revenue & EPS. The stock was boosted by growth in the company’s cloud and advertising business. Read More

CHINA

The China “Lesson” For American Companies…

The Chinese Economy. It is no secret that the Chinese consumer is slowly becoming almost as "valuable" to companies as American consumers. This is great news for when the Chinese economy is doing great and the consumer's spending power is increasing. However, it is also no secret that the Chinese economy is not doing too well right now. This economic downturn is happening because of a whole host of reasons, which is not relevant to this article.

This is hurting companies like Starbucks, Apple, and Estee Lauder (The beauty & cosmetics companies), to name a few. In the last 6 months or so, all of these companies' stocks have slid in part because their "numbers" from China were not great. Companies are expecting slower growth from their investments in China, and a period of slower growth in the consumer's purchasing power.

Starbucks is being overtaken again by Luckin' Coffee in China, local phone brands like Xiaomi & Huawei are taking market share away from Apple, and Estee Lauder is expecting weaker sales coming in from China in the coming quarters.

Who’s Responsible? From a purely business perspective, this reaction by the stock market as they try to punish companies for investing in China and not getting "immediate" results from it is unreasonable, in my opinion. It's human nature to try out the "next big thing", but it is also unreasonable because the reaction from investors seems a little short-sighted. Any company that has been able to invest in China would unequivocally say that it is an incredible market for them with the potential to be a lot more.

However, companies like Apple, Starbucks, and Estee Lauder should are also equally liable for the current situation. In most cases, international expansion from companies is a way for them to hedge their bets in their home countries while also looking to make a little more money. These companies tried to make China the centerpiece of their business too fast (and probably too soon).

The Future. It is highly likely that the Chinese consumer will come back from this crisis even stronger than it was a couple of years ago. Because, most economic downturns are cyclical, and for the sake of Starbucks, Apple, and Estee Lauder (among other companies), I hope it does.