Apple and Amazon earnings show even tech champs can’t escape the pandemic

The critic in question was responding to a Data Sheet column in which I speculated that Apple’s fourth-quarter earnings could fall short of Wall Street forecasts due to inevitable, pandemic-induced supply chain challenges. In support of the hypothesis, I cited an analyst note from Bank of America warning of just this possibility. 

My correspondent was having none of it. “Every quarter APPLE crushes all expectations, but then there are people like you who come out feeling they have to get out ahead of reports with guesses which always end up wrong. But it hurts the stock in advance of the reports,” the vexed bull wrote. “Thanks for nothing.”

Sorry, not sorry, dear reader! 

When Apple delivered its earnings on Thursday, the iPhone maker shocked investors after disclosing it had earned $1.24 per share for the quarter ended Sept. 25, the first time the companyfailed to beat expectations since April 2016. To be sure, the consensus among ticker-watchers was right on the money, anticipating exactly $1.24 per share in earnings—but, hey, CEO Tim Cook has been crushing it so hard that he has trained the markets to expect surprise good news. Quarter after quarter, people bet on being wrong.

Worse yet, Apple reported a revenue miss. Apple recorded $83.36 billion in the quarter versus $84.85 billion expected—the first such slip since May 2017. (Revenue was still up 29% year-over-year.) Cook blamed the industry-wide chip shortage and COVID-related manufacturing hiccups in Southeast Asia, saying the disruptions cost an estimated $6 billion. Investors, displeased, sent Apple shares down 3%. 

Let’s be honest, I am just as invested in Apple as the next guy. My retirement depends on the funds that track the S&P 500—which Apple, accounting for more than 5% of that stock market index’s weight, dominates. We’re not trying to be downers here at Data Sheet; we’re just trying to provide useful information. The point of this newsletter is to enlighten—and, hopefully, entertain—so tech-curious folks can stay up to date on the latest news and make better decisions. (Of course, consider none of this investment advice!)

Apple wasn’t the only company to get hammered. Amazon, similarly, disappointed. Also reporting earnings on Thursday, the e-commerce behemoth posted its slowest growth in six years with $110.8 billion in revenue for its third quarter, a 15% rise that fell short of expectations of $111.6 billion. Profits sagged, too, at $6.12 earnings per share versus an expected $8.92 per share. Investors bid down Amazon’s shares 4.8%

Combined, the two companies lost $174 billion in the aftermath. As my colleague Eamon Barrett writes, “it’s a bad time to be in the ‘stuff’ business”—even for tech giants that did so spectacularly well taking society digital during the pandemic. The challenges of the physical world—factory closures, lagging shipments, trouble hiring, and price-chewing inflation—are catching up to these highflying champions. Based on Cook and Amazon CEO Andy Jassy’s recent remarks on their respective earnings calls, the headwinds show no sign of relenting in the near term.

Santa’s elves best be on their game this holiday season.

Robert Hackett
@rhhackett
robert.hackett@fortune.com

NEWSWORTHY

FTC amps up the veto power. Top Democrats at the Federal Trade Commission have adopted a new policy that would give the agency's commission the ability to block future deals for a company that it has already determined is pursuing anticompetitive M&A, according to The Wall Street Journal. Introduced in the middle of an M&A blitz, the change was approved by a 3-2 vote, with the FTC's two Republicans dissenting over concerns about what the change will mean for deal flows and agency resources. 

Super Follows go international. In an expansion of its prior roll out, Twitter is introducing Super Follows on select creators—a designation whereby users can subscribe to accounts for a monthly subscription to access exclusive content—to all iOS users worldwide, TechCrunch reports. Previously, the social media company's monetization effort had only allowed users in the U.S. and Canada. 

Inking those gains. Netflix's surprise hit Squid Game has led to another type of surprise hit: A cryptocurrency traded under the name SQUID. Inspired by the streaming goliath's South Korean drama, the token, which can only be used in an online game set to begin in November, had risen some 86,000% by the middle of Friday afternoon over the prior week, as our colleague Chris Morris writes. But there's a catch. Some buyers have reported to crypto-tracking website CoinMarketCap that they've been unable to sell the token, preventing the time-old crypto market practice of day trading.

Why not rename it Watchbook? The company formerly known as Facebook (now Meta) is developing a smartwatch, Bloomberg reported Thursday, based on a photo that was found inside the app controlling Meta's new smart glasses. Featuring a front-forcing camera and rounded screen, the watch may mark Meta's latest push into wearables, a space that figures to play a key role in the virtual and augmented realities that will make up the metaverse. You didn't think you were going to get to the weekend without more Facebook/Meta news, did you? Don't worry, there's even more below. 

FOOD FOR THOUGHT

A long time coming. Facebook's aforementioned changing of its corporate name to Meta has, in the eyes of some, been in the works for a while. The Big Blue App's name had become what some former employees told CNBC a "brand tax" on the company's other apps like Instagram and WhatsApp. Yet for years, Mark Zuckerberg resisted a change. Instead, the company added the "from Facebook" tagline to its other apps in 2019—a change that seemed to hit Instagram the worst, CNBC reports.

From the article:

Instagram’s marketing employees began seeing, through quarterly brand-tracking results, that the new label was causing harm.

They tried to make the “from Facebook” font smaller, not use it at all or play with the colors in a way that would hide the Facebook name, ex-employees said. Ultimately, they were overruled, according to one former employee.

Zuckerberg insisted that Facebook had turned Instagram into a screaming success since acquiring it for $1 billion in 2012, and it was time for Instagram to give back, a former executive recalled. 

Instagram marketers would eventually be measured by how well they tied the brands together. It was mandated by Zuckerberg and non-negotiable.

IN CASE YOU MISSED IT

Shiba Inu and Dogecoin are together now worth more than 388 of the companies on the S&P 500 by Shawn Tully

Not FAANG but MAMAA: Jim Cramer reveals new acronym for the 5 largest tech giants by Marco Quiroz-Gutierrez

Amazon's paltry sales growth shows why it needs more stores by Phil Wahba

EXCLUSIVE: SEC's Gensler says crypto 'unlikely to reach' potential outside of regulatory oversight by Declan Harty

John Carmack, a key architect of Facebook's metaverse, is pretty bearish on its prospects by David Meyer

Facebook's name change is greeted with a big fat Meh-ta by Sophie Mellor and Nicholas Gordon

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BEFORE YOU GO

Stop hating on candy corn. Declan, here. I can only speak for myself in this two-person newsletter, but I will admit it: I like candy corn. It's an opinion that has been widely rebuked in the public sphere, with publications like The Takeout asking if the delightfully tri-colored candy is "Satan's earwax" and Deadspin calling it "garbage." My wife has also made it known that she finds it incredibly disgusting that I like candy corn. Well, bet you didn't know that candy corn dates back to the 1800s? Or that it is one of the top three Halloween treats for this year, per the National Confectioners Association (though the other two—chocolate and gummy candy—are incredibly broad). So, leave us candy-corn enjoyers alone about our maybe questionable taste. Oh, and happy Halloween.