Big business is still shelling out for tech products—even if consumers are pinching pennies

A primary reason: business spending is still booming.

The Big Tech giants powered past their respective headwinds—slower ad growth at Google and YouTube for Alphabet, weak PC and video game sales at Microsoft—partially due to solid cloud computing sales. While both companies fell fractionally short of analysts’ cloud revenue estimates, growth in that highly promising business (36% at Alphabet, 40% at Microsoft) helped drive share price jumps for both companies in mid-day trading Wednesday.

With earnings season now in full swing, the results provide another piece of evidence that—at least for now—companies continue to spend at a consistent clip even as consumers put away their pocketbooks.

“We will be exposed to consumer-driven businesses and (small- and medium-sized businesses), but at some level, our strength as a company is much stronger in the core commercial,” Microsoft CEO Satya Nadella said during Tuesday’s earnings call.

Despite some of the doomsday projections for tech earnings (guilty as charged), several tech companies that make their bones off the commercial class, rather than working class, have  surprisingly upbeat results from the most recent quarter.

Three of the world’s top chipmakers have brushed off concerns about a semiconductor slowdown, each receiving a modest pop in stock price on the back of commercial and industrial clients.

Texas Instruments shares rose 4% in mid-day trading Wednesday after blowing past earnings and revenue estimates, with company officials touting better-than-expected automotive, enterprise systems, and communications equipment sales. 

That report came one day after NXP Semiconductors also beat analyst forecasts and issued a bullish outlook on the current quarter, thanks to strong automotive and industrial chip demand. 

And Samsung quelled fears of a major downturn earlier in the month, with analysts predicting that the South Korean company’s chip manufacturing business exceeded expectations. (Samsung hasn’t released a segment-level breakdown of financial results.)

Last week’s earnings reports also showed steadiness at two companies making an aggressive pivot to a cloud-based business model: tech conglomerate IBM and German software giant SAP. Barron’s reported that SAP officials are “seeing little impact on demand from macroeconomic factors,” with orders consistently flowing in from North America, Latin America, and Asia.

By comparison, companies primarily driven by consumer spending are pumping the brakes.

Shopify missed earnings and revenue projections Wednesday, joining e-commerce competitor Walmart in warning this week about a prolonged slowdown in consumers’ discretionary spending. Shopify shares still rose 8% in mid-day trading Wednesday, though the jump follows a broader tech stock rally and a 15% decline on Tuesday following layoff announcements.

Twitter and Snap, which draw virtually all of their revenue from consumer-driven advertising, also fell far short of expectations last week as companies tighten their marketing budgets. 

In addition, Verizon and AT&T shares sank last week after both wireless companies reported mobile phone subscribers are feeling the effects of inflation.

The diverging trendline doesn’t quite follow perfectly. Audio streamer Spotify blew past subscriber and ad revenue targets Wednesday, sending shares up 12% in mid-day trading. T-Mobile also topped subscriber growth forecasts Wednesday, outpacing its wireless brethren.

On the whole, though, it’s better to be in business with corporate America than the casual consumer these days.

***

P.S.: Fortune’s latest newsletter, CHRO Daily, is launching Monday, Aug. 1. This dispatch will feature news, analysis, and tips for HR executives, helping them navigate their ever-evolving role. The newsletter will cover hiring strategies, the transition to hybrid and remote work, employees’ occupational needs, and other topics central to the HR department. Amber Burton, who joined Fortune this month after prior stints at Protocol and The Wall Street Journal, will be your guide through all things HR. To sign up, click here.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

Headed for the backburner. Senate Majority Leader Chuck Schumer told attendees at a fundraiser that a bill designed to blunt the power of tech giants lacks the votes needed to break a filibuster, Bloomberg reported Tuesday, citing sources who attended the event. The purported comments cast more doubt on the future of the American Choice and Innovation Act, a package that would, in part, prevent large tech companies from pushing their own products and services ahead of competitors on their respective online platforms. The bill’s co-sponsors have disputed claims that they lack the 60 votes needed for passage, pushing Schumer to hold a floor vote ahead of Congress’ early August recess.

Too open for business? Federal investigators are reviewing whether cryptocurrency exchange Kraken violated U.S. sanctions by allowing users in Iran to trade digital assets on the company’s platform, The New York Times reported Tuesday, citing five sources with knowledge of the inquiry. The Treasury Department’s Office of Foreign Assets Control is expected to fine Kraken following a three-year investigation into the private company. An internal spreadsheet distributed to Kraken employees last month showed about 1,500 users in Iran.

Running interference. Four former employees of TikTok parent ByteDance said the Chinese company used a now-defunct U.S. news aggregation app to promote pro-China messaging, BuzzFeed News reported Tuesday. The former workers said ByteDance officials instructed staffers to pin the pro-China content high on the company’s TopBuzz app, which had tens of millions of monthly active users before ByteDance shut it down in 2020. ByteDance officials refuted the claims.

Keeping up with the Kardashians. Instagram CEO Adam Mosseri defended recent changes to the popular social media app Tuesday following complaints from influencer sisters Kylie Jenner and Kim Kardashian. Mosseri posted a two-minute clip explaining Instagram’s recent emphasis on short-form video and algorithmically driven recommendations, arguing that the tweaks reflect changing user tastes. Jenner and Kardashian, who have 687 million followers combined, called on Instagram on Monday to revert to its most recent format.

FOOD FOR THOUGHT

Storm clouds brewing. If Microsoft is going to take on the federal government and Amazon, it’ll need some help from its frenemies. The Wall Street Journal reported Wednesday that Microsoft is trying to enlist several other Big Tech players in a lobbying effort targeting the U.S. government’s preference for Amazon as a cloud contractor. Microsoft officials are pushing government agencies to take a multicloud approach to their digital infrastructure needs, a tactic that would spread federal spending across more companies. Microsoft’s targeted team of rivals includes Alphabet’s Google, Oracle, IBM, VMware, Dell, and HP. Amazon dismissed the effort as a self-serving drive by Microsoft, arguing that public-sector customers should have the freedom to choose the best vendor.

From the article:

Microsoft has grown frustrated about its lack of progress selling its Azure cloud services to the U.S. federal government with its rival’s Amazon Web Services continuing to win most of those contracts, said some of the people familiar with its efforts.

A Microsoft spokeswoman said the company “has consistently advocated a multicloud approach as a commercial best practice, and almost all companies have adopted this.” The company, she added, works “with other companies and trade associations to encourage the federal government to adopt the same strategy.”

IN CASE YOU MISSED IT

Tech industry’s massive 2022 layoffs are sign of a ‘boomerang’ effect, LinkedIn economist says, by Tristan Bove

Unstoppable Domains notches $1 billion valuation as investors bet on NFT-based digital identities, by Taylor Locke

Want your company’s A.I. project to succeed? Don’t hand it to the data scientists, says this CEO, by Jeremy Kahn

Adding to Coinbase’s SEC woes, Cathie Wood reveals she dumped over 1.4 million shares, by Abhishek Vishnoi and Bloomberg

Supermarket chain under fire over its use of ‘Orwellian’ facial recognition technology and ‘secret watch-lists’ to cut crime, by Alice Hearing

Reddit co-founder Alexis Ohanian says he’s ‘very serious’ about his offer to save the Choco Taco, by Christine Mui

BEFORE YOU GO

GTA grows up. Is Grand Theft Auto finally ready to clean up its act? The video game embodiment of violence, misogyny, transphobia, and otherwise crude behavior for 20-plus years will look a little less bawdy with its latest release, changes that reflect a cultural shift within the game’s developer, Rockstar, Bloomberg reported Wednesday. The rehabilitation effort follows complaints from Rockstar employees about a frat-like scene at the Take-Two Interactive Software division, which has fostered a more progressive workplace over the past few years. Rockstar hasn’t yet provided a release date for GTA 6—likely in 2024 or 2025—but it’s expected to avoid jokes targeting marginalized communities and feature the franchise’s first female protagonist. It’s a start, I suppose.