Apple’s record service revenue couldn’t make up for falling hardware sales

As many Apple watchers have predicted, the company’s financial results this quarter are a break from the last few years of nonstop growth. The iPhone maker reported a revenue of $117.2 billion for its first fiscal quarter (ended December 2022), which is five percent down year over year, marking the first time Apple’s revenue is down since 2019. 

There are a couple of bright spots in the company’s performance, namely in its setting a revenue record of $20.8 billion in its Services business and hitting more than 2 billion active devices in its installed base. All-time revenue records were also set in markets like Canada, Indonesia, Mexico, Spain, Turkey and Vietnam.

In a statement, CEO Tim Cook said “As we all continue to navigate a challenging environment, we are proud to have our best lineup of products and services ever, and as always, we remain focused on the long term and are leading with our values in everything we do.”

On its earnings call, Cook said there were three main things that impacted revenue: the “challenging macroeconomic environment”, foreign exchange issues and COVID-related supply constraints that led to delays in the ship times of iPhone 14 Pro and Pro Max models. “Production is now back to where we want it to be,” he added.

Apple’s decline in revenue is in line with a general slump in the tech industry, with Meta having just reported revenues that are 4 percent down from the previous year. Alphabet is also seeing a slowdown in growth this quarter, and while Microsoft saw its revenue climb, its earnings missed expectations and profits fell by 12 percent. Amid the economic downturn, tech companies havebeenlaying off significant portions of their workforce, though Apple doesn’t appear to have made similar moves at the moment.

Alphabet’s revenues are still growing, but just barely

It’s no secret that the huge tech companies are still making money hand over fist, but there’s also a noticeable slowdown going on. Google’s parent company Alphabet is not immune — the company just reported its earnings results for Q4 of 2022, and just barely grew revenue year over year. The $76 billion the company pulled in during the quarter is up only one percent from Q4 of 2021. 

Google’s ad business is the backbone of the company, and revenue slipped there by about 3.5 percent compared to a year ago. But eight percent growth in the “other” category (which includes products like Google and Nest hardware and revenue from the Play Store) and 32 percent yearly growth in in Google Cloud made up for those ad losses. Overall profits, meanwhile, dropped significantly: Quarterly net income of $13.6 billion is down 34 percent year-over-year.

Of course, the backdrop for all this is that Google announced a few weeks ago that it is laying off about 12,000 employees; that makes up about six percent of the company’s overall workforce. At the time those layoffs were announced, we didn’t yet know what Google’s financials for last quarter looked like, but now we can see that things are slowing down. 

That’s all relatively speaking, though. Net income of $60 billion for 2022 as a whole was down significantly compared to the $76 billion in profit Alphabet made in 2021 — but it’s still far ahead of the $40 billion the company pulled in for 2020. It looks like the big numbers Alphabet posted in 2021 weren’t exactly sustainable, and obviously we don’t yet know what 2023 will bring. But we’ll be tuning into the company’s call with investors, which starts at 4:30PM ET, to see what additional details CEO Sundar Pichai can share about the state of Alphabet in the year to come.

Sony has now shipped over 32.1 million PS5s following blockbuster holiday sales

Sony’s gaming business had a blockbuster holiday quarter as it sold 7.1 million PS5s from October to December compared to 3.9 million in the same quarter last year. That’s a whopping 82 percent increase, so the company’s supply issues appear to be largely solved — much as the company has said as of late. In other words, you should be able to buy a PS5 now with little to no delay. 

All of that resulted in a giant boost in revenue, as its Game & Network Services segment took in 1.25 trillion yen ($9.7 billion), up 53 percent year on year. That includes over double the revenue for hardware and healthy boosts in software (30 percent), network services (20 percent) and others including PSVR and first-party software sales on other platforms (73 percent). 

To grasp the significance of all this, Sony has now sold 32.1 million PS5s compared to 25 million in November 2022, so total unit sales increased 28 percent in just a single quarter. It also means that Sony may hit its fiscal year 2022 PS5 sales forecast (18 million units from March 2022 to March 2023) if it can ship 5.2 million consoles next quarter, something that previously seemed wildly optimistic. If it does reach that goal, it’ll reach 37 million in total PS5 sales by the end of its fiscal year.

Sony has fought Microsoft’s acquisition of Activision, though Microsoft itself recently pointed out that Sony has five times more exclusive games than Xbox. In terms of first-party titles, God of War Ragnarök and Ghost of Tsushima Director’s Cut were standouts on PS5 this quarter. 

Sony’s gaming business dwarfed its other segments, though its imaging sensor business continues to rise as well, with sales up 63 percent year on year to 417 billion yen ($3.24 billion). Sony supplies the lion’s share of camera sensors to both smartphone and mirrorless camera manufacturers.  

Rivian is laying off another six percent of its workforce

Electric vehicle maker Rivian is laying off another six percent of its workforce. The company reduced its headcount by the same proportion of workers back in July. The automaker has around 14,000 employees, according to Reuters, so it will be letting go around 840 people this time.

As with the previous round of layoffs, Rivian says it’s focusing resources on increasing production and becoming a profitable company.”While this doesn’t impact manufacturing jobs in Normal, teams across the company will be losing passionate collaborators — teammates who stretched themselves daily and have given their all to help us execute on our mission,” CEO RJ Scaringe wrote in an email to employees. The company shared a copy of the memo with Engadget.

As part of its push toward profitability, Rivian is attempting to ramp up production of its R1T and R1S vehicles, as well as the delivery vans it’s making for Amazon. It had to slash its production target for 2022 due to supply chain issues. Reuters notes that Rivian fell just short of its goal of making 25,000 vehicles last year.

The company is also working on more affordable R2 electric trucks, which it plans to produce at high-volume, but it doesn’t expect to start shipping them until 2026. Rivian will build that truck at a $5 billion factory it’s constructing in Georgia.

“Continuing to improve our operating efficiency on our path to profitability is a core objective and requires us to concentrate our investments and resources on the highest impact parts of our business,” Scaringe wrote. “The changes we are announcing today reflect this focused roadmap.” 

We’ll get a clearer picture of the state of Rivian’s business when it reports quarterly earnings on February 28th. The company announced its latest layoffs soon after Tesla and Ford cut prices of their EVs, making it more difficult for newer players like Rivian to compete. Earlier this week, EV startup Arrival said it would cut around half of its workforce.

PayPal is laying off 2,000 employees

PayPal is about to become the latest tech company to lay off a substantial part of its workforce. The payments firm announced Tuesday plans to cut approximately 2,000 employees, a number that equates to about seven percent of its total staff. According to PayPal president and CEO Dan Schulman, the layoffs will occur over the next few weeks, with some parts of the company affected more than others.

“We will treat our departing colleagues with the utmost respect and empathy, provide them with generous packages, engage in consultation where required and support them with their transitions,” Schulman said. “I want to express my personal appreciation for the meaningful contributions they have made to PayPal.”

The company joins a growing list of tech companies that have announced layoffs in recent months. Earlier this month, Google disclosed plans to lay off 12,000 employees, or about around six percent of its global workforce. Before that, Microsoft said it would cut 10,000 jobs. Schulman, like his counterparts at Microsoft, Google and other tech firms, blamed PayPal’s layoffs on the “challenging macro-economic environment” the company finds itself in recently. “While we have made substantial progress in right-sizing our cost structure, and focused our resources on our core strategic priorities, we have more work to do,” he said.

It’s worth noting the US economy has not entered into a recession yet. At 3.5 percent, the national unemployment rate is at a 50-year low, and the gross domestic product grew over the last quarters. Turning specifically to PayPal, the company beat Wall Street expectations during its most recent earnings call, with revenue and income increasing by 11 percent and 7 percent year on year, respectively.

Spotify reaches 205 million Premium subscribers as losses mount

Spotify just released its Q4 earnings and announced that it now has 205 million premium subscribers, up 10 million from last quarter. It also made €3.17 billion ($3.43 billion) in revenue, so it exceeded expectations in both subscriber count and sales. It now counts nearly 500 million monthly active users including ad-supported and paid subscriber tiers. 

However, its losses continued with €270 million ($292 million) in red ink compared to €39 million in the same period last year, due to moves that chief executive Daniel Ek called “too ambitious.” For all of 2022, the company reported a net €430 million loss ($466 million) on revenue of €11.7 billion ($12.7 billion). 

Spotify said that the losses were due to “higher personnel costs primarily due to headcount growth and higher advertising costs,” along with currency fluctuations. That helps explain the company’s actions last week, when it announced that it was laying off 6 percent of its workforce as part of a company-wide restructuring. 

As part of that, chief content officer Dawn Ostroff stepped down and Ek said that the company would “fundamentally change how we operate at the top,” including his own role. At the time, Ek said that “in hindsight, I was too ambitious in investing ahead of our revenue growth.” Looking ahead to the next quarter, Spotify forecasts that it’ll hit a half-billion monthly active users and see a modest boost to 207 million premium subscribers.