As investors try to gauge how 2023 could play out, two telling earnings reports toward the beginning of the year worth watching will be Apple (AAPL 0.01%) and Meta Platforms (META +0.22%). The tech giants have both seen their stocks crumble over the past year as their sales trends deteriorated. Over the past five months, shares of Apple and Facebook parent Meta Platforms have fallen 25% and 60%, respectively. This compares to a 17% decline for the S&P 500 over this same period. The two companies' earnings reports can help investors see whether these businesses' top lines continued to worsen or demonstrated signs of revitalization -- something that could bode well for Wall Street's view of the consumer.
Ahead of Meta Platforms' fourth-quarter report on Feb. 1 and Apple's fiscal first-quarter update on Feb. 2, here's a quick preview of what to expect from both tech companies.
Apple: iPhone production constraints may weigh on sales
iPhone maker Apple wrapped up fiscal 2022 reporting full-year revenue growth of 7.8%. This was down from 33% growth in fiscal 2021. Notably, however, the company's 8% year-over-year growth in fiscal Q4 was an acceleration from 2% growth in fiscal Q2.
NASDAQ: AAPL
Key Data Points
"Our record September quarter results continue to demonstrate our ability to execute effectively in spite of a challenging and volatile macroeconomic backdrop," said Apple chief financial officer Luca Maestri in the company's fiscal fourth-quarter earnings release. But hopes for more strong growth in the company's important holiday quarter waned when Apple said in a Nov. 6 update that COVID-19 restrictions in China negatively impacted iPhone production enough for management to lower its expectations for shipments of its latest iPhone models.
While the degree of the negative impact on Apple's top line is unclear, the consensus analyst forecast calls for a 0.8% year-over-year decline in revenue during the quarter.
Meta Platforms: Revenue could decline again
Facebook parent and digital advertising juggernaut Meta Platforms has had a rough year, with its top line deteriorating significantly. After reporting 38% growth in the fourth quarter of 2021, growth slowed to just 7% in Q1 and then turned negative in Q2 and Q3. Meta's third-quarter revenue fell 4% year over year.
NASDAQ: META
Key Data Points
Looking to Q4, management said it expected revenue to be between $30 billion and $32.5 billion, down from about $33.7 billion in the fourth quarter of 2021. Management said factors weighing on the quarter are a foreign exchange headwind, increasing competition, macroeconomic uncertainty, underdeveloped monetization in its popular TikTok-like Reels product, and "signal loss" in the performance of some of its ad products because of changes in Apple's iOS ecosystem.
Analysts, on average, expect Meta's fourth-quarter revenue to decline 6% year over year.
Whatever Apple and Meta report during the first two days of February, it may be a good indicator of how healthy (or not) the consumer is. Both companies' sales are consumer-driven. Apple's product and service sales, of course, are derived primarily from consumer demand. In addition, marketer budgets for Meta Platforms' ad products are driven by their expected response from the consumer to their advertising campaigns. While investors will want more data points beyond these two companies' earnings reports to gauge the current state of the consumer, any outperformance to the upside relative to expectations from these two companies could signal a potentially healthier-than-expected consumer.
