The stock market was broadly lower early Friday afternoon, with investors generally expressing concern at the possibility that the Federal Reserve could remain more restrictive in its monetary policy for a longer period of time. The January employment report released earlier in the day showed a stronger labor market than most had anticipated, suggesting that the interest rate hikes that the Fed has already made haven't yet shown up in terms of slowing job creation. The Nasdaq Composite (^IXIC 1.93%) lagged the rest of the market, with declines of more than 1% as of 1:15 p.m. ET.
Many investors focus their attention on the biggest stocks in the market, and the popular FAANG stocks include some of the largest companies in the world. Apple (AAPL 0.36%), Amazon.com (AMZN 2.68%), and Alphabet (GOOGL 9.73%) (GOOG 9.39%) all reported their latest financial results in the past 24 hours, and shareholders had mixed reactions to what these companies had to say.
Apple moves higher
Shares of Apple were up between 2% and 3% Friday afternoon. The iPhone maker reported fiscal first-quarter financial results for the period ending Dec. 31, and despite some headwinds for the business, shareholders seemed comfortable with the tech titan's numbers and the trends it's seeing.
Apple's fiscal Q1 numbers showed some of the slowdown in consumer demand during the holiday season that many investors had expected. Revenue of $117.2 billion was down 5.5% year over year, with a nearly 8% drop in product sales offsetting a 6% rise in revenue from Apple services. Higher expenses also weighed on margins, with gross margin falling nearly a percentage point to 43%. Net income of $30 billion was down 13% from year-ago levels, producing earnings of $1.88 per share.
Looking at specific products, iPad sales were the only category that rose, with iPhone revenue dropping more than 8%. Mac sales saw the biggest percentage hit, down 29%. Revenue challenges were consistent across Apple's global footprint.
Apple's stock has fallen sharply from its highs, suggesting investors were afraid of even worse declines in key business metrics. Even though the company's report wasn't ideal, it nevertheless seemed to show a better picture than many had expected.
Amazon and Alphabet sink
Moving the other direction, Amazon shares fell 7%, while Alphabet suffered a 3% drop. Both companies reported financial results that left shareholders wanting more.
Amazon's fourth-quarter report showed a 9% rise in sales to $149.2 billion, but net income plunged 98% to just $278 million, or $0.03 per share. Again, the big difference was the accounting hit that Amazon had to recognize in its investment in electric vehicle company Rivian Automotive, which lost ground in Q4 of 2022. Guidance for 4% to 8% year-over-year growth in the first quarter of 2023 and potential decreases in operating income also failed to inspire shareholders.
At Alphabet, revenue inched higher by 1% in the fourth quarter of 2022 to $76.05 billion. However, a 5-percentage-point decline in operating margin to 24% weighed on profits, and the reversal of some extraordinary items led to about a one-third drop in net income to $13.62 billion. That worked out to earnings of $1.05 per share. CEO Sundar Pichai tried to point to the work Alphabet has done in artificial intelligence as starting to show signs of paying off, but concerns about the state of the advertising market going forward weighed on investor sentiment.
The takeaway long-term investors should draw from all three reports is that even large companies have to adapt to changing conditions in the broader economy and their respective industries. Apple, Amazon, and Alphabet all have the financial resources to deploy to make strategic shifts, but it still takes vision to make the right decisions and keep shareholders confident in their long-run prospects.
