Earnings Freefall for Tech Companies Looks Set to Pause a While
Wall Street has given up on the hope that technology companies will report higher earnings next year, potentially setting up their shares to at least stabilize if not stage a short-term rally now that the third quarter reporting period is winding down.
The drop in the outlook has already been precipitous. Analysts now see profits for the industry declining 0.2% next year, compared with a prediction in late June for an increase of 10.5%, according to data compiled by Bloomberg Intelligence. While expectations have come down across a number of sectors, tech stands out: The overall S&P 500 is still expected to report earnings growth in 2023.
The worsening earnings outlook is a big reason for the Nasdaq 100 Index’s 34% drop this year, but some market watchers are optimistic the worst of the negative revisions are over for now, as investors have fairly up-to-date reads on corporate fundamentals and Federal Reserve monetary policy. A number of companies, notably Meta Platforms Inc., also are cutting costs through layoffs or other means, a trend that should support profits and margins.
The Nasdaq 100 surged 4.7% on Thursday, supported by a bullish reading on inflation.