Tech weakness? Google and Samsung both disappointed investors with their latest quarterly earnings.
Samsung said Tuesday that its operating profit plunged 60% in the quarter to 6.2 trillion won ($5.3 billion). Sales for the three months ended March dropped 14% to 52.4 trillion won ($45 billion).
The dismal report comes a week after Samsung delayed the launch of its highly anticipated foldable smartphone after several reviewers reported defects. Shares fell less than 1% in Seoul.
While Samsung said sales of its flagship Galaxy S10 smartphones have been solid, the profitability of its mobile devices business still declined because of stronger competition in markets for low- to mid-priced handsets.
Samsung predicted price declines to continue with memory chips in the second quarter despite expectations for modest improvement in demands driven by mobile products. Samsung expects its display business to rebound in the second half of the year, predicting higher demands for flexible screens in new smartphone launches.
Samsung, which has dual strength in parts and finished products, is the world’s biggest maker of memory chips and smartphones.
Google parent company Alphabet posted $36.3 billion in revenue for the first quarter after the US market closed on Monday. About 85% of that revenue came from its core advertising business.
Overall revenue increased by just 17% from the same period a year earlier, missing Wall Street estimates and raising concerns that Google is feeling the competition from Facebook and Amazon.
Shares in Alphabet fell 7% in extended trading.
That dip could shave more than $65 billion from Alphabet’s market value if it holds when the markets open today.
Google’s digital-ad rivals Facebook and Amazon, meanwhile, both reported strong earnings last week, adding to the investor surprise when Alphabet stumbled despite a strong economy.
Alphabet executives deflected concerns of growing competition on a conference call with analysts Monday, instead suggesting that fluctuating currency rates and changes to Google ad products during the quarter led to the slowdown. The online-ad industry is also still in a yearslong shift to phone and tablet ads and away from ones aimed at desktop users. Ads for mobile devices bring in less money.
Still, the results sparked concerns that Google’s enormously profitable advertising machine might be starting to sputter. Some analysts suggested it’s a signal that Google might need to diversify its business more quickly.
“Does this put more pressure on Google to make more aggressive bets on cloud?” asked Wedbush Securities analyst Dan Ives.
Google executives highlighted the company’s cloud-computing business as one of its fastest growing segments during the Monday call. But the cloud currently accounts for only a small slice of Alphabet’s overall revenue. The company reported $5.4 billion in “other” revenue, which includes cloud, hardware and Play Store purchases.
Hardware sales also slowed during the quarter for the Pixel phone, Google chief financial officer Ruth Porat said on Monday’s call, reflecting a broader industry slowdown in smartphone sales.
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