What to Watch for in Big Tech's Earnings Reports This Week

(Bloomberg) -- As tech companies gear up to report their fourth-quarter and year-end results, it’s worth looking back at the industry’s erratic year. Two of the highest fliers, Apple Inc. and Facebook Inc., lost a combined $400 billion in market cap since September, according to Bloomberg data. Part of the problem was external (see: a trade war with China), but some of the damage was self-inflicted too. When they report earnings this week, tech’s biggest players will get their first shot at recasting the narrative for a better 2019.

Facebook had a particularly tough year, largely thanks to factors under its control. The company continued to make missteps that cost it much-needed consumer trust, it found itself in the hot seat in Washington a few times, and some of its newer products like Facebook Watch failed to gain traction. Numbers that Wall Street will be keeping a close eye on for its Wednesday report will be how many people are using the service and how often, as well how the advertising business might have been impacted by its recent scandals. So far, even though the big political and social questions surrounding Big Tech are showing no signs of going away, advertisers see its products as an increasingly critical way to reach the users who stick around.  

Apple has sought to place the blame for its lackluster 2018 performance largely on the mounting trade tensions between the U.S. and China. In his letter to employees in January, Chief Executive Officer Tim Cook wrote, “We did not foresee the magnitude of the economic deceleration, particularly in Greater China.” And added that “most” of the company’s revenue shortfall and “over 100 percent of our year-over-year worldwide revenue decline” occurred in the region. Exactly how bad or good was the fourth-quarter? We may never know. Apple recently stopped reporting some key numbers around product sales.

The new disclosure limits may be in anticipation of a weak fourth quarter, some analysts have said. Expect Wall Street to ask Apple for updates on China when it reports on Tuesday. This could be the company's first holiday revenue decline since 2001.

Amazon’s stock was similarly battered during the last few months of the year, but it’s already started to bounce back, climbing more than 20 percent since a dip in December. (And it handily beat the S&P since the start of last year.) Part of the turn was due to what is expected to be a strong holiday season. We’ll find out on Thursday if Santa delivered as many Amazon packages as analysts expected.

And here’s what you need to know in global technology news

U.S. prosecutors have filed criminal charges against Huawei, accusing China's largest smartphone maker of stealing trade secrets and committing bank fraud. 

Nick Clegg, the former U.K. deputy prime minister now leading Facebook's lobbying efforts gave his first speech since taking the job in Brussels on Monday. 

New Uber documents unsealed as part of its legal dispute with Waymo makes public the investor letter that forced out Travis Kalanick. You can read it in its entirety here. 

Tech stocks have been trending upward, but they're getting less love from hedge fund managers. 

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net

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