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What just happened? More tech companies are feeling the impact of the economic downturn as data-storage giant Seagate and social media company Snap see their stock prices fall on the back of disappointing financial reports. Both firms have blamed the general uncertainty within the economy as inflation spikes and the Russia/Ukraine war continues.
Seagate has pointed to the familiar problem of "weakening global economic conditions" for its disappointing revenue forecast of $2.35 billion in the current period—analysts were expecting $3 billion. Profit, meanwhile, is expected to be around $1.40 per share, much lower than average estimates of $2.27.
Seagate said it was scaling back production plans due to lower demand, thereby avoiding a situation where the company is sitting on an excess of components it can't shift. Consumer PC hardware is said to be one area particularly affected.
"In this environment, we are reducing our production plans to maintain supply discipline as our customers manage through macro uncertainty and ongoing non-HDD component shortages," said Seagate CEO Dave Mosely. "Right now, the consumers of the world have decided they're spending money on other things."
Reducing production is a strategy Micron is also adopting, notes Bloomberg. Elsewhere, AMD, Apple, and Nvidia are reportedly reducing their 5nm orders from TSMC due to low demand from money-conscious consumers. It's one of the reasons why the RTX 4090 might be the only Lovelace card we see this year.
Mosely did have some positive news. Demand for online storage devices keeps growing, and data centers continue to generate a massive amount of income for the company. He also believes that consumer demand will start to improve in about two quarters. That didn't prevent Seagate shares from falling 11% in after-hours trading.
Snap, the company behind Snapchat, is also feeling the impact of the economic downturn. Its Q2 revenue of $1.11 billion missed expectations of $1.14 billion, though its daily active user count of 347 million was higher than the expected 344.2 million. Second-quarter revenue was up 13% YoY, but analysts expected 16%. Snap shares fell 28% in extended trading.
Snap blamed the results on advertisers cutting their budgets, slowing demand, the privacy controls introduced by Apple in iOS 14, and increased competition from the ever-popular—despite the controversies—TikTok. Again, though, the economy is cited as the root problem in most cases. It also refused to give guidance for the third quarter as "forward-looking visibility remains incredibly challenging."
"We are not satisfied with the results we are delivering, regardless of the current headwinds," the company said in an investor letter.