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December 23, 2022


  • Big Tech giants shed a combined market value of around $2.5 trillion in 2022.


  • In 2023, key headwinds include macro pressures such as inflation and currency volatility, stiff competition from rival products and services, supply chain woes and bloated cost structures.


  • Opportunities for Big Tech companies in 2023 include cost-cutting measures and leaning into long-term growth drivers.



2022 was a tough year for Silicon Valley. After solid growth for over a decade and a pandemic-induced boom, Big Tech behemoths such as Meta, Alphabet and Apple shed a combined market value of around $2.5 trillion due to macroeconomic headwinds, global supply chain issues and plummeting revenues. In November 2022, the Internet companies covered by Doug Anmuth, Head of the U.S. Internet team at J.P. Morgan, were down by 53% on average year-to-date, and by over 40% weighted by market capitalization — well below the performance of the S&P 500, which was down by 16% year-to-date.

Today, rampant inflation, rising interest rates, sluggish growth and a potential recession are forcing these companies to rethink their business models and reposition for the future. What is the 2023 outlook for Big Tech? Can the sector weather the storm? 


View Transcript (updates content above) Show Audio Description (updates content above)



Macroeconomic Headwinds

Inflation is pressuring discretionary spending, and this is in turn dampening consumer demand for tech products and services. Apple has been particularly affected: in September 2022, the electronics giant told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family due to declining sales.

“Economic conditions or shifting consumer demand could cause greater than expected deceleration or contraction in the handset and smartphone markets. This would negatively impact Apple’s prospects for growth,” noted Samik Chatterjee, Head of the Telecom & Networking Equipment/IT Hardware team at J.P. Morgan. 

Consumer spending slowed in 2022

Chase consumer card data in the U.S. (discretionary, card not present) 


Line chart showing Chase consumer card spending (card not present) in 2022 compared with 2021.

Source: J.P. Morgan (Chase consumer card spending tracker, seven-day average of total spending, data through November 2022). Please click here for Chase Card data disclaimers and methodology. 

On the whole, Chase consumer card spending (card not present) decreased in the first 11 months of 2022 on a year-over-year basis compared with 2021.  


Big Tech companies are also grappling with volatile currency markets. Amazon Web Services, a subsidiary of Amazon that provides on-demand cloud computing platforms, has been affected by the surging U.S. dollar. “Given AWS prices mostly in USD, it is working closely with international customers for whom the service has simply become more expensive. In some cases, we think this is resulting in price concession in an effort the mitigate the impact for customers,” noted Anmuth. Plus, against a recessionary backdrop, some customers are moving to lower storage tiers or instance levels in a bid to control costs.

Likewise, Microsoft recently posted its worst quarterly revenue growth in five years, citing factors including U.S. dollar strength, which dented international earnings from its Azure cloud-computing services. This is coupled with higher overheads — the company expects its operating margin to contract by around 1% in FY2023, partly due to an additional $800 million in energy bills. “In our view, Microsoft’s results speak to a more challenging environment for the near future,” said Mark Murphy, Head of the U.S. Enterprise Software research team at J.P. Morgan. “This serves as an unwelcome reminder of how the tangled web of inflationary cost pressures can create a minefield by reaching into overlooked corners of a business.” 

Bloated Cost Structures and Tech Layoffs

Tech hiring became increasingly competitive in 2021 and 2022, with companies bumping up pay packages and benefits in a bid to attract and retain talent. However, the aforementioned macro pressures are now forcing Big Tech firms to optimize costs by streamlining their workforce.

During its recent third-quarter earnings call, Meta reported that overall revenue fell 4% year-on-year, largely driven by softening advertising sales against a challenging macro backdrop and heightened competitive pressures. Additionally, the company’s expenditure around the metaverse remains high. In November 2022, CEO Mark Zuckerberg cut 11,000 jobs (around 13% of Meta’s workforce) and announced a hiring freeze. The company is also decreasing its discretionary spending in other areas — specifically, by scaling back budgets, reducing perks and shrinking its global real estate footprint.

“We view the headcount reduction favorably in light of Meta’s slowing revenue growth and significant hiring increases over the last several quarters. Based on 2022 expenses per employee estimates, the headcount reduction could theoretically remove around $8 billion of costs on an annualized basis,” said Anmuth. “This shows management is operating with increased discipline.”


Key opportunities for Big Tech in 2023 include rightsizing cost structures through headcount reduction and greater operating discipline, increasing focus on profits and cash flow, leaning responsibly into new growth drivers and gaining market share during this tough macro period.

Doug Anmuth, Head of the U.S. Internet team, J.P. Morgan

Amazon, too, has reduced its workforce. Like its peers, the company’s third-quarter earnings fell short of expectations — largely due to macro pressures across its core e-commerce business and AWS. It has announced plans to lay off 10,000 employees in corporate and technology roles.

As with Meta, this move is aimed at trimming Amazon’s cost structure. “As we’ve seen with the rationalization of its fulfilment network and headcount, Amazon is balancing its investments between the near-term macro environment and long-term strategic opportunities,” noted Anmuth. “We remain confident that the company can re-accelerate revenue growth and expand its operating income margins into 2023.” 

Tech Supply Chains

Even though global supply chain issues improved in the latter half of 2022, disruptions may continue to plague Big Tech companies in 2023. “For instance, while Amazon continues to benefit from high in-stock levels and faster delivery speeds, it is seeing some operational challenges around the supply of delivery drivers and higher labor costs,” said Anmuth.

Apple is also experiencing supply chain woes. In recent months, its key assembly plant in Zhengzhou, China — which is responsible for most of the world’s iPhone Pro supply — has been affected by Covid lockdowns and worker unrest. As a result, the company is expected to face a production shortfall of close to 6 million iPhone Pro units.

“The ongoing challenges around delays in returning to a normal level of production at the Zhengzhou facility could limit the pace with which supply-demand equilibrium can be reached in the coming months,” noted Chatterjee. However, supply appears to have rebounded from trough levels, with lead times moderating across most regions. “We expect a portion of the shipment shortfall in the December quarter to be made up in the March quarter. Overall, we forecast total iPhone volumes to track around 237 million in the 2023 financial year, which implies a decline of 4% year-on-year,” added Chatterjee.  

Tech Industry Competition

The growing threat posed by other social media platforms will prove to be another key headwind for Big Tech companies in 2023, particularly Meta and Alphabet. TikTok’s runaway popularity has led to increased competition for user attention — and consequently, advertising dollars. In fact, research company Omdia estimates TikTok’s ad revenue could exceed Meta and YouTube’s combined video ad revenue by 2027.

“For Meta, tough competition from TikTok and the Apple iOS changes — which give users greater control of their data — will both have a bigger impact than expected, and stronger engagement in Instagram’s Reels feature is cannibalistic to monetization in the near term,” said Anmuth. “In addition, advertising load is already reaching saturation on Instagram Feed and Stories.”

There is increased competition for user engagement

Average time spent by U.S. adult social media users, minutes per day 


Line chart depicting the average time spent daily on YouTube, Facebook, TikTok, Instagram and Snapchat by U.S. adult social media users.

Source: Insider Intelligence, April 2022. Note: ages 18+, includes all time spent regardless of device or multitasking. YouTube includes YouTube TV. 

By 2024, U.S. adult social media users are expected to spend the most amount of time daily on TikTok (48 minutes on average), followed by YouTube (46 minutes), Snapchat and Instagram (31 minutes) and then Facebook (27 minutes). 

What is the Future of Big Tech in 2023?

Overall, Big Tech faces myriad challenges in 2023, including macro pressures, increased competition, supply chain woes and bloated cost structures. However, every cloud has a silver lining: Companies are now rethinking their business strategies and this could pave the way for a more sustainable era for Big Tech.

This includes leaning into a smaller number of high-priority growth areas. For instance, Amazon’s Prime offering and flexibility in pushing first-party versus third-party inventory will serve as major advantages for its retail business in 2023 and its multi-year head start in cloud computing will cement AWS as a global market leader. Alphabet will seek to diversify its revenue streams by developing its non-ad businesses, such as Google Cloud. As for Meta, the company is expected to remain focused on its new AI discovery engine, its ads and business platforms, and its multi-year transition to the metaverse.

“Overall, key opportunities for Big Tech in 2023 include rightsizing cost structures through headcount reduction and greater operating discipline, increasing focus on profits and cash flow, leaning responsibly into new growth drivers and gaining market share during this tough macro period,” observed Anmuth. “Expectations have become more reasonable, and companies should lap some of the pressures felt in 2022.”  

Big Tech companies continue to invest in long-term opportunities

Infographic depicting the various sources of sales and revenue for Amazon, Alphabet and Meta in 2022.

Source: Company reports and J.P. Morgan estimates

In 2022, Amazon spent $81B on AWS, Alphabet spent $26B on Google Cloud and Meta spent $2.1B on Reality Labs. 



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