Tech Earnings Season Starts Soon. Warnings Are Already Piling Up
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With tech earnings season about to start, investors should be aware that a flurry of the industry’s less-followed players have been warning about emerging weakness across the enterprise and telecommunications-networking landscape.
Evercore ISI hardware analyst Amit Daryanani, speaking Tuesday on Barron’s Live, noted that heading into earnings he has concerns about weakness in IT enterprise spending, continued soft demand from communications carriers, and continued caution by consumers. The primary bright spot he sees heading into earnings: spending on cloud and AI infrastructure.
The list of companies providing cautious commentary on the outlook is growing by the day.
NetScout Systems stock (ticker: NTCT) is down 17% on Tuesday after the cybersecurity software company slashed its revenue forecast for its March 2024 fiscal year to a range of $840 million to $860 million, down from a previous forecast of $915 million to $945 million. NetScout also trimmed its adjusted profit per share forecast for the year to $2 to $2.20, down from $2.20 to $2.32. The company said it is seeing “slower order conversion,” due to “industry and economic headwinds facing our customers” that began in September.
Ericsson American depositary receipts (ERIC) are 3.3% lower after the networking infrastructure company on Tuesday provided disappointing financial guidance. “We expect the underlying uncertainty impacting our Mobile Networks business to persist into 2024,” the company said.
Adtran (ADTN), which provides networking hardware, on Monday warned that it now sees third-quarter revenue of $272.3 million, below its previous guidance range of $275 million to $305 million. Adtran said that its “customers remain focused on reducing inventory levels and managing capital expenses.”
Late last week, Belden (BDC), another network infrastructure provider, said it now sees third-quarter revenue of $625 million, down from a previous forecast of $675 million to $690 million. “Demand began to weaken in the third quarter, adding to ongoing pressure from channel destocking,” Belden said in its announcement. “We believe softer demand will continue as we move into the fourth quarter, impacting both revenue and profitability.”
A10 Networks (ATEN), which also provides networking infrastructure, likewise provided September quarter preliminary results that failed to match previous estimates. “In our third quarter we experienced delays related to North American service provider customers pushing out capital expenditures,” the company said earlier this month. “Deals we expected to close at the end of the quarter were delayed into future periods.”
Cambium Networks (CMBM), which provides wireless-network infrastructure, said earlier this month that it now sees third quarter revenue of $40 million to $45 million, below previous guidance of $62 million to $70 million. The company cited a number of reasons for the big miss, including a delay in government orders due to U.S. government budgetary timing issues, and a decrease in orders from distributors in the company’s enterprise business, among other things.
Tech earnings season kicks off Wednesday with results from Netflix (NFLX), to be followed by a deluge of financial reports next week from Alphabet (GOOGL), Microsoft (MSFT), International Business Machines (IBM), Meta Platforms (META), ServiceNow (NOW), Amazon.com (AMZN), Intel (INTC), and Juniper Networks (JNPR), among others.
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The inflation rate ran at an annual pace of 2.2% in the quarter compared with a rise of 3.3% in the second quarter
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SYDNEY—New Zealand’s inflation rate returned to within the central bank’s target band for the first time since early 2021 in the third quarter, opening a path to more supersized interest-rate cuts in coming months.
The inflation rate ran at an annual pace of 2.2% in the quarter, near the midpoint of the desired 1% to 3% target band, with some economists warning that the Reserve Bank of New Zealand must continue lowering the official cash rate at speed as a neutral policy rate is still well off in the distance.
The annual increase in inflation compares with a rise of 3.3% in the second quarter, StatsNZ said Wednesday. Inflation rose by 0.6% in quarterly terms.
The inflation data justifies the 75 basis points of cuts announced so far since August, with the RBNZ stepping up the pace of lowering the official cash rate last week by joining the Federal Reserve in slashing by 50 basis points.
Economists warn that there is a risk that inflation will undershoot the target band in coming quarters, especially if the RBNZ backs away from more significant cuts.
The official cash rate has so far fallen to 4.75% from 5.50%, with a neutral policy rate likely closer to 3.00%, according to economists.
New Zealand’s farm-rich economy has been in and out of recession for years as the RBNZ proved to be one of the more aggressive central banks globally when combating the inflation surge that emerged after the Covid-19 pandemic.
Economic activity remains flat and in need of resuscitation, especially with growth in China, its main trading partner, in a slowdown, economists said.
Higher rents were the biggest contributor to the annual inflation rate, up 4.5%. Almost a fifth of the annual increase in the consumer-price index was due to rent prices.
Prices for local authority rates and payments increased 12.2% in the 12 months to the third quarter, StatsNZ said. Prices for cigarettes and tobacco also rose sharply in line with an annual excise-tax increase.
Still, lower prices for gasoline and vegetables helped to offset rising prices, StatsNZ added.
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