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Oil Companies Report Record Profits while Tech Industry Struggles

US and European oil companies continue their string of windfall profits while tech-based businesses report dismal earnings as they grapple with a slowing economy.
Oil Companies Report Record Profits while Tech Industry Struggles

The world’s largest oil companies continue to reap rewards from sustained high commodity prices as Exxon Mobil Corp. reported almost $20 billion in profit, its most lucrative quarter ever, while rival Chevron Corp. reported just a slight dip from the record haul it set in the prior quarter, reports the Wall Street Journal.

Exxon Hits Record Profits Again as Oil Industry Sees Banner Quarter (Wall Street Journal)

Excerpt from the Wall Street Journal: Exxon’s third-quarter earnings climbed about 10% from the previous quarter, which also set a profit record at the time. It said investments over the past five years were yielding rewards, including spending following the onset of the pandemic when many peers pulled back. Chevron’s third-quarter profit slipped about 3% to $11.2 billion from its all-time high in the second quarter due to net charges in the quarter of more than $600 million. Without those charges, it would have also hit record earnings. Despite the hefty profits and high energy prices, the two largest U.S. oil companies didn’t telegraph any plans Friday to increase spending on oil or fuel production, sticking to their annual budget ranges that were set before the war in Ukraine caused a spike in energy prices as supplies drained globally.
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According to the New York Times, gargantuan profits continue to roll in at Europe’s energy giants. London-based Shell reported adjusted earnings of $9.45 billion for the third quarter, its second-highest profit on record. On the same day, Paris-based Total Energies reported a profit of $9.9 billion. For both companies, the profits were more than double what they earned in the same period a year ago.

Shell and Total, Oil Giants, Report Huge Profits on High Energy Prices (New York Times)

Excerpt from the New York Times: Shell and Total, like other energy companies this year, are benefiting from high oil and natural gas prices partly stoked by the war in Ukraine, as Russia squeezes gas flows to Europe. For Shell, the profit was a step down from the record-breaking $11.5 billion it reported for the second quarter, when it received an average of just over $100 a barrel for oil, compared with $93 in the third quarter. Natural gas prices, however, increased in the third quarter. Shell is returning a large chunk of this bounty to shareholders. The company said that it planned to increase its dividend to shareholders for the fourth quarter by 15 percent, to about 29 cents a share. The company also pledged to buy back $4 billion worth of its shares, bringing total buybacks announced this year to $18.5 billion, or 10 percent of the company’s share capital.
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In contrast, a week of earnings by big technology companies has been a rout for investors, as recession fears and the strong dollar hit businesses that were thought to be more resilient. And these industry giants warn more pain is ahead, writes the Wall Street Journal.

"It’s just hard to see any points of good news on the horizon," Intel Corp. Chief Executive Pat Gelsinger said. Inflation in the U.S., Europe’s economy rattled by high energy costs and the war in Ukraine, and disruptions in Asia mean "we’re still looking to have the economic headwinds as we go into next year," he said Thursday as the company cut its full-year sales outlook.

Tech Boom Ends as Companies From Amazon to Meta Adjust to Turbulent Times (Wall Street Journal)

Excerpt from the Wall Street Journal: Tech companies that enjoyed strong growth in the early days of the pandemic are feeling the effects of a new reality of high inflation, rising interest rates, currency headwinds and other issues on their income statements. The slowdown in personal computers sales and digital advertising seen earlier this year appears to be spreading to areas such as cloud computing that were thought to be resistant to economic weakness. As a result, leaders Apple Inc., Amazon Inc., Microsoft Corp., Facebook parent Meta Platforms Inc. and Google parent Alphabet Inc. are sharpening their control over costs and monitoring head count—sounding more like old blue chips than highflying tech juggernauts. Meanwhile, investors in those five companies have lost more than $580 billion combined through Thursday’s post-market trading, after quarterly earnings—often paired with muted forecasts—pummeled their stocks.
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In a related story from CBS News, Meta shares tumbled 24% on Thursday to its lowest level in nearly four years following an earnings report that one Wall Street analyst described as a "train wreck." It's a far cry from the company's position nearly a year ago, when CEO Mark Zuckerberg on October 28, 2021, announced with great fanfare that Facebook was changing its name to Meta Platforms to emphasize its focus on the "metaverse."

"Meta's results last night was an absolute train wreck that speaks to pervasive digital advertising doldrums ahead for Zuckerberg & Co. as they make the risky and head scratching bet on the metaverse," Wedbush analyst Dan Ives said in a report.

Meta's value has plunged by $700 billion. Wall Street calls it a "train wreck." (CBS News)

Excerpt from CBS News: Facebook parent Meta Platforms is making a huge investment in virtual reality, but its actual reality is looking like a real disaster. Last fall, Facebook was still riding high: Its market value reached a peak of more than $1 trillion in September 2021. Revenue and profits were surging as advertisers flocked to Facebook and Instagram to reach their billions of users. To be sure, practically the entire tech industry has taken a beating this year, but Meta's stock plunge has far outpaced the overall sector, with its shares down 67% from a year earlier compared with the tech-heavy Nasdaq's 31% slide over the same period. Meta's plunge translates into an eye-popping loss of about $700 billion in market value. The company's travails raise questions about its all-in bet on the metaverse, as well as whether the social media company could suffer the fate of other major businesses whose gambles on the future failed to pay off. In the near-term, Meta's core Facebook business is facing challenges as the economy slows and advertisers trim spending.
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