During Google’s last earnings call, a new expression was invented by Google CEO and re-used by its CFO when he tried to describe the priorities: “cost base re-engineering”. Mark Zuckerberg was more sober, indicating that 2023 would be the year of efficiency. Metaverse and Artificial Intelligence and other growth buzzwords are still around but on the back seats. Big technology has discovered cost discipline and, for now, it sounds like a new religion. The 2022 hiring binge is over. Meta is planning to “improve productivity, speed and cost structure… in order to become more profitable”. Google’s CEO Sandar Pichai is committed “to investing responsibly with great discipline and defining areas where the company can operate more cost effectively.”

Amazon discussed costs and efficiency in depth. It sounds like that the 18,000 jobs suppressed in the last quarter should be enough to restore good levels of productivity and efficiency. Amazon already reports “satisfactory” improvements during the last quarter in logistics and the US Grocery business. Having now 59% of their delivery for third-party merchants they focus on efficiency and speed. Unlike Meta and even Google, Amazon has long history of cyclical downturns and increased competition. They see the current dire conditions as an opportunity to onboard more clients due to their speed, scale and efficiency.

Apple is the only big tech company which did not reduce its workforce. They don’t need to. According to Tim Cook, Apple gross margin was 43%, up 70 basis points from last quarter due to leverage and a favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially. Not bad considering the very significant currency and macro headwinds during the quarter. In 2023, Apple does not need to focus on “cost base re-engineering”. They have done that since Tim Cook took over as a CEO in 2011 and before that when he oversaw world-wide operations and closed factories, shifting from in-house to contract manufacturing.

Unstoppable Growth was the driver for technology share prices until December 2021. As we move into 2023, growth is still abundant but flattening. The focus has drifted towards cost discipline. Whatever happens on the macro side, on current valuations, the new mix of growth and efficiency should prove neutral to supportive for share prices of profitable and well managed technology leaders. On the other hand, low margin or loss making companies’ shares will see their fate tied to the Fed’s moves.