By Therese Poletti
“The PC industry continues to be hampered by supply and logistical challenges, and unfortunately these issues have not seen much improvement in recent months,” IDC analyst Jitesh Ubrani said in a statement.
HP is going to be one of the hardest hit companies. According to FactSet, analysts are estimating a 1.32% growth rate for revenue in its fiscal fourth quarter, which ends in October. That almost flat growth follows a stunning 27.3% surge in revenue in the July quarter, fueled by consumer PC sales and printing.
The news isn’t all bad for tech. The chip shortage is expected to again pay off for semiconductor companies — as a group, semis and semiconductor equipment are forecast to see earnings growth of 38.5% in the third quarter, with revenue growing on average 22.9%.
Stacy Rasgon, a Bernstein Research analyst, said recently that the trends are “fueling bullish feelings from semiconductor companies themselves, most of whom are calling for shortages and strong order patterns to maintain well into next year,” and added that his inbox is flooded with queries from investors asking how long the current growth can last.
Don’t miss: Big Tech is headed for its biggest year yet, and it isn’t even close
“Investor conviction appears to be increasingly waning as they continue to worry that the peak must be approaching, and maintain considerable uncertainty as to how much of the current demand environment is real, versus phantom given the normal customer behavior in times of shortages is to order more than they need in hopes of getting enough parts to get by.”
The sole chip maker that is not expected to see any growth in the third quarter is chip giant Intel, which has been under a cloud after some chip delays in the past year and its big push to spend more on contract manufacturing. Analysts expect to see flat third-quarter earnings and nearly flat revenue compared with the year-ago period, while competitors like Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -2.05% and Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -2.60% are expected to see stunning revenue growth of 46% and 44%, respectively.
The tech-related sector that looks the strongest besides semiconductors is communication services, which includes Facebook Inc. /zigman2/quotes/205064656/composite FB -3.55% , Alphabet Inc. /zigman2/quotes/202490156/composite GOOGL -2.50% /zigman2/quotes/205453964/composite GOOG -2.58% and Netflix Inc. /zigman2/quotes/202353025/composite NFLX -2.21% . While the expected 23% earnings growth and 19.8% sales growth still pales in comparison with the first half of the year, when companies were lapping the beginning of the pandemic, it destroys any quarterly numbers from 2020.
Facebook is expected to see 37% revenue growth in the third quarter, showing its ability to bounce from one controversy to the next in recent months without paying for any of them. The threat to the social-media powerhouse, as well as Google and other Big Tech companies, comes from lawmakers looking to change the Section 230 protections that content platform companies enjoy, along with other legislative and regulatory concerns — if other concerns don’t get in the way.
“I think that Washington, D.C. has enough fish to fry,” Connaughton said. “They probably won’t get to tech for another six months.”
Whatever happens on the regulatory front is not likely to have much immediate impact on the financial reports we will see in the coming weeks. The roiled supply chain and semiconductor shortage, though, will take at least a pound of flesh.