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How Recession May Soon Affect Big Tech Companies

How Recession May Soon Affect Big Tech Companies

Tech Companies Recession

Given the COVID-19 pandemic, combined with declining treasury yields, broken global supply chains, the likelihood of a recession seems quite a certainty from here. For big tech companies like Google, Facebook, Amazon Uber, and many others recession can be a challenging affair.

Last month, the level of 2020-year recession searches keywords on Google got past the trend witnessed during the Great Recession for the first time since. This comes at a time when the entire global economy is suffering from the impact of a pandemic — COVID-19. When it comes to businesses worldwide, they are buckling down to face the challenges of the impending recession as the stock markets breakdown.

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The complete picture of the recession will come to light when we finally see the extent of job cutbacks amid COVID-19 restrictions. Given the COVID-19 pandemic, combined with declining treasury yields, broken global supply chains, the likelihood of a recession is nothing but a certainty from here, according to most experts. For large technology firms, in particular, recession can be a challenging affair.

According to a recent report, the majority of C-suite officials (80%) at global technology firms in the U.S. and Europe view financial turbulence brewing in the coming few years. We know that the influence of tech companies is quite substantial on the global economy. In this article, we will analyse how tech giants may be hit as a result of a global economic breakdown to get an idea of what may be in the pipeline for this year.

Will Google & Facebook’s Ad Based Business Model Make Them Recession Proof?

Let’s look at Google and Facebook, two tech giants who rely on advertising money on a large extent. Advertising consumption usually outlines to complete business expansion, implying that businesses who are often reliant on ads for income will grapple as companies contract their ad spend and related resources. But others say the ad-based business model adopted by Google and Facebook may be recession-proof, given people will not stop using social media or the internet during a recession.

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Recession: Hardware Tech Companies May Not Fare Well!

Another direct sufferer among large tech companies may be organisations that require big capital expenditure by enterprises. According to experts, large license based enterprise tools and equipment may take a sideline during the recession. So, companies like HPE and Cisco Systems, which deals in servers and networking hardware products may see tumbling revenue due to low demand from potential enterprise clients that may not require to use funds on hardware. Then there are tech giants like Intel, AMD, and Apple, which are heavily reliant on supply chains and active global financial movement involving COVID-19 affected countries like China, particularly for semiconductor products and related hardware component requirements. 

Will Cloud Giants Continue To Grow During Recession?

In the decade after the Great Recession of 2008, cloud computing grew to become the centre of all information-technology strategies, be it startups and also large companies. Companies like AWS and Microsoft lead the space by renting out computing resources virtually for years now, and this has grown into an enormous industry. Now, coming to the impact of the recession on cloud companies like AWS or Microsoft Azure, it is expected that they may continue to do fine. Cash-flow restrictions in a downturn could urge businesses to adopt more cloud services rather than purchase their private infrastructure. 

Additionally, the demand for cloud-based software and apps is only going to climb regardless of the economic situation. Even during the COVID-19 crisis, as we observe self-quarantine to withdraw contracting or expanding the illness, cloud-based applications for telecommuting and entertainment could see even more adoption. As a result, Amazon Web Services, Microsoft Azure, and Google Cloud may witness a boost in their revenue.

What About Cab Sharing Giants Like Uber?

Car ride-sharing based companies such as Uber and Lyft began as startups and through IPO, collectively amassed over $100 billion in market value. A primary reason for their rapid growth in the last 3-4 years was the massive amount of VC money inflow into the companies. But, according to analysts, COVID-19 has provided a massive shock to the entire notion of sharing economy as social distancing becomes the new norm to minimise exposure to the virus. So, for sharing based companies, a recession may bring some bad days ahead.

Also Read: How Global Recession Will Impact The IT Industry in India

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