Folks have been calling for a recession for what seems like the past two years. No such recession has arrived. At least by the technical definition of a “recession,” which calls for two consecutive quarters of gross domestic product declines. But what if a recession has already come and gone, and we are now in an early cycle of economic recovery?
That’s what recent earnings reports seem to suggest.
Tech titans Alphabet (GOOGL) and Microsoft (MSFT) reported earnings last night. So did payments giant Visa (V). And social media firm Snap (SNAP).
The consistent theme? Business has been bad for most of the past 12 months, but now things are getting a lot better.
Earnings Growth
For years, Alphabet has reported double-digit revenue growth. That has been the standard at Alphabet. That standard broke in 2022. Then, for four straight quarters from mid-2022 to mid-2023, Alphabet reported revenue growth of less than 10%, including one quarter where revenues rose just 1%.
Last night, though, Alphabet reported that it returned to double-digit revenue growth for the first time since mid-2022. Revenues rose 11%.
Google Search got its groove back in the quarter. YouTube returned to big-time growth. Google Cloud stayed strong.
Across the board, Alphabet’s business appears to have turned a corner. It got hit hard in 2022 and early 2023 but is now improving in a major way.
Same thing at Microsoft.
Microsoft’s most important business is its Azure cloud business. That business has suffered through a steady growth slowdown that started in early 2022.
That slowdown ended last night. Azure revenues rose 28%, up from the 27% growth rate reported in the previous quarter. That marks the first time Azure revenue growth has accelerated quarter-to-quarter since early 2022.
Microsoft’s business, too, appears to be turning a corner.
Meanwhile, Visa and Snap have also seen their key performance metrics slow dramatically over the past 12 months. Transactions and payment volume growth have steadily slowed at Visa. Revenue growth has gone negative at Snap.
But both of those trends also ended last night.
Visa’s transactions and payment volume growth rates stabilized last quarter. Snap’s revenue growth turned positive.
In other words, corporate earnings are painting a unique picture of the U.S. economy.
While everyone has been and still is calling for a recession, corporate America is basically saying that a recession has already come and gone. The tough times hit in 2022. They lasted into 2023. And, over the past few months, they’ve ended.
Things are getting better now.
This is crystal clear in the broader earnings picture.
Over the previous four quarters, earnings growth consistently slowed every quarter, including three straight quarters of negative earnings growth.
But earnings growth both improved and turned positive this quarter. It is expected to stay positive and keep improving for the next several quarters.
The Final Word
On Wall Street, the economic turnaround has arrived.
Which means it is time to tune out the recession chatter and fear-mongering headlines. While they might grab your attention, they won’t guide your investments wisely.
Your portfolio deserves to be ready for what the data says is a major impending economic upturn.
Don’t miss out on this opportunity…
Unlock the secrets to thriving in the upturn.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
