By Byron Kaye and Upasana Singh
(Reuters) – Australia’s Appen Ltd, which provides artificial intelligence training for Facebook, Google and Amazon.com Inc, said a slowdown in customer spending would cause its first half-year loss since listing, sending its shares plummeting.
Tuesday’s warning shows how hefty budget cuts by global tech giants, faced with raging inflation and rising interest rates, are trickling down to the Australian stock market, where Appen is an analyst favorite for its high-profile client base.
In addition to Appen’s challenges, new privacy features in Apple Inc products have reduced the ability of major advertisers, including Facebook, which is owned by Meta Platforms Inc, and Google by Alphabet Inc, to target users, affecting their hunger. to highly accurate user data, analysts say.
Appen’s business model involves outsourcing hundreds of data auditing projects to contractors who manually audit and label online content, which customers then feed into their algorithms.
After warning of a profit decline in May, Appen now said it expected a net loss of $3.8 million in the six months ended June, which would be the first interim loss since its 2015 listing on a net profit of $12.5 million a year earlier.
“Conditions have changed over the year,” Chief Executive Officer Mark Brayan said during an analyst meeting.
“We think this is a slowdown rather than a competitive situation,” he added when asked if the company had lost business to rivals such as Canada’s Telus International, which together with Appen dominate the global market for so-called artificial intelligence training.
Shares of Appen fell a staggering 29% mid-session, against a half percentage point drop in the broader market.
“Revenue visibility has been historically low, and in this environment of declining global ad spend…it seems likely that visibility has declined,” Jefferies analyst John Campbell wrote in a research note.
RBC Capital Markets analyst Garry Sherriff said the cooling investor sentiment “will likely continue…given multiple material downgrades and questions about earnings visibility and strategy”.
(Reporting by Byron Kaye in Sydney and Upasana Singh in Bengaluru; editing by Rashmi Aich)