Most Talked-About Earnings This Week

As earnings season peaks, there is a massive number of earnings reports this week, but several names are being particularly closely followed by traders, and, unsurprisingly, they are mostly in tech:

What's Moving the Market

• Market sentiment boosted at the start of the week amid easing Middle East tensions ahead of key earnings.
• A plethora of tech earnings likely to guide the market across the peak of earnings season, either affirming or reversing the rotation out of hyperscalers into smaller AI infrastructure firms.
• Markets are looking closely at capital expenditure as higher memory prices push AI companies to increase spending to meet development goals.
• Traders looking for broader market insight, whether demand for the cloud is solid, ad spending is maintained, or consumer demand remains resilient despite higher inflation.

Top Earnings This Week

Markets are set for a positive open this week, once again reacting to geopolitical events from over the weekend. The US and Iran agreed to pause attacks amid restarted negotiations, but the Strait of Hormuz remains essentially closed. However, oil prices have come down, erasing all of last week's gains, and investors are not being distracted by the latest developments in the Middle East. The situation remains tense following the escalation in the Red Sea, but there is a very active earnings schedule later this week, which will likely capture traders' attention and be the focal point for US trading. Four of the former "Magnificent 7" are expected to report earnings, as investors continue to evaluate the AI trend. The Nasdaq will likely be in focus given its heavy tech weighting, as corporate data and insight into the market's driving trend could be the determining factor for traders.

The trend so far this season has been to double down on the rotation out of Big Tech and into what might be called "Little Tech", as investors seek value while not giving up on AI growth yet. Last week, Google parent Alphabet beat on both the top and bottom lines, but its share price dropped as investors grew increasingly concerned about how much companies are spending on AI. This could be a theme as other hyperscalers are set to report this week, led by Microsoft, Meta, Apple and Amazon. As memory costs rise, companies are raising spending targets to meet their development goals. The crucial issue for investors is that they seem to be growing impatient for a return on investment from all the capex in AI. Here's what traders will be looking at for the upcoming major names this week:

Microsoft: Will Demand Outweigh Spending?

The software-cum-cloud company will report earnings on Wednesday after the market closes, with the consensus EPS estimate rising to $4.24 from $3.65 a year ago. Revenue is anticipated to rise 15% to $87.7 billion, with the bulk coming from its Azure cloud division. Software sales will be in focus after the company's share price was punished last quarter as investors bet AI would reduce demand for non-proprietary software. Analysts are expecting the company to increase its capital expenditure targets, but if it manages to surprise in sales, keeping cash flow positive, the markets could support the stock price.

Traders Looking at Meta's Spending

The social media firm will update investors after the market closes on Wednesday, with analysts predicting its earnings will rise relatively modestly to $7.22 from $7.14 on a 27% increase in revenue to $60.3 billion. Markets will likely look to ad spending for insight into how smaller businesses are performing, but the stock itself might react more to guidance, particularly on capex. If the company raises its spending projections but shows progress on AI ad integration and benefits from compute deals, it might help keep the stock from falling as Alphabet's did.

Investors Weigh Price Hikes

The iPhone manufacturer's fiscal third-quarter earnings are scheduled for Thursday after the market closes, with the consensus EPS estimate at $1.89, up from $1.57 a year ago. Sales are projected to rise 16% to $109 billion, despite a series of price hikes to offset higher component costs. Analysts are positive that demand for iPhones will remain solid despite slower economic growth in China and higher prices, but investors will be looking to the company's outlook and guidance for reassurance.

Amazon's Cost Outlook in Focus

The e-commerce company, increasingly relying on cloud computing, is scheduled to report after the market closes on Thursday, with earnings projected at $1.82, up from $1.68 a year ago, while sales are anticipated to rise 17% to $196 billion. There will likely be diverging views on the company's importance, as broader market traders focus on its e-commerce division to see if consumer demand holds up amid rising energy prices. Traders in the company's shares are more likely to focus on cost issues, including energy and memory prices, worried that it will force the company to spend more to keep up with its compute build-out plans. Notably, there is a considerable range among analysts' expectations, suggesting a high level of uncertainty, which could increase volatility in the share price after earnings.