Big Tech Earnings Center on AI

Major technology companies will release their latest earnings in the coming weeks, with recent declines prompting a reassessment of the AI peak and value opportunities elsewhere.

The End of The Upswing

Last week saw a significant shift away from technology stocks in the markets, prompted partly by Tesla's disappointing results, which contributed to the largest drop in the Nasdaq index in two years. With several large companies reporting earnings this week, it could signal investors believe major AI-focused firms may struggle to meet very high expectations. Analyst consensus indicates earnings grew on average over 9.7% from last year, though companies appear increasingly uncertain about economic conditions. As a result, it may be difficult for businesses to deliver earnings matching the strong share price growth seen in recent months.

For all companies, the primary focus is likely AI and how it has driven demand for cloud services. To date, the largest revenue generators from AI are firms offering cloud services to support computing demand, not necessarily those directly selling AI services. Investors may be growing impatient waiting for clear revenue increases in this area.

What's On the Docket

Microsoft will report first on Tuesday, with analysts anticipating increased bottom line EPS to $2.93 from $2.69 last year and revenue growth of 14.5% to $64.4 billion. As a leader in the AI transition through its OpenAI investment, the company has also benefited from cloud computing gains. However, investors are curious how Microsoft will reassure clients following a recent global outage linked to Crowdstrike.

Meta has invested heavily in AI development, but shareholders likely prioritise cash flow given promises of large buybacks and a new dividend earlier this year. Meta relies on advertising revenue, so it may capitalise on increased election year spending and recovery from high inflation, which benefitted Google last week. EPS of $4.72 is expected, up from $2.98 last year, on revenue growth of 25.9% to $38.3 billion.

Amazon reports on Thursday with a focus on the growing AWS cloud unit riding AI and corporate migration. Consumer confidence in merchandise sales trends will also be monitored. Earnings are anticipated to rise to $1.02 per share from $0.65 last year as revenue increases 10.5% to $148.5 billion.

While Apple earnings may see bottom-line growth, the next quarter is typically stronger, so commentary on the outlook holds interest. Following the launch of Apple Intelligence, stakeholders will watch for contributions to new iPhone sales. Earnings are projected to improve to $1.34 per share from $1.18 last year, with sales rising 10.4% to $84.4 billion.

META Double-Top Failure

META formed a double-top pattern at $530 after failing to push past $545 per share. The subsequent reversal to $450 suggests further downsides to the $400 per share regional support, where a potential head-and-shoulders pattern may form. However, the current drop has yet to confirm the new trend while prices remain within the bullish channel, and recapturing $500 could enable bullish momentum. In case the regional support fails to hold, the next support in sight lies at $330 per share.

Source: SpreadEx

Key Takeaways

Major tech companies will report their latest earnings in the coming weeks, with recent declines prompting investors to reassess opportunities outside of AI. Microsoft, Meta, Amazon and Apple are set to announce their quarterly results, with a focus on how each has leveraged AI and cloud computing to drive revenue growth against a backdrop of economic uncertainty. While earnings are expected to rise across the board, shareholders will be looking for reassurance around the ongoing demand for cloud services and contributions from new AI initiatives.​