This week is a significant one for the stock market, with a number of the world’s largest companies set to report their third-quarter earnings.
Amongst them are five members of the Magnificent Seven – Alphabet, Apple, Amazon, Microsoft, and Meta – which are worth roughly $12 trillion combined.
Given the sheer size of these companies, their earnings reports could have a huge impact on global markets, with the magnitude and influence of these mega-cap giants having the potential to affect not just their own share prices, but also the share prices of those around them.
AvaTrade’s chief market analyst, Kate Leaman, offers the below preview on the impact these earnings may have on the markets and the wider tech industry:
“Generally speaking, if these companies show strong results, it could give investors a big boost of confidence in tech spending – both for everyday consumers and businesses. It would be a sign that tech is holding steady, even with the current economic challenges. Solid growth in cloud services and a rebound in digital ads would especially lift spirits in the industry, likely giving tech stocks a nice lift in the near term.”
Alphabet (Google): “Alphabet’s Q3 earnings will likely underscore its strength in digital advertising, even as growth rates slow slightly. Google Cloud remains another key focus, as the company aims to solidify its position amid strong competition from Microsoft and Amazon.
“Analysts predict Alphabet’s Q3 revenue to reach $76.69 billion, a 9.7% increase from last year, driven by ad sales and cloud services. Alphabet’s investments in AI, including Bard AI and machine learning, will be closely monitored for future growth potential.
“Alphabet’s Q3 results are a bellwether for digital ad growth and cloud services amid competitive pressure. Strong ad revenue may solidify investor confidence in the digital economy’s recovery, while Google Cloud’s growth could set the stage for future cloud sector expansion, affecting related stocks positively.”
Apple: “All eyes are on how the iPhone 15 performs, especially in a competitive smartphone market where consumers are becoming more cautious with big purchases. Investors are curious to see if the latest model could drive sales growth beyond last year.
“Meanwhile, Apple’s services – like Apple Music, iCloud, and Apple TV+ – continue to be a crucial part of the company’s strategy, helping to balance fluctuations in hardware sales. Analysts expect solid overall results, but they’ll be closely watching both iPhone and services performance as key indicators of future growth.
“Apple’s performance, particularly with the iPhone 15, will likely give us insight into consumer sentiment for high-end products amidst cautious spending. Strong sales here could uplift the tech sector, especially if Apple’s services revenue complements hardware gains, showcasing a balanced growth model that could encourage broader tech investments.”
Amazon: “For Amazon, with earnings expected later this week, there are two big things to watch: growth in AWS and North American retail.
“AWS drives a huge chunk of Amazon’s profits, so if it performs well, it’s a good sign that businesses are still spending on cloud services even in this tricky economy. On the retail side, Amazon’s North American results can give us a sneak peek into consumer confidence as we approach the holiday shopping season – a critical time for retail that often defines the year.
“If Amazon can keep this momentum, especially with AWS, it’ll send a strong message about the resilience of cloud services. Should retail numbers look solid, it might suggest people are feeling more comfortable with their spending again – a good sign for the tech and retail space as we head into the holidays.”
Meta: “Meta remains a dominant player in digital advertising, with expected Q3 revenue growth of 17.9% year-over-year, reaching $40.3 billion. While ad revenue and AI enhancements drive growth, heavy investments in the metaverse and Reality Labs continue to weigh on profits. Investors are eager for updates on how Meta plans to balance these long-term projects with immediate profitability.
“Meta’s advertising growth combined with AI advancements may offer a solid revenue base, but with the ongoing expense of metaverse projects, the tech industry will be watching to see if the company can maintain profitability while investing heavily in future-focused technologies. Strong ad performance could lead to a positive sentiment toward digital advertising stocks.”
Microsoft: “Microsoft’s Azure cloud division is expected to show robust growth, bolstered by AI adoption. However, investors will be comparing the pace of growth to past quarters, given rising competition.
“The company’s partnership with OpenAI has expanded AI capabilities across its products, especially Microsoft 365, and remains a vital part of its strategy. Analysts project Q3 revenue at $60.87 billion, with net income around $21.1 billion.
“Azure’s anticipated 29% growth rate highlights continued demand for cloud and AI solutions. If Azure continues its projected growth, it will indicate robust demand for cloud and AI, driving optimism across the tech sector, especially in software and cloud infrastructure.”
Leave a Comment