It’s that time again. Major tech names are set to release results in the coming weeks and the market’s eagerly awaiting the headlines.
But just because the likes of Apple, Amazon and Microsoft all get lumped together under the same umbrella doesn’t mean they’re exposed to the same risks and opportunities. It’s important investors know what to look for – and what it means for wider markets as these industry giants release their latest figures.
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Alphabet – 24 October
Advertising will remain the main driver of investor sentiment. As a market leader, Google’s advertising revenue tends to be more resilient than others in times of economic stress. We’re optimistic that momentum will have continued.
YouTube in particular will be important to watch. It has a growing audience as Alphabet looks to harness the power of short-form content and streaming – YouTube now has a higher share of US screen time than Netflix.
The group’s cloud business stormed into profit-making territory last quarter and investors will be looking for that to have continued.
Broader uncertainty might have taken some of the speed off the rate of growth, but we expect this business area to have performed strongly. As ever, there are no guarantees.
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Amazon – 26 October
Amazon’s retail division has been faring better than expected, and we’d hope this trend has continued in the upcoming results.
Amazon has hired 250,000 seasonal workers for the upcoming Christmas rush – that’s 100,000 more than last year. This suggests management is confident about the consumer outlook. If this rings true, it would be good news for revenue and also dispel any lingering concerns about demand – we’re cautiously optimistic.
Amazon has been caught out by overspending in the past though, and bulking out the workforce to this degree does increase risk if performance disappoints – a risk the market would punish the group for.
Of course, all eyes are on cloud business, AWS too. Growth has slowed here, and the market will be hunting for clues that performance is going to reaccelerate.
It’s clear artificial intelligence (AI) could be a long-term growth driver. However, we’d like some further steer about what the recent cloud controversy relating to anti-competitive practices in the UK could mean for Amazon.
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Apple – 2 November
Just like its namesake, the iPhone maker needs to grow in order to prosper. Investors need to see a clearer growth pattern emerge before excitement can be unleashed where Apple’s concerned. Last quarter, Apple’s net sales were 1.4% lower than the previous year, led by a drop in iPhone sales. We think this trend could continue.
There’s a long-standing debate swirling around how resilient and loyal Apple’s customers are. As the global cost of living is still high, there will be a limit to how many people are prepared to spend on big ticket items. We suspect Apple’s strong brand will limit any sharp falls in demand from cropping up, but that’s not the only part of the business case.
The Services division (think AppStore and Apple Music) is likely to have continued growing. This helps underpin profits because margins in software have typically been more attractive than in manufacturing physical goods. The crucial part to all of this will be any hint on the outlook as we head into Christmas – it’s this trajectory that has the potential to help move markets.
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Meta – 25 October
Meta’s valuation has been on a largely unbroken upwards march over the last year. The possibility of continued momentum mainly stems from hopes that the US rate hiking cycle’s coming to an end. This could help pave the way for growth stocks to enter into a more favourable arena.
At the same time, Meta has surprised to the upside in recent results, which has helped the market breathe a sigh of relief after a challenging period.
The biggest catalyst for market moves will come from whether or not that will continue. The group expects third-quarter revenue to be $32-34.5bn, with growth of 3% excluding exchange rates.
We think the more focused business model will contribute to the group meeting this target, but there are some touch points that will need monitoring.
Full-year expenses are predicted to come in higher than planned, including restructuring costs. Looking beyond 2023, Meta expects expenses to grow as it looks to invest in growth areas, including AI and the metaverse. We’d like reassurance that budgets don’t appear too outlandish or lacking in direction – things that have badly spooked the market in the past.
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Microsoft – 24 October
Microsoft expects revenue in its first quarter to be $53.8-54.8bn, which was lower than analysts expected.
The slower rate of growth reflects the part of the business that relies on Windows. Microsoft's dealing with a marked slowdown in personal computing revenues, which reflects the incredibly challenging consumer environment. Buying a new laptop and the software that comes with it is simply not a priority for lots of people right now.
A worse-than-expected slowdown here could likely be punished by the market – this is what happened following July’s quarterly earnings release although past performance isn’t a guide to the future.
This is where cloud business, Azure, could come in.
This has been picking up the slack and we’d like to know if corporations are trimming their spending on this technology, which we suspect they have been.
The outlook on this side of things will be very important for gauging market sentiment.
The bid to buy gaming giant and Call of Duty maker, Activision, has just been given the green light by UK regulators too. We’d like a bit more colour in what this might mean for earnings projections.
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What investors need to know
The prevailing mood is one of cautious optimism and that increases expectations.
One of the main things investors should keep an eye on is outlook statements. The festive quarter tells us the most about where a company lies and how the consumer landscape is faring, which can read across far beyond the holiday season itself.
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Unless otherwise stated, estimates are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.
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