This is going to be an important week for tech giants: first-quarter earning reports are about to be publicly shared, and investors are closely watching companies like Amazon, Microsoft, Alphabet and Meta.
Tech giants now need to share good news with investors, for a number of reasons.
Tech giants’ first-quarter earnings reports: Estimates and Calendars
Estimates are already here. The official reports will be released during the week, and will be related to the period ending in March 2023.
- Microsoft (MSFT) reports earnings estimates for $2.2 billion and revenue for $51.019 billion. Reports will be published on April 25, 2023.
- Alphabet (GOOGL) reports earnings estimates for $1.082 billion and revenue estimates for $68.887 billion. Reports will be published on April 25, 2023.
- Meta Platfomrs (META) earnings estimates amount to $2.019 billion and revenue estimates to $27.645 billion. Reports will be published on April 26, 2023.
- Amazon (AMZN) reports earnings estimates for $0.212 billion and revenue estimates for $124.555 billion. Reports will be published on April 27, 2023.
Why investors are watching big tech stocks
The reason why tech giants are drawing the attention of investors is that some of the highest cap tech companies managed to positively lead the S&P 500 index even during global financial uncertainty, high inflation, strict regulatory policies, and banking crisis.
When a stock performs well during uncertain times, there are higher expectations. In case they will not perform as expected – or even exceed expectations – investors might shift their attention to other stocks and drive down the prices of big tech stocks.
Investors seem to be more sensitive because of the spreading fears related to a possible recession this year. The reports might be a signal of what are the companies that are fundamentally strong enough to mitigate the effects of a global crisis.
What are the elements investors are looking at
Tech companies experienced significant growth during the first stage of the pandemic, and significant falls right after.
Moreover, the rising rates hit banks pivotal to the tech sector and further increased uncertainty.
Nevertheless, AI and cost cuts might positively impact tech giants. Google has already announced that it will increase the use of artificial intelligence also thanks to the launch of a new AI-based search engine, while Microsoft backed the popular AI chatbot ChatGPT. In the meantime, Andy Jassy – CEO of Amazon – announced that Amazon is “investing heavily” in generative AI and LLMs (Large Language Models) in a letter to Amazon’s shareholders.
Layoffs in the tech sector might also have improved the financial conditions of these companies, if we look at them under a more general rebalancing policy made necessary after the unsustainable surge in tech stock prices right after the breakout of the pandemic.
Meta is one of the tech companies that announced new layoffs, mentioning the need for an increased efficiency over the year – something that could be relevant is sight of the publication of the reports.
As reported by Barron’s, one of the reasons behind the need for tech companies to communicate good news is represented by the high valuations of tech giants: price-to-earnings (PE) on Nasdaq-100 signals a significant increase, and this valuation should be justified by tech giants with these new reports.
What to expect?
The current global economic and financial situation does not leave room for great expectations. Nevertheless, during times like this it might be sufficient for companies to be stable.
In cases of publicly traded companies, investors look at the possibility to invest in stocks able to challenge even global financial issues.
The reports that will be released this week will represent a test bench for tech giants, even if not all tech leaders agree on the future developments related to AI’s sustainability and research.
In spite of the publication of the open letter that asks to halt AI experiments, companies might want to bet on this technology to show their resilience over time, and this could represent just one of the elements that could affect investors’ opinions.
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