Weekly Preview: Earnings To Watch This Week

The reason for the weekly gains is combination of optimism for an economy that has shown immense resiliency and corporate earnings which have come far better than expected. On the other hand, there’s the overhang of the Fed which paused its rate hike at its last meeting. It is highly anticipated that the Fed will increase rates again at next week’s meeting. The question is, will they then pivot to a more dovish approach? If the Fed disappoints, can big tech power the rally?

Wall Street expects Alphabet to earn $1.34 per share on revenue of $72.8 billion. This compares to the year-ago quarter when earnings came to $1.21 per share on revenue of $69.69 billion.
What to watch: The stabilization of its advertising segment, combined with favorable AI trends, could be a boon for Alphabet in this coming earnings release. Investors are expecting this to be the case, among other growth developments evidenced the stock’s strong run in the first half of the year. Shares of the Google and YouTube parent have risen 35% year to date, besting the 18% rise in the S&P 500 index. The stock has risen close to 22% over the past six months, driven by optimism that a slowdown in digital advertising could be over. For that matter, the slowdown in advertising so far in 2023 has not been as bad as expected. The U.S. digital advertising spending is expected to rise from $244.78 billion in 2022 to $263.89 billion in 2023, marking 8% year over year growth, according to Insider Intelligence.
The stock has also risen on the assumption that Google’s strong cloud growth will provide an offsetting factor for any weakness in its core business. Elsewhere, the rapid adoption of OpenAI’s ChatGPT, in partnership with Microsoft, has a cohort of the stock market questioning whether Google’s decades-long dominance in online search might be coming to an end. In response, the company launched its ChatGPT rival Bard, which has received positive reviews. Investors will look for the company to provide details about way it plans to monetization Bard’s capabilities. In the meantime, while Google's advertising business may continue to experience some weakness, the company has plenty of other drivers to achieve its growth objectives for higher free cash flows on an annualized basis. On Tuesday, investors will want more details on these initiatives and how soon they can deliver results.

Wall Street expects Microsoft to earn $2.55 per share on revenue of $55.47 billion. This compares to the year-ago quarter when earnings were $2.23 per share on $51.87 billion in revenue.
What to watch: How much higher can Microsoft stock go? Shares of the software and cloud giant recently made a new all-time high and the stock closed at a record $359.49 on Tuesday. The catalyst was the company’s announcement of Microsoft 365 Copilot, an AI-powered version of its productivity platform. I asked recently whether Microsoft had already been crowned the winner in the artificial intelligence race. With the company’s "multi-year, multi-billion dollar" investment in ChatGPT developer OpenAI, Microsoft had made no secret that AI would be a key source of its future growth. Microsoft 365 Copilot, which will be offered for $30 per month for Microsoft 365 customers on different plans, is a direct response to that. Already ranging from $12.50 per month to $36 per month for each user, Microsoft said the Copilot subscription will be added on top of existing Microsoft 365 plans.
Wall Street analysts applauded the announcement. With some estimating that at $30 per user per month, Copilot could boost Microsoft’s fiscal 2025 revenue by as much as $9 billion, assuming 20% of customers sign-up for the voluntary add-on, or $19 billion if 40% of them do. Mizuho Securities analyst Gregg Moskowitz boosted his Microsoft price target to $420 from $390 following the news. With a gain of 44% over the past six months, while climbing 45% year to date, Microsoft’s AI investments are already being rewarded. Coupled with its fast-growing Azure cloud platform, Microsoft stock remains one to own in 2023 and beyond. On Tuesday, the company’s guidance will gauge how confident the management feels about its growth potential.

Wall Street expects Microsoft to earn $2.55 per share on revenue of $55.47 billion. This compares to the year-ago quarter when earnings were $2.23 per share on $51.87 billion in revenue.
What to watch: How much higher can Microsoft stock go? Shares of the software and cloud giant recently made a new all-time high and the stock closed at a record $359.49 on Tuesday. The catalyst was the company’s announcement of Microsoft 365 Copilot, an AI-powered version of its productivity platform. I asked recently whether Microsoft had already been crowned the winner in the artificial intelligence race. With the company’s "multi-year, multi-billion dollar" investment in ChatGPT developer OpenAI, Microsoft had made no secret that AI would be a key source of its future growth. Microsoft 365 Copilot, which will be offered for $30 per month for Microsoft 365 customers on different plans, is a direct response to that. Already ranging from $12.50 per month to $36 per month for each user, Microsoft said the Copilot subscription will be added on top of existing Microsoft 365 plans.
Wall Street analysts applauded the announcement. With some estimating that at $30 per user per month, Copilot could boost Microsoft’s fiscal 2025 revenue by as much as $9 billion, assuming 20% of customers sign-up for the voluntary add-on, or $19 billion if 40% of them do. Mizuho Securities analyst Gregg Moskowitz boosted his Microsoft price target to $420 from $390 following the news. With a gain of 44% over the past six months, while climbing 45% year to date, Microsoft’s AI investments are already being rewarded. Coupled with its fast-growing Azure cloud platform, Microsoft stock remains one to own in 2023 and beyond. On Tuesday, the company’s guidance will gauge how confident the management feels about its growth potential.

Wall Street expects the Facebook parent to earn $2.91 per share on revenue of $31.12 billion. This compares to the year-ago quarter when earnings came to $2.46 per share on revenue of $28.82 billion.

What to watch: Amid the recent surge in tech stocks, Meta stock has been on an absolute tear, skyrocketing 120% over the past six months, crushing the 14% rise in the S&P 500 index. With its 6% increase in thirty days, META stock is up a breathtaking 151% year to date, compared with a 18% rise in the S&P 500 index. Given the strong momentum the stock has been on, investors want to know how much better can things get. Its management has pushed all of the right buttons, including various cost optimization initiatives, many of which have enabled Meta to lower its 2023 expense guidance on two occasions, most recently lowering it to $86 to $92 billion from the prior $89 to $95 billion. These initiatives not only puts the company in a much stronger financial standing in the near term, it is poised to improve in the long term as cost efficiencies are further realized.
Then there is the recent launch of Threads, the company’s new social media app which has already surpassed a 100 million users, ranking it as the fasted adopted app of all time. The question investors want to know is whether Meta can monetize Threads given that so many people are already using it. Analysts are taking a wait-and-see attitude, with some predicting Threads could potentially add between $2 billion and $3 billion in revenue for Meta in 2024. In the near term, however, Meta must continue to flex its growth muscle within its core digital advertising business given that it boasts an estimated 3 billion monthly active users on its family of products. Digital ad improvements will be the key driver of the stock. As such, the company on Wednesday must continue to show gradual improvements in that area, while demonstrating its prominence among big tech for the quarter and full year.

Wall Street expects Amazon to earn 35 cents per share on revenue of $131.47 billion. This compares to the year-ago loss of 20 cents per share on revenue of $121.23 billion.
What to watch: With a gain of 55% year to date, besting the 18% rise in the S&P 500 index, Amazon stock ranks as one of the top performers in the market and tech in particular. The e-commerce giant's growth strategy is bearing fruit, and driven by some recent operating cost reductions, Amazon now has slimmer cost profile which will lend to faster earnings growth in the quarters ahead. Some of the recent cost-saving measures include shutting down unprofitable businesses, reducing its global headcount and reprioritizing resources in an effort to right-size the business. The goal is to remain leaner and stronger. Amazon is expected to report Q2 earnings per share of 35 cents, which would be a massive increase from the year-ago loss of 20 cents.

Meanwhile, Q2 revenue is expected to be roughly $131 billion, reflecting an 8% increase from the previous year. But it’s not just the company’s profitability and margin profile to be excited about. There’s also Amazon Web Services, which has been the company’s main profit producer. Anchored by the AWS cloud platform, the company’s services segment is still enjoying exponential growth which has offset recent weakness in the retail segment. All told, Amazon has many growth levers it can pull. "There's a lot to like about how our teams are delivering for customers," CEO Andy Jassy said in a recent press release. From a valuation perspective, while Amazon stock is not as cheap as it was at the start of the year, its shares still looks like a bargain relative to the company’s long-term potential. For that to matter in the near term, on Thursday beyond a top- and bottom line beat, investors will want strong profit guidance to support the long-term return investment thesis.