Expectations are high for Big Tech earnings as Wall Street keeps a close eye on AI
Busy week in Silicon Valley… Google, Microsoft, Meta, Amazon, and Apple are on deck to drop Q3 earnings. The Magnificent 7 (which includes Nvidia and Tesla) are expected to report average earnings growth of 18% compared to less than 1% growth for the rest of the S&P 500. FYI: the Mag 7 make up over a third of the S&P 500’s market value. Back in July, big techies reported mixed results as investors looked to see whether AI had revved up growth.
Bankin’ on bots… To supercharge demand, techies are infusing AI into various parts of their businesses, from search to cloud to ads. Cloud-computing giants Amazon, Microsoft, and Google have touted new AI functions to drive more sign-ups. In Q2, Microsoft said its OpenAI-fueled Azure cloud service added ~100 customers daily. It invested billions to own nearly half of OpenAI (which expects to lose $5B this year). Meantime, Google said it earned billions in revenue leveraging AI for its cloud biz. And Amazon’s AWS (the largest cloud provider) saw its Q2 cloud revenue jump 19% to $26B as AI integrations fueled hype.
Reel money: Meta’s ad sales grew 22% in Q2 after it used AI to boost ad targeting and recommendation algos on Insta and FB.
AiPhones: Last month Apple debuted an AI-infused iPhone, but underwhelming preorder sales suggest folks aren’t quite sold yet.
It’s time to turn AI into ROI… Big Techies have invested $150B+ primarily in AI over the past year, and investors are eager to see returns. Expectations are high. Nvidia reported triple-digit Q2 sales growth, but the stock fell after the gains weren’t as feverish as in the past (tough comparisons). The techy Nasdaq hit a record high on Friday, suggesting investors have lofty growth expectations.