Big Tech earnings reporting continues, with several of the largest companies expected to report results next week. What should Wall Street expect after tech company earnings released this week and more layoffs hitting the tech industry?
Brent Till, senior analyst at Jefferies, commented on the potential for future layoffs and how AI is driving technology valuations ahead of revenues, saying, “The excess that still exists in the technology ecosystem… “What a waste.”
“The biggest factor right now…is the AI bubble that we're in. Yes, we believe in it, but as they say, everyone overestimates the short term and We may be underestimating the long term,” he told Yahoo Finance. “So I think this is probably the biggest concern, especially for Microsoft (MSFT), which is operating with his Copilot AI excitement…”
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Editor's note: This article was written by luke carberry morgan.
video transcript
Sheena Smith: For more information on what we can expect, we'd like to welcome Brent Till. He is a senior analyst at Jefferies. Brent, as always, great to get your insight, especially ahead of such an important week for the tech industry. What are your biggest questions for these big tech companies heading into next week?
Brent Hill: The first factor is the demand environment. AI hype is his number two. We're in a huge hype cycle. And Kennedy's companies provide AI. Then we only think about the sustainability of demand. You've seen tech stocks soar. And I think everyone's concern is that there's a bit of a bubble in terms of overall movement with some of these names. So, will demand continue behind the scenes?
So I think those are big issues at this point. I think the biggest driver right now is the AI bubble that we're in. Indeed, we believe it. However, as is often said, we may all be overestimating the short term and underestimating the long term. So I think that's probably the biggest concern, especially for Microsoft operating with the excitement of Copilot AI. Definitely Amazon. Another big topic in AI is whether we can catch up with Microsoft. they retreated. I think it can be done throughout the year.
And the biggest thing that we're seeing for Meta is that overall advertising demand is actually coming back. We have moved from a hard landing in the economy to the possibility of a softer landing. And that soft landing is good for advertising, too. All meta checks were amazing. And we keep hearing great things.
I think what we're most focused on is these layoffs. And I think everyone in the technology industry that we talk to is saying more cuts are coming. I think a lot of people thought these cuts were done. However, I believe there is still a lot of excess waste left in the technology ecosystem. And there will probably be more layoffs than we expect. And that goes back to the fact that demand isn't bad. But I think these companies understand that they can do more with less. And that's a good thing in restoring the technology's eventual health.
Brad Smith: Brent, I want to go back to what you said earlier, which is that this bubble could potentially burst at some point in the AI hype. And ultimately, the show-me story really started to formulate at this point. Is there one company he would be wary of right now if the AI bubble bursts?
Brent Hill: Well, I think we need to look at the companies that are the most excited about AI. It's definitely Microsoft, Adobe. There are a few others. Salesforce probably isn't as excited about AI. But they are businesses. And we think Adobe and Microsoft are in a phenomenal position. The problem is, again, this happened last year with Microsoft. That means they're coming out. They're showing these demos. But when we talk to customers in the field, they say it's not as good as we demonstrated. And its introduction is not so fast.
And look, Microsoft is leading to this. They say they had no income in the first half of the just-ended financial year. The second half of the current fiscal year, which ends in June, is here and one of the earnings is coming. So we're currently expecting this revenue growth. What details can they tell us? What color is it? How will these developments unfold?
This is all talk. Customer field implementation begins now. Top executives that we know who have been in the software industry for over two years, over 12 years, 30, 40, in some cases he's 40 years, they're all becoming a little bit more skeptical. I think it's here. Does this really match up to the hype? And I think in certain cases, like Microsoft and his Copilot, his developer solutions, his GitHub, the hype is well deserved. However, I am still not convinced about other areas.
