Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and other Big Tech companies are gearing up for what is expected to be one of the most eventful earnings seasons of the year. . As efforts to monetize this technology continue and investors look for signs that their multibillion-dollar investments are starting to pay off, generative AI is sure to be a top concern.
“We expect growth for large technology companies overall to be around 8%,” said Alex Smith, head of channel research at Canalys. “In terms of overall growth, Nvidia will far outpace the rest of the market.”
But it's not just generative AI that investors are interested in. After a rocky start to the year, Apple's earnings are set to be rocky, with the iPhone maker facing everything from antitrust lawsuits to weak sales in China, one of its most important markets. .
Meanwhile, Meta (META) and Google's parent company Alphabet (GOOG, GOOGL) will give Wall Street insight into the digital advertising market. Both companies saw revenue increase last quarter, but Alphabet's fell short of analysts' expectations. Search giants will have to change the scenario this quarter.
It's going to be a tough few weeks, so be prepared.
Generative AI takes center stage again
The explosion of generative AI is still reverberating on Wall Street, as the stock prices of leading companies like Nvidia and Microsoft continue to soar. But after a year of hype, companies need to start showing that the excitement is paying off.
“You can be sure that the first and most important thing that investors will look at is that companies clean their AI. [saying something uses AI even if it doesn’t] And turn that into a meaningful contribution to the bottom line and bottom line,” Daniel Newman, CEO of technology advisory and research firm Futurum Group, told Yahoo Finance.
NVIDIA stock is up about 75% since the beginning of the year, and 225% in the past 12 months, as hyperscalers like Google, Microsoft, Amazon, and Meta snap up as many of the company's AI chips as they can. This led to a huge increase in Nvidia's revenue. In the fourth quarter, Nvidia reported revenue of $22.1 billion, up from his $6.1 billion a year ago.
But the company is set to start seeing explosive growth this year, which could dampen investor enthusiasm even if the company continues to outperform.
“We've had major blowouts in the past, but as soon as we start to get past the first year of major blowouts, we're going to see an even higher average growth rate,” said Bob O'Donnell, president of TECHnaracy Research. Ta.
However, that doesn't mean NVIDIA will relinquish its market leadership anytime soon. It's still miles ahead of rivals AMD and Intel in terms of market share, and having just announced its Blackwell architecture at the GTC developer conference in March, it should be even further ahead.
“They still have a commanding lead and market share, their influence is huge, and to their credit, it's not slowing down,” O'Donnell said. “But at some point the law of large numbers starts to come into play.”
Next are hyperscalers such as Microsoft, Amazon (AMZN), and Google. The company is riding the AI hype train, but many of its generative AI software products are still in development, making it a little difficult to fully understand its overall adoption among enterprise and consumer customers. It's too early. Still, Wall Street will likely expect at least some revenue growth from companies' AI investments.
“How much is AI driving?” [Microsoft’s] Azure? How much is AI driving Google Cloud's growth? How much is it continuing to help AWS, whose numbers appear to be slowing?” Newman said.
Microsoft announced that AI services contributed 6 percentage points to Azure revenue growth last quarter, up from 3 percentage points in the previous quarter. And analysts will be looking to see if the company can maintain that kind of growth this quarter.
Amazon also pointed to AI as a growth driver during its last earnings call, saying its revenue was “rapidly accelerating” as customers showed interest in the technology. It will be interesting to see if the company provides further context on its acceleration in its upcoming earnings release.
Like Microsoft, Google is likely to face questions about its sales and customer response to its AI-powered productivity suite. The company, which hosts the I/O Developers Conference in May, has also faced controversy over its AI deployment, pulling its Gemini AI generator after it produced historically inaccurate images.
apples on deck
Apple's earnings will also be in the spotlight, but don't expect the company to reveal anything about its future generative AI plans.
“Apple needs to disclose something, but the company was in no hurry to appease industry investors,” said Patrick Moorehead, CEO of Moore Insights & Strategy. . “I think they're going to wait until WWDC, which is a few months away, to announce it.”
Beyond AI, investors are eagerly awaiting commentary on Apple's iPhone sales and litigation. On Monday, market intelligence firm IDC reported that global iPhone shipments fell nearly 10% this quarter. That could have a significant impact on Apple's overall revenue.
Sales in China is also an issue for the company. Apple reported a 13% decline in revenue in its third-largest market last quarter. Coupled with the decline in iPhone shipments, this could pose a problem for the company's profitability.
But despite these headwinds, there may be a silver lining. Wamsi Mohan of BofA Global Research said Apple should report double-digit growth in its services division, which could boost overall sales.
The company's upcoming earrings will also give investors their first glimpse at Vision Pro sales, and should provide insight into early consumer and business interest in AR/VR headsets.
Digital advertising sales increase
Meta and Google will also work together to show whether the digital advertising market can maintain its momentum. Last quarter, Meta's ad revenue increased 24%, and Google's ad revenue, which includes YouTube ads, increased 11%.
Amazon, which has built an excellent advertising business of its own, is likely to see continued growth in advertising sales. Last quarter, the company reported $14.7 billion in advertising revenue, up 27% year over year. Another performance like this could be a big boost to the company's earnings.
Analysts are also looking at whether AI is having an impact on ad sales.
“In theory, even if cookies were phased out, the use of AI should improve targeting, but that hasn't happened yet,” Moorhead said. “For me, the proof you need to see is a higher cost per click or better CPM.”
All of this and more will be revealed next week when Big Tech's earnings start. Let's get ready.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter @Daniel Howley.
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