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Tech stocks have been standout performers in the market this year, with a combination of favorable developments on the macro front driving this momentum. These factors include improved clarity surrounding an end-point to the Fed’s tightening cycle and efforts from Tech management teams to rein in operating expenses (OpEx) through reduced headcount and other measures.
With many Tech companies on deck to report March-quarter results this week, the market will be looking for top-line growth trends and whether there is further room for profitability and margin-improvement measures beyond what has been already announced.
These questions will be front and center in this week’s earnings reports from four of the ‘Big 5 Tech players’. Alphabet and Microsoft will report after the market’s close on Tuesday (4/25), Instagram parent Meta Platforms will report after the close on Wednesday (4/26), and Amazon will report after the close on Thursday (4/27).
In addition to the aforementioned OpEx angle, reports from these players will give us the latest trends on the cloud front, particularly from Amazon, Alphabet, and Microsoft.
Digital advertising has historically been seen as core to Alphabet and Meta, but Amazon has also become a major player in the space. Ad spending likely remained stable in the first three months of the year, but it will be interesting to see how these management teams see trends for the current and coming periods, given the macroeconomic uncertainties. This will have a direct read-through for Snap, which reports Q1 results this week on Thursday (4/27).
All of these companies are big players in the artificial intelligence (AI) space, with the Microsoft vs. Alphabet rivalry particularly intense. With the initial excitement around ChatGPT and other AI applications now behind us, the questions now center around how these AI capabilities will be monetized through new and existing business models. It is reasonable to expect each of these management teams to spend considerable time on their Q1 earnings calls on their AI offerings.
Take a look at the chart below that shows current consensus expectations for this group for the current and coming periods in the context of what they achieved in the preceding period.
As you can see, the group is expected to have -11.2% lower earnings in 2023 Q1 on +1.9% higher revenues. This would follow the -28% drop in earnings on +1.4% higher revenues in 2022 Q4.
The group’s phenomenal boost in 2021 partly reflected pulled-forward demand from future periods that is being adjusted last year and this year. As you can see above, the expectation is for ‘regular/normal’ growth to resume next year, but a lot of that is contingent on how the macroeconomic picture unfolds.
Beyond the big 5 Tech players, total Q1 earnings for the Technology sector as a whole are expected to be down -17.3% from the same period last year on -4.4% lower revenues.
This big-picture view of the ‘Big 5’ players and the sector as a whole highlight the earnings growth challenge at present. The Tech space is expected to resume its growth-engine status from next year onwards.
Q1 Earnings Season Scorecard
Including Monday morning’s results, we now have Q1 earnings from 90 S&P 500 members, or 18% of the index’s total membership. Total earnings for these 90 index members are down -1.9% from the same period last year on +7.1% higher revenues, with 77.8% beating EPS estimates and 66.7% beating revenue estimates.
We have a super busy reporting docket this week, with almost 700 companies reporting Q1 results, including 178 S&P 500 members. In addition to the aforementioned mega Tech players, this week’s docket has representation from every sector of the economy.
2023 Q1 earnings are expected to be down -8.3% on +2.2% higher revenues. This would follow the -5.4% earnings decline in the preceding period (2022 Q4) on +5.9% higher revenues.
Embedded in these 2023 Q1 earnings and revenue growth projections is the expectation of continued margin pressures, which has been a recurring theme in recent quarters.
Estimates for Q1 came down as the quarter got underway, in line with the trend that had been in place since the start of 2022. That said, the magnitude of negative revisions to Q1 estimates was smaller than we had seen in the preceding two periods.
Estimates for full-year 2023 have also been coming down as well, as we have been pointing out consistently in these pages.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> 2023 Q1 Earnings Season Off to a Promising Start
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Alphabet, Microsoft, Meta Platforms, Amazon and Snap are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – April 25, 2023 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) , Meta Platforms (META - Free Report) , Amazon (AMZN - Free Report) and Snap (SNAP - Free Report) .
Big Tech Earnings: What to Expect
Tech stocks have been standout performers in the market this year, with a combination of favorable developments on the macro front driving this momentum. These factors include improved clarity surrounding an end-point to the Fed’s tightening cycle and efforts from Tech management teams to rein in operating expenses (OpEx) through reduced headcount and other measures.
With many Tech companies on deck to report March-quarter results this week, the market will be looking for top-line growth trends and whether there is further room for profitability and margin-improvement measures beyond what has been already announced.
These questions will be front and center in this week’s earnings reports from four of the ‘Big 5 Tech players’. Alphabet and Microsoft will report after the market’s close on Tuesday (4/25), Instagram parent Meta Platforms will report after the close on Wednesday (4/26), and Amazon will report after the close on Thursday (4/27).
In addition to the aforementioned OpEx angle, reports from these players will give us the latest trends on the cloud front, particularly from Amazon, Alphabet, and Microsoft.
Digital advertising has historically been seen as core to Alphabet and Meta, but Amazon has also become a major player in the space. Ad spending likely remained stable in the first three months of the year, but it will be interesting to see how these management teams see trends for the current and coming periods, given the macroeconomic uncertainties. This will have a direct read-through for Snap, which reports Q1 results this week on Thursday (4/27).
All of these companies are big players in the artificial intelligence (AI) space, with the Microsoft vs. Alphabet rivalry particularly intense. With the initial excitement around ChatGPT and other AI applications now behind us, the questions now center around how these AI capabilities will be monetized through new and existing business models. It is reasonable to expect each of these management teams to spend considerable time on their Q1 earnings calls on their AI offerings.
Take a look at the chart below that shows current consensus expectations for this group for the current and coming periods in the context of what they achieved in the preceding period.
As you can see, the group is expected to have -11.2% lower earnings in 2023 Q1 on +1.9% higher revenues. This would follow the -28% drop in earnings on +1.4% higher revenues in 2022 Q4.
The group’s phenomenal boost in 2021 partly reflected pulled-forward demand from future periods that is being adjusted last year and this year. As you can see above, the expectation is for ‘regular/normal’ growth to resume next year, but a lot of that is contingent on how the macroeconomic picture unfolds.
Beyond the big 5 Tech players, total Q1 earnings for the Technology sector as a whole are expected to be down -17.3% from the same period last year on -4.4% lower revenues.
This big-picture view of the ‘Big 5’ players and the sector as a whole highlight the earnings growth challenge at present. The Tech space is expected to resume its growth-engine status from next year onwards.
Q1 Earnings Season Scorecard
Including Monday morning’s results, we now have Q1 earnings from 90 S&P 500 members, or 18% of the index’s total membership. Total earnings for these 90 index members are down -1.9% from the same period last year on +7.1% higher revenues, with 77.8% beating EPS estimates and 66.7% beating revenue estimates.
We have a super busy reporting docket this week, with almost 700 companies reporting Q1 results, including 178 S&P 500 members. In addition to the aforementioned mega Tech players, this week’s docket has representation from every sector of the economy.
2023 Q1 earnings are expected to be down -8.3% on +2.2% higher revenues. This would follow the -5.4% earnings decline in the preceding period (2022 Q4) on +5.9% higher revenues.
Embedded in these 2023 Q1 earnings and revenue growth projections is the expectation of continued margin pressures, which has been a recurring theme in recent quarters.
Estimates for Q1 came down as the quarter got underway, in line with the trend that had been in place since the start of 2022. That said, the magnitude of negative revisions to Q1 estimates was smaller than we had seen in the preceding two periods.
Estimates for full-year 2023 have also been coming down as well, as we have been pointing out consistently in these pages.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> 2023 Q1 Earnings Season Off to a Promising Start
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.