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Zacks Earnings Trends Highlights: Microsoft, Alphabet, Meta and Amazon
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For Immediate Release
Chicago, IL – October 26, 2023 – Zacks Director of Research Sheraz Mian says, "Looking at Q3 as a whole, total S&P 500 earnings are currently expected to be down -0.3% from the same period last year on +1.0% higher revenues"
Earnings Picture Continues to Improve
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
For the 146 S&P 500 companies that have reported Q3 results, total earnings are up +8.6% from the same period last year on +4.8% higher revenues, with 80.1% beating EPS estimates and 61.6% beating revenue estimates.
The earnings growth for this group of 146 S&P 500 members represents a notable improvement over what we had seen from this group of companies in other recent periods. Still, the revenue growth pace represents a clear decelerating trend.
Looking at Q3 as a whole, total S&P 500 earnings are currently expected to be down -0.3% from the same period last year on +1.0% higher revenues. If companies continue to surprise to the upside, the Q3 earnings growth rate will most likely turn positive in the next few days.
Excluding the drag from the Energy sector, whose earnings are expected to decline -35.5% in Q3, earnings for the other 15 Zacks sectors in the S&P 500 index would be up +4.6% on +3.5% higher revenues.
The market’s contrasting reactions to the otherwise strong results from Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) primarily reflected growth trends in the two companies’ cloud operations.
Alphabet’s cloud revenues were a tad bit on the weak side and represented a modest deceleration from the June quarter’s growth pace. Microsoft not only beat cloud revenue estimates but actually showed the growth trend accelerating.
Investor’s disappointment with the Alphabet report notwithstanding, the search giant showed impressive gains in advertising revenues, with YouTube ad revenues particularly showing momentum. Alphabet’s advertising performance likely offers a useful read-through for Meta (META - Free Report) and Amazon (AMZN - Free Report) .
In terms of Q3 earnings and revenue results, Microsoft’s earnings increased +27% from the same period last year on +12.8% higher revenues, while the same for Alphabet increased by +41.5% and +11.8%, respectively.
Microsoft and Alphabet are part of the 7 mega-cap stocks, most of which are from the Tech sector. We call this group the ‘Big 7 Tech Players.'
Q3 earnings for this group of companies are expected to grow by +40.7% from the same period last year on +11.7% higher revenues.
The ‘Big 7 Tech Players’ are a big contributor to overall index earnings now and going forward. Excluding the earnings contribution from the ‘Big 7’, S&P 500 earnings for the rest of the index would be down -6.3% (down -0.3% otherwise) in Q3.
Beyond these mega-cap stocks, the growth outlook for the Tech sector has notably improved as well. The sector has been operating in a constrained growth environment since 2021 Q4, but this is on track to change starting with the group’s Q3 results.
The long-feared recession doesn’t show up in this near-term earnings outlook.
This big-picture view of corporate profitability doesn’t leave much room for that development either, as shown in the chart above.
Given the emerging consensus on the ‘soft-landing’ outlook for the economy, one can expect this favorable turn in the overall earnings picture to strengthen further as companies report Q3 results and share trends in underlying business.
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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.
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Zacks Earnings Trends Highlights: Microsoft, Alphabet, Meta and Amazon
For Immediate Release
Chicago, IL – October 26, 2023 – Zacks Director of Research Sheraz Mian says, "Looking at Q3 as a whole, total S&P 500 earnings are currently expected to be down -0.3% from the same period last year on +1.0% higher revenues"
Earnings Picture Continues to Improve
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The market’s contrasting reactions to the otherwise strong results from Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) primarily reflected growth trends in the two companies’ cloud operations.
Alphabet’s cloud revenues were a tad bit on the weak side and represented a modest deceleration from the June quarter’s growth pace. Microsoft not only beat cloud revenue estimates but actually showed the growth trend accelerating.
Investor’s disappointment with the Alphabet report notwithstanding, the search giant showed impressive gains in advertising revenues, with YouTube ad revenues particularly showing momentum. Alphabet’s advertising performance likely offers a useful read-through for Meta (META - Free Report) and Amazon (AMZN - Free Report) .
In terms of Q3 earnings and revenue results, Microsoft’s earnings increased +27% from the same period last year on +12.8% higher revenues, while the same for Alphabet increased by +41.5% and +11.8%, respectively.
Microsoft and Alphabet are part of the 7 mega-cap stocks, most of which are from the Tech sector. We call this group the ‘Big 7 Tech Players.'
Q3 earnings for this group of companies are expected to grow by +40.7% from the same period last year on +11.7% higher revenues.
The ‘Big 7 Tech Players’ are a big contributor to overall index earnings now and going forward. Excluding the earnings contribution from the ‘Big 7’, S&P 500 earnings for the rest of the index would be down -6.3% (down -0.3% otherwise) in Q3.
Beyond these mega-cap stocks, the growth outlook for the Tech sector has notably improved as well. The sector has been operating in a constrained growth environment since 2021 Q4, but this is on track to change starting with the group’s Q3 results.
The long-feared recession doesn’t show up in this near-term earnings outlook.
This big-picture view of corporate profitability doesn’t leave much room for that development either, as shown in the chart above.
Given the emerging consensus on the ‘soft-landing’ outlook for the economy, one can expect this favorable turn in the overall earnings picture to strengthen further as companies report Q3 results and share trends in underlying business.
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.
See Stocks Free >>
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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.