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Written by: Matt Britzman | Hargreaves Lansdown
- Major US stocks set to release results over the coming month
- Focus shifts from macroeconomic data to company earnings
- A look at how AI and cloud initiatives could drive future growth
US earnings season is upon us. It’s been macro-economic data driving markets in recent weeks, as investors try and second guess the Federal Reserve’s next move with interest rates. So, it’s a welcome relief to have some company earnings to dive into.
Alphabet – 23 July
As Alphabet’s second quarter earnings approach, the M&A rumour mill is swirling. If reports are true and Alphabet is in talks to buy cybersecurity firm Wizz for $23bn, it would mark a major move to beef up its security offering. Wizz has successfully taken on the likes of Microsoft and Palo Alto in the cyber space, taking market share over the past couple of years. Perhaps the biggest hurdle could be a regulator that’s been a blocker for many large-scale deals – though a new team in the White House later this year could help things in that regard.
Back to earnings, analysts are expecting another quarter of double-digit top line growth with revenue in the region of $84bn. Cloud is expected to continue its run of impressive growth as demand for AI services grows, and companies look to optimise their processes and protect margins. Search remains core to Alphabet’s success and investors will be hoping to see signs that new initiatives like AI search results are enough to help Google maintain its dominance.
Microsoft – 23 July (date not confirmed)
Microsoft is set to deliver fourth quarter results at some point next week. Investors will be hoping to see another strong showing from the cloud business, Azure. Analysts are looking for top line growth of 19.5% from Azure, which looks very achievable. Back in April, management said cloud-AI demand was outstripping supply. Despite a mammoth effort to build out compute, that supply/demand imbalance is likely to help underpin Azure growth for some time yet.
There is, of course, more to Microsoft than Cloud. Eyes will be on how some of the software business lines are performing given the SaaS (software as a service) market has been softer of late. The rollout of tools like copilot is underway, but large-scale adoption will likely take some time.
Tesla – 23 July
There’s been a seismic shift in sentiment toward Tesla over the past couple of months. Things kicked off with shareholders voting to reinstate Elon Musk’s multi-billion dollar pay package, removing some doubts that his focus may shift to other ventures. Tesla then delivered second-quarter delivery numbers that were better than expected. The EV market is still challenging, so a key question heading into second-quarter earnings is how much impact incentives have had on margins.
Attention will also be on the energy storage business after Tesla saw deployments more than double over the quarter. Based on those numbers it’s not a stretch to model second-quarter energy revenue of more than $3.5bn, and this is Tesla’s highest-margin business. If it can capture a good chunk of the AI-related energy demand that’s coming, it’ll go a long way to supporting the bull case that Tesla is much more than a car maker.
Meta – 31 July
Meta spooked markets back in April despite some decent first-quarter results. Revenue was up 27% year-on-year, and the mid-point of management’s guidance points to 18% growth in the second quarter. But Mark Zuckerberg’s comments that material revenue from new AI initiatives is still a few years away were a little disappointing.
The other bugbear was around capital expenditure targets. Meta’s meteoric valuation recovery since the start of 2023 can, in part, be put down to belt-tightening. But news that AI projects will need more cash funnelled their way wasn’t what investors were hoping to hear.
Mark Zuckerberg’s commentary is just as important as the numbers themselves. In today's landscape, throwing cash at AI is the aim of the game, but Meta needs to convince investors there’ll be a worthy return at the end of the road.
Amazon – 1 August (date not confirmed)
As ever, all eyes will be on AWS growth when Amazon reports second quarter results. At the group level, net sales are expected to grow 7-11% year-on-year and reach $144.0-$149.0bn. For AWS specifically, investors will want to see that the reacceleration of growth over the first quarter wasn’t a one-off. AWS has a leading market position in everything data related, it should be well placed to capture a huge chunk of the demand coming from the AI wave.
There was also a strong showing from both the e-commerce and advertising segments over the first quarter, something investors will be keen to see continue. But markets were a little unhappy with the second quarter profit guidance of $10-14bn, anything toward the top end of that range will likely be met with a positive reaction.
Apple – 1 August
Apple reports third-quarter earnings on the heels of its recent developer day, which lit the spark on its journey into AI. This is a key period for a business that’s struggled to deliver real innovation in recent times. The hope is that with new tech that’s only available on newer models, a long-awaited iPhone upgrade is coming.
This isn’t an immediate switch, though, with most of the benefits likely to feed into next year's results. That said, reports from Bloomberg suggest Apple is expecting to see a 10% uplift in new iPhone sales this year, which would require a strong second half.
A note of caution stems from competition in China after back-to-back quarters of revenue declines. Investors will be watching closely for how the demand picture is evolving. Despite an overall decline in sales in the region, the flagship iPhone saw growth last quarter. News that the iPhone 15 and iPhone 15 Pro Max were the best-selling smartphones in urban China suggests that Apple's allure remains intact.”
NVIDIA – 28 August (date not confirmed)
The surge in NVIDIA’s valuation was one of the biggest contributors to US market returns in the first half of 2024. The exceptional growth in sales momentum seen last year continued into the first quarter with revenue up 262% to $26bn. Again, the boom in Artificial Intelligence (AI) was the key demand driver, fuelling growth of over 400% in the data centre segment.
NVIDIA guided that second quarter group revenue is likely to land within 2% of $28bn, and analyst estimates now see this coming in towards the top of that range. That’s no huge surprise given the company’s recent run of beating expectations. But it does mean that investor hopes are running high, as is volatility in the trading of the company’s shares. There’s no immediate threat to its dominance, but investors will be keen to see more proof points that AI is delivering the transformative change that it promises to so many sectors.
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