New York: Apple, Alphabet, Microsoft, Amazon and Facebook—the biggest players in technology and the five largest US companies by market cap—are all projected to post double-digit revenue growth for the December quarter when they report earnings this week, reflecting strength in their main businesses of selling gadgets, cloud computing, digital advertising and online retailing.
But with the stocks already at or near records, looming over some of these top players are questions that, if the answers don’t please investors, could send them tumbling—and may take the broader market lower along with them. The tech sector accounts for more than a fifth of the S&P 500, meaning that swings in the stocks could have a significant impact on markets as a whole.
With the S&P 500 up 25% in the past 12 months, investors are keeping a close eye out for any potential weakness or sign that the trend could start letting up. Here’s a look at what’s in store for each company.
The social-media giant kicks off the biggest tech earnings on Wednesday after the market closes in New York. Facebook Inc. is expected to say revenue rose 42% to $12.6 billion as it continues to expand in the digital advertising market. In light of a resolution by chief executive officer (CEO) Mark Zuckerberg to “fix" Facebook in 2018, investors are keen to see how recent changes to the news feed are affecting the amount of time people spend on the social network, a measure known as engagement. Meanwhile, profit may be curbed by increased expenses after management pledged to boost spending to shore up security efforts and protect against abuse of its platform. Still, adjusted earnings are predicted to rise to $2.26 a share, according to analysts polled by Bloomberg.
The world’s largest software maker is gearing up to report an estimated 10% gain in revenue on Wednesday to $28.4 billion, fuelled by momentum in its Azure cloud-computing business. Investors and analysts will be listening for how Microsoft Corp. addresses the impact of widespread computer-processor weaknesses, known as Meltdown and Spectre, which have the potential to slow down PCs and data-center servers when patched.
The iPhone maker reports its fiscal first-quarter results on Thursday. Investors are waiting anxiously for results of the holiday period, during which the flashy, pricey iPhone X was expected to set off a “super cycle" of new users and upgrades. Analysts predict revenue will top $87 billion, 11% higher than Apple Inc.’s record sales a year earlier. Earnings are projected to be $3.83 a share. The question mark hanging over Apple’s quarter is a series of reports, including one recently from Consumer Intelligence Research Partners, that have indicated lukewarm demand for the iPhone X. Shares slipped 2.1% on Monday after Japan’s Nikkei reported that Apple is cutting iPhone X production because of weak demand.
Google’s parent company is expected to show steady sales growth of 22% when it reports on Thursday afternoon, helped by its grip on the digital advertising market. Any mention of how chip vulnerabilities Spectre and Meltdown (see Microsoft) are impacting its cloud business or expenses will be closely watched, although Google spotted the flaws first and said it saw no slowdowns. Alphabet Inc. investors will also be on the lookout for increases in traffic acquisition costs, the amount Google pays partners for ad space, and any commentary on whether the advertiser boycott from inappropriate content on YouTube is affecting growth.
Amazon.com Inc., reporting on Thursday, may be the company with the fewest sore spots heading into its report. The e-commerce behemoth kept its lock on online retail spending over the holiday season, and its fourth quarter report should reflect that success, with revenue growth estimated at 37%. Investors will keep their eyes on any inventory issues that may have cropped up with the integration of natural grocer Whole Foods, while trying to gauge Prime subscription revenue and Amazon Web Services growth. As with the other cloud businesses, the potential for any disruption from the chip weaknesses will also top investors’ list of items to watch.
Amazon’s profit forecast for the current quarter will be scrutinized as a gauge of how quickly the internet giant is investing in new projects. Investors pull back on Amazon when they think CEO Jeff Bezos is spending money too freely. Bloomberg