- Alphabet, Microsoft, Meta Platforms, and Amazon report earnings next week, with Apple scheduled for the following week.
- ‘FAAMG’ profit and revenue growth, as well as guidance updates will be the next test for stocks amid a suddenly choppy market.
- As such, here’s what to watch for when the ‘Big Five’ mega-cap tech stocks release their latest financial results.
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- *Earnings Date: Tuesday, October 24
- *EPS Growth Estimate: +36.8% Y-o-Y
- *Revenue Growth Estimate: +9.7% Y-o-Y
- *Year-To-Date Performance: +56.1%
- *Market Cap: $1.74 Trillion
- The Key Metric
- GOOGL Stock Performance
- *Earnings Date: Tuesday, October 24
- *EPS Growth Estimate: +12.8% Y-o-Y
- *Revenue Growth Estimate: +8.8% Y-o-Y
- *Year-To-Date Performance: +38.1%
- *Market Cap: $2.46 Trillion
- The Key Metric
- MSFT Stock Performance
- *Earnings Date: Wednesday, October 25
- *EPS Growth Estimate: +119.5% Y-o-Y
- *Revenue Growth Estimate: +20.6% Y-o-Y
- *Year-To-Date Performance: +159.9%
- *Market Cap: $804.9 Billion
- The Key Metric
- META Stock Performance
- *Earnings Date: Thursday, October 26
- *EPS Growth Estimate: +114.3% Y-o-Y
- *Revenue Growth Estimate: +11.3% Y-o-Y
- *Year-To-Date Performance: +52.9%
- *Market Cap: $1.32 Trillion
- The Key Metric
- AMZN Stock Performance
- *Earnings Date: Thursday, November 2
- *EPS Growth Estimate: +7.7% Y-o-Y
- *Revenue Growth Estimate: -0.9% Y-o-Y
- *Year-To-Date Performance: +35.1%
- *Market Cap: $2.74 Trillion
- The Key Metric
- AAPL Stock Performance
Wall Street’s third-quarter earnings season shifts into high gear next week with some of the biggest names in the market set to release their latest financial results.
With the S&P 500 and Nasdaq Composite coming under pressure in recent sessions amid a plethora of worries, including prospects of higher interest rates as well as mounting geopolitical tensions in the Middle East, most of the focus will once again be on the ‘Big 5’ group of mega-cap tech companies.
The benchmark S&P 500 is down roughly 7% from its late-July highs, cutting its year-to-date gain to 11.4%. The pullback has wiped out most of the blue-chip Dow Jones Industrial Average’s 2023 gains.
Earnings from Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) will be significant considering these five stocks make up a substantial amount of both the S&P 500 and Nasdaq and have accounted for most of their gains this year.
As such, there will be a lot on the line when the so-called ‘FAAMG’ group of mega-cap companies report their respective results in the week ahead.
Alphabet
Google-parent Alphabet will be the first ‘FAAMG’ company to report earnings when it delivers its latest quarterly results after U.S. markets close on Tuesday, October 24, at 4:00 PM ET.
Analysts have become increasingly bullish ahead of the print, according to an InvestingPro survey: of the 28 analysts surveyed, 27 upwardly revised their GOOGL earnings forecast, while only one made a downward revision.
Source: InvestingPro
Consensus estimates call for Alphabet to report Q3 profit of $1.45 per share, rising nearly 37% from EPS of $1.06 in the same quarter a year earlier, as the search giant continues to reap the benefits of ongoing cost-cutting measures.
Revenue is forecast to increase roughly 10% from the year-ago period to $75.7 billion, which if confirmed would mark the second-highest quarterly sales total in the company’s history.
Alphabet reported revenue and earnings for the second quarter that topped estimates, driven by growth in its cloud-computing unit.
The market will stay focused on growth rates at Alphabet's Google Cloud Platform, which saw sales jump 28% to $8.03 billion in Q2. The search giant has been investing heavily in its cloud business, which includes Google Workspace productivity apps in addition to Google Cloud Platform, as it plays catch-up with Amazon Web Services and Microsoft Azure, the top two players in the market.
GOOGL stock - which is up 56.1% year-to-date - ended Thursday’s session at $137.75, not far from its 2023 peak of $141.22 reached on October 12.
Source: InvestingPro
At current levels, the Mountain View, California-based company has a market cap of $1.74 trillion, making it the third most valuable company trading on the U.S. stock exchange.
Even with the recent upswing, GOOGL stock could see an increase of 11.7%, according to InvestingPro, bringing shares closer to their ‘Fair Value’ of $153.89.
Microsoft
Microsoft is set to deliver its fiscal first-quarter earnings and revenue update after the U.S. market closes on Tuesday, October 24 at 4:05 PM ET and results are expected to get a boost from a strong performance in its cloud-computing businesses.
The Redmond, Washington-based software-and-hardware giant is forecast to post double-digit profit growth as well as a modest increase in revenue growth, reflecting solid demand for its cloud computing products.
Unsurprisingly, an InvestingPro survey of analyst earnings revisions points to mounting optimism ahead of Microsoft’s report, with analysts raising their EPS estimates 19 times in the last 90 days, compared to three downward revisions.
Source: InvestingPro
Consensus estimates call for earnings per share of $2.65, improving 12.8% from a profit of $2.35 in the year-ago period amid the positive impact of reduced operating expenses and ongoing job cuts.
Meanwhile, sales are expected to grow about 9% annually to $54.5 billion, thanks to a strong performance in its cloud business as well as fresh initiatives in artificial intelligence.
If those figures are confirmed, it would mark the second-best quarter in Microsoft’s 48-year history, demonstrating the strength and resilience of its operating business as well as strong execution across the company.
Microsoft surpassed expectations on both the top and bottom lines in the last quarter but called for lower revenue guidance than analysts had predicted, sending shares down by 2.1%.
As always, most of the focus will be on the performance of Microsoft’s Intelligent Cloud segment, which includes Azure public cloud services, Windows Server, SQL Server, and Enterprise Services.
The key unit saw sales growth of 15% in fiscal Q4 to $23.99 billion, while revenue from its Azure cloud services, which Microsoft does not report in dollars, grew 26%, compared with 27% in the preceding quarter.
MSFT stock closed at $331.32 last night, within sight of its all-time high of $366.78 reached in July. With a market cap of $2.46 trillion, Microsoft is the world’s second-most valuable company.
Source: InvestingPro
Microsoft has been on a major uptrend since the start of the year, rising 38.1% in 2023 as the tech heavyweight benefits from its growing involvement in the emerging AI space.
Shares appear to be fairly valued heading into next week’s earnings update, as per the quantitative models in InvestingPro, which point to a potential upside of just 0.8% from current levels.
Meta Platforms
Meta Platforms, parent of social networks Facebook, Instagram, Threads, and WhatsApp, is projected to release third-quarter earnings on Wednesday, October 25 after the U.S. market closes at 4:05 PM ET and it is expected to be its most profitable quarter in years.
An InvestingPro survey of analyst earnings revisions reveals growing optimism ahead of the report, with analysts boosting their EPS estimates 23 times over the last 90 days while making just one downward revision.
Source: InvestingPro
Wall Street sees Meta earning a profit of $3.60 per share, soaring almost 120% from EPS of $1.64 in the year-ago period, as the Mark Zuckerberg-led company continues to focus on improving operating efficiency. If that is in fact reality, it would mark the company’s most profitable quarter since Q4 2021.
Revenue is expected to increase 20.6% year-over-year to $33.4 billion, amid signs of better conditions in the digital advertising market.
Meta reported double-digit revenue growth for the second quarter and beat estimates on quarterly revenue guidance as well, sparking a 5.8% rally in its shares.
As usual, investors will pay close attention to Meta’s update regarding Facebook’s daily and monthly active user accounts - two important metrics for the social media giant. Facebook said daily active users (DAUs) rose 5% annually in the previous quarter to 2.06 billion, while monthly active users (MAUs) increased 3% to 3.03 billion.
Meta’s stock has been on a tear heading into its earnings report, with shares of the Menlo Park, California-based tech company hitting a series of 52-week highs recently. META stock closed at $312.81 yesterday, ending just below a 22-month peak. At current levels, Meta has a market cap of $804.9 billion.
Source: InvestingPro
Shares have staged an astonishing rally this year and are up a whopping 160%, making META the best-performing ‘FAAMG’ stock of 2023 by a wide margin. Investors have been encouraged by aggressive cost-cutting initiatives implemented by CEO Mark Zuckerberg in recent months.
It should be noted that even after the stock more than doubled since the start of the year, META shares remain undervalued at the moment according to InvestingPro, and could see an increase of 15.9% from the current market value.
Amazon
Amazon is slated to release its third quarter financial results on Thursday, October 26 at 4:00 PM ET and sell-side confidence is brimming.
Earnings estimates have been revised upward 23 times in the 90 days leading up to the print, according to an InvestingPro survey, compared to just two downward revisions, as Wall Street grows increasingly bullish on the tech titan.
Source: InvestingPro
Consensus calls for Amazon to post earnings per share of $0.60, surging 114% from EPS of $0.28 in Q3 2022, thanks to the positive impact of several cost-saving measures implemented during recent months.
Revenue is expected to climb 11.3% from the year-ago period to $141.5 billion, reflecting ongoing strength in its cloud computing and advertising businesses. If confirmed, that would be the second-highest quarterly sales total in its history.
The e-commerce and cloud giant reported profit and sales that easily topped Wall Street estimates in the second quarter, despite facing an uncertain demand outlook, triggering an earnings-day rally of almost 9%.
Investors will stay laser-focused on Amazon’s cloud unit to see if it can maintain its pace of growth. Amazon Web Services revenue rose 12% in Q2 to $22.1 billion, slowing from sales growth of 16% in the preceding quarter.
Amazon’s AWS is widely considered the leader in the cloud-computing space, ahead of Microsoft Azure and Google Cloud.
AMZN stock closed at $128.35 on Thursday, not far from a recent 52-week peak of $145.86 touched on September 14. With a valuation of $1.32 trillion, the Seattle, Washington-based tech giant is the fourth most valuable company listed on the U.S. stock exchange.
Shares have significantly outperformed the broader market in 2023, climbing 52.9% year-to-date.
Despite the impressive year-to-date rally, Amazon’s stock is still relatively undervalued according to the InvestingPro model and could see a gain of 16% from current levels, bringing it closer to its fair value of $148.89 per share.
Apple
Apple will be the final ‘FAAMG’ stock to report quarterly results when it delivers fiscal fourth-quarter earnings after the market closes at 4:30 PM ET on Thursday, November 2. A call with CEO Tim Cook and CFO Luca Maestri is set for 5:00 PM ET.
The Cupertino, California-based consumer electronics giant is forecast to suffer a rare annual sales decline, reflecting the challenging operating environment that has weighed on demand for its pricey smartphone models.
Not surprisingly, profit forecasts have been revised downward nine times in the past 90 days, according to InvestingPro, as the iPhone maker deals with several headwinds.
Source: InvestingPro
As per Investing.com consensus estimates, Apple’s earnings per share are expected to be $1.39, an improvement of 7.7% from EPS of $1.29 a year ago. Revenue is forecast to decline 0.9% year-over-year to $89.3 billion amid slowing demand for the company’s high-end smartphones and computers.
Apple reported slowing earnings and sales growth for its fiscal third quarter and provided cautious commentary amid the gloomy macroeconomic outlook, sending shares lower by 5.5%.
Wall Street will pay close attention to growth in Apple’s Services business, which was the fastest growing segment in fiscal Q3 with annualized revenue growth of 8%. The unit includes sales from Apple’s App Store, monthly subscriptions, payment fees, extended warranties, licensing fees, and search-licensing revenue.
AAPL stock - which has gained 35.1% year-to-date - ended at $175.46 on Thursday, not far from its all-time high of $198.23 reached on July 19.
Source: InvestingPro
At current levels, the Cupertino, California-based consumer electronics conglomerate has a market cap of $2.74 trillion, making it the most valuable company trading on the U.S. stock exchange.
Apple’s stock appears to be overvalued heading into the earnings print according to a number of valuation models on InvestingPro: the average Fair Value for AAPL stands at $160.61 a potential downside of 8.3% from current levels.
With InvestingPro, you can conveniently access a single-page view of complete and comprehensive information about different companies all in one place, eliminating the need to gather data from multiple sources and saving you time and effort.
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Disclosure: At the time of writing, I am short on the S&P 500, Nasdaq 100, and Russell 2000 via the ProShares Short S&P 500 ETF (SH), ProShares Short QQQ ETF (PSQ), and ProShares Short Russell 2000 ETF (RWM).
Additionally, I have a long position on the Energy Select Sector SPDR ETF (NYSE:XLE) and the Health Care Select Sector SPDR ETF (NYSE:XLV).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.