Earnings season is well underway and big tech is in the spotlight. Microsoft (MSFT) and Google (GOOGL) are set to report on Tuesday. Meta (META) is scheduled to report on Wednesday. Amazon (AMZN) is expected to report on Thursday. Yahoo Finance spoke to experts, reporters, and analysts across the industry to break down the biggest themes and what to watch from earnings this week.
Yahoo Finance Markets Reporter Jared Blikre broke down the Magnificent Seven – Amazon (AMZN), Apple (APPL), Microsoft (MSFT), Meta (META), Alphabet (GOOGL) Tesla (TSLA), and Nvidia (NVDA) – and their dominance of the S&P market cap. Blikre said, “30 percent right now. That is the same amount that it was when the market peaked at the beginning of 2022.”
FS Investments Chief Market Strategist Troy Gayeski discussed the valuations of big tech stocks and what he is keeping an eye on this earnings season. Gayeski explained, “AI is obviously going to be a key driver of revenue growth and profit growth … (Our question is) whether the multiple that people are paying is justified.”
Yahoo Finance Tech Editor Dan Howley is watching the cloud and how AI fits into the plans of the major tech companies. Howley said, “How are these big investments that these companies are discussing fitting into their overall revenue when it comes to their cloud performance.”
Video Transcript
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JARED BLIKRE: We have some big tech earnings on deck. Microsoft, Alphabet tomorrow afternoon. I’m looking at the schedule on the YFi Interactive. Wednesday, we have Meta. Amazon, Thursday. And you’ll have to wait until next week for Apple. But this is a chart that goes back 10 years and shows how much of these top 10 stocks have been a percentage of the S&P 500 market cap, 30% right now.
That is the same amount that it was when the market peaked at the beginning of 2022. That was before the Fed got hawkish. And we went all the way down to 20% here, but back up to 30%. That’s a big number with a lot riding on these results because 24% of EPS of the entire S&P 500 is being taken up by these seven stocks.
TROY GAYESKI: AI is obviously going to be a key driver of revenue growth and profit growth. But so far, it’s really only impacted NVIDIA. Our question hasn’t been whether these are great companies that can grow earnings and revenue over time. It’s whether the multiple that people are paying is justified. And by June and early July, it looked like that was a dangerous assumption.
DAN HOWLEY: The big question here is the cloud and how AI fits into those kinds of measurements. How are these big investments that these companies are discussing fitting into their overall revenue when it comes to their cloud performance. So we’re hoping to get some kind of inkling as to how much that’s impacting the overall revenue share when it comes to their cloud offerings.
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