雅虎香港財經 Tech earnings season is coming, and AI is top of mind
Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and the rest of their Big Tech cohorts are gearing up for what is expected to be one of the more eventful earnings seasons in some time. Generative AI will no doubt be top of mind as the push to monetize the technology continues and investors look for any indication that those billions of dollars in investments are starting to pay off.
“We're forecasting it to be about an 8% growth as a kind of collective growth number for the large-cap technology companies,” said Alex Smith, head of Canalys' channels research department. “In terms of overall growth, Nvidia is going to far outstrip the rest of the market.”
But generative AI isn’t the only thing on investors’ minds. Apple’s earnings should prove eventful after the company’s rough start to the year, with the iPhone maker facing everything from antitrust lawsuits to slowing sales in China, one of its most important markets.
Meta (META) and Google parent Alphabet (GOOG, GOOGL), meanwhile, will give Wall Street a sense of how the digital advertising market is performing. Both companies saw sales increase in the prior quarter, but Alphabet fell shy of analysts’ expectations. The search giant will need to flip the script this quarter.
Strap in because it’s going to be a wild few weeks.
Generative AI takes center stage again
The generative AI explosion is still reverberating across Wall Street as shares of heavy hitters like Nvidia and Microsoft continue to soar. But after a year of hype, companies will need to start showing that the excitement is paying off.
“We can be absolutely sure that the first and most important thing that investors are going to be eyeballing is companies kind of taking their AI washing [saying something uses AI even if it doesn’t] and turning it into meaningful contributions to the top and bottom line,” Daniel Newman, CEO of the technology advisory and research firm The Futurum Group, told Yahoo Finance.
Shares of Nvidia are up roughly 75% year to date and 225% over the past 12 months, as hyperscalers like Google, Microsoft, Amazon, and Meta grab as many of the company’s AI chips as possible. That has sent Nvidia’s revenue through the roof. In Q4, Nvidia reported revenue of $22.1 billion, up from $6.1 billion in the prior year.
But the company is going to begin lapping its explosive growth numbers this year, which could put a damper on investor enthusiasm even if it continues to outperform.
“You've had these massive blowouts but as soon as you start to lap that first year of massive blowouts, then it's going to be more average growth numbers,” said TECHnalysis Research president Bob O’Donnell.
That’s not to say Nvidia will relinquish its lead in the market anytime soon. It’s still miles ahead of rivals AMD and Intel in terms of market share, and it just debuted its Blackwell architecture during its GTC developer conference in March, which should put it even further ahead.
“They still have a commanding lead and share, and their influence is huge, and they are not slowing down, to their credit,” O’Donnell said. “But the law of big numbers starts to kick in at a certain point.”
Then there are the hyperscalers like Microsoft, Amazon (AMZN), and Google. While they’ve been riding the AI hype train, many of their generative AI software offerings are still in the works, meaning it’s a bit early to get a full read on overall uptake among enterprise and consumer customers. Still, Wall Street will likely be looking for at least some revenue growth from the companies’ AI investments.
“How much is AI driving [Microsoft’s] Azure? How much is AI driving Google Cloud growth? How much is it continuing to help AWS which has sort of seen its numbers slow,” said Newman.
In its last quarter, Microsoft announced that AI services contributed 6 percentage points of growth to its Azure revenue, up from 3 percentage points in the prior quarter. And you can bet analysts will be looking to see if the company can keep that kind of growth up in the current quarter.
Amazon also pointed to AI as a growth catalyst during its last earnings call, saying revenue was "accelerating rapidly" as customers showed interest in the technology. It will be interesting to see if the company provides any more context around that acceleration in its upcoming earnings call.
Google, like Microsoft, will also likely face questions about sales of its AI-enhanced productivity suite and how customers are responding. The company, which will host its I/O developer conference in May, has also faced controversy over its AI rollout, pulling back its Gemini AI generator after it generated historically inaccurate images.
Apple on deck
Apple’s earnings will also be a hot ticket but don’t expect the company to reveal anything about its future generative AI plans.
“Apple needs to disclose something, but the company has never really been in a hurry to pacify industry investors,” said Patrick Moorhead, CEO of Moor Insights & Strategy. “I think they're going to wait until WWDC in a couple of months to bring that out.”
Outside of AI, investors are eagerly anticipating Apple’s iPhone revenue numbers and commentary on its lawsuits. On Monday, market intelligence firm IDC reported that global iPhone shipments fell nearly 10% in the current quarter. That could have a significant impact on Apple’s overall revenue.
Sales in China are also a problem for the company. Apple reported revenue in its third-largest market declined 13% in the prior quarter. That, coupled with falling iPhone shipments, could spell trouble for the company’s earnings.
Despite those headwinds, however, there could be a bright spot. According to BofA Global Research’s Wamsi Mohan, Apple should report double-digit growth in its Services segment, which could help buoy overall sales.
The company’s upcoming earnings will also give investors their first glimpse into Vision Pro sales, which should offer some insight into early consumer and enterprise interest in the AR/VR headset.
Digital advertising sales on the rise
Meta and Google will also be on deck to show whether they can keep up the momentum in the digital advertising market. In the prior quarter, Meta’s ad sales jumped 24%, while Google’s ad sales, including YouTube ads, increased 11%.
Amazon, which has built its own impressive advertising business, could also see continued ad sales growth. In the prior quarter, the company reported advertising revenue of $14.7 billion, up 27% year over year. Another performance like that could provide a nice boost to the company’s bottom line.
Analysts will also be on the lookout to see if AI is impacting advertising sales.
“Theoretically, targeting should be better by using AI even with the deprecation of the cookie, but we haven't seen that yet,” Moorhead said. “To me, the evidence that I would have to see is a higher cost per click or a better CPM.”
We’ll find out all of that and more when Big Tech earnings kick off next week. Get ready.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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