Earnings season: What’s to come for the Magnificent 7 stocks?

It’s earnings season in the US, a period that begins one or two weeks after the last month of each quarter, where earnings reports of all the big corporations start to trickle in. 

So far, we have seen some heavy hitters like Tesla falling short of expectations. On 24 Jan when it released its earnings, Tesla recorded Q4 top-line revenue of 25.17 billion USD against the market estimate of 25.87 billion USD.

Tech earnings dominated the headlines last week, with Chipmaker ASML being the star of the week, recording a 9% rise to €2 billion (2.17 billion USD) net profit. This surpassed analyst expectations of €1.87 billion (2 billion USD). 

This week, the tech industry is set to dominate the news again with report cards of five of the Magnificent 7 set to be released — Microsoft, Alphabet, Meta, Apple, and Amazon. 

What to expect?

Microsoft Q2 earnings (Tuesday, 30 January)

Microsoft is expected to post an improvement in its earnings report year on year, with the Zacks Consensus Estimate indicating a possible 2.75 USD earnings per share. Revenues are expected to grow by 15.7% compared to 2023’s Q2 earnings, to sit at 61 billion USD. 

Q1 growth was largely driven by the continued strength of the cloud, which surpassed 31.8 billion USD in quarterly revenue, according to company Chairman and CEO Satya Nadella.  

With AI being a big contributor to Q1 growth, the CEO spoke in his annual letter about his aims of making the age of AI “real for people”. “Every customer solution will be reimagined for the AI era. And that's exactly what we’ve already begun to do.“

The stock price sits at 402.56 USD a share, with the company being the newest member of the 3 trillion USD club in market valuation.

Alphabet Q4 earnings (Tuesday, 30 January)

After Q3 results that saw Alphabet beat Wall Street expectations of 1.45 USD earnings per share to record 1.55 USD earnings per share, the cloud business is expected to report 1.60 USD earnings per share in Q4. This is according to the Zacks Consensus Estimate, which also forecasts a revenue reading of 70.71 billion USD — meaning a 12% growth year on year.

The positive Q3 earnings report was largely driven by search and YouTube ad revenue. This surged to 59.65 billion USD, up from 54.48 billion USD a year earlier, to record an overall revenue growth of 11% in the quarter. 

With the demand side looking solid for generative artificial intelligence, Alphabet is looking to further integrate its chatbot Bard into all of its apps and services. The company is also looking to challenge Microsoft’s AI foray into office applications. This is to maintain the market leadership of office apps like Google Sheets and Docs. The stock price stands at 150.35 USD a share as at the time of writing.

Meta Q4 earnings (Thursday, 1 February)

Meta experienced remarkable Q3 growth that saw the company record earnings of 4.39 USD a share, compared to projected earnings of 3.60 USD. The quarter saw the company clock revenues of up to 34.15 billion USD, a 23% growth year on year. 

Meta’s Q4 results on Thursday could see the company report revenues of 38.82 billion USD and an estimated earnings per share of 4.80 USD. This would mean a 20.7% increase in revenue year on year, according to Zacks research. 

The company’s 194% stock surge in 2023 hogged the headlines, buoyed by an increase in active users which translated to ad revenue growth that kept surging from Q1 through to Q3. 

Despite the company’s big risk losses at Reality Labs, Zuckerberg’s “Year of Efficiency” strategies have borne dividends with leaner overheads and increased investment into AI, data analytics and features like Reels. The stock is trading at 390.68 USD per share as of the time of writing, up 11.21% for the year. 

Apple Q1 earnings (Thursday, 1 February)

Also being released on Thursday is Apple’s Q1 earnings report. With the company braving strong competition from China to report revenues of 89.5 billion USD compared to projected earnings of 89.28 USD, Apple is projected to report revenues of 117.95 billion USD with earnings per share at 2.11 USD. 

These Wall Street projections have incorporated investor fears of soft demand in China, with Huawei being a strong homegrown competitor. This is in part due to the 2023 yearly decline in sales that saw Apple fail to meet its 2022 record of 394.33 billion USD in sales. 

In the build-up to its Q4 earnings report, Apple’s Vice President for Environment, Policy and Social Initiatives, Lisa Jackson, reiterated the company’s commitment to carbon neutrality, emphasising the development of a growing line of carbon-neutral products and anticipating rising demand in the future. 

“We’ve achieved an important milestone in making the world’s most popular watch carbon neutral — and we will keep innovating to meet the urgency of the moment.”

The stock price stands at 194.50 USD a share, with a year-to-date gain of 3.93% as Apple embarks on an exciting AI project that will see the entry of iPhones with generative AI capabilities into the market. 

Amazon Q4 earnings (Thursday, 1 February)

Amazon recorded an impressive 13% growth in Q3 that saw revenues stand at 143.1 billion USD, up from 127.1 billion USD in Q3 2022. 

Factset analysts project a 2023 Q4 earnings report that will indicate revenues of 165.9 billion USD and earnings of 0.79 USD per share. Despite the company’s market leadership in cloud computing services as well as e-commerce, investors are concerned that the company may not be in pole position to reap big in the era of generative AI. 

With a 4 billion USD AI deal with Anthropic now in place, Amazon is gearing up for the AI arms race as the company seeks to ramp up earnings and improve its AWS services. The stock currently sits at 156.87 USD as at the time of writing, with a year-to-date gain of 3.52%. 

The Magnificent 7 stocks are likely to dominate financial news this week. Traders should keep an eye on each of these company’s earnings reports to see if they fall short of or surpass projected earnings per share numbers and revenues. Earnings surprises, which means going above or below projected numbers, could see volatility in that company’s stock.