Microsoft, Meta, Amazon, And Other Earnings Will Be the Tech-Stock Rally’s Test

With all five stocks boasting fat year-to-date gains, the risk is that even small disappointments on results or guidance could trigger a round of profit-taking. A few key technology companies checked in ahead of the big guns, and the early signs are troubling.

Netflix

(NFLX), for instance, is off 10% since its recent earnings report. While the streaming video company posted much higher growth in subscribers than the Street had expected, revenue growth and guidance both disappointed investors.

German software giant

SAP

(SAP) slumped 6% after its June quarter results missed estimates as some customers remained conservative about spending on IT. The chip equipment company

ASML

(ASML) dipped after providing cautious commentary, citing “continued macroeconomic uncertainties.”

Taiwan Semiconductor

(TSM) shares fell after the contract chip manufacturer said results continue to be hurt by weak sales of mobile phone and PCs, plus high inventories at customers.

Here’s a look at the key issues for each of the big five tech companies:

Microsoft: There are three major factors at play for Microsoft, which reports results on Tuesday. The company has rallied 43% this year, mostly due to investors’ enthusiasm about its position in artificial intelligence software. Shares surged a few days ago after the company announced higher-than-expected pricing for AI-based “Copilot” software for its suite of office applications. There isn’t much AI revenue yet at Microsoft, but any commentary about the technology’s future impact on the business could boost the shares further.

Meanwhile, investors will be looking for signs that a recent slowdown in growth in the company’s Azure cloud computing business is bottoming. Here, too, demand for AI-related processing will be a factor.

The offset will be the continuing weakness in PC demand, which affects the company’s Windows and device businesses. One wild card will be any signs that the AI-powered Bing chatbot is gaining market share from Google in the internet search market.

Alphabet: The company is the parent of Google and YouTube, so its results will provide important clues on the health of the online advertising market. Recent Wall Street commentary has suggested that online ad spending has improved in recent months, potentially setting Alphabet up for a solid earnings beat.

As with Microsoft, AI has played an important part in the stock’s 36% rally this year so investors will be eager for updates on how the company sees the trend unfolding. But there is also some fear on the Street that rival AI chatbots like ChatGPT and Microsoft Bing will eat into Alphabet’s dominance in search and that the investment required to build AI software capability will boost capital spending.

Another factor will be the growth outlook for the company’s cloud computing business. The company reports the same day as Microsoft, another player in cloud computing.

Meta Platforms: The parent of Facebook, Instagram, WhatsApp, and now Threads has had a big year, with the stock soaring nearly 150%. Much of that reflects the company’s “year of efficiency” push to bring down costs, which has included more than 20,000 job cuts.

Analysts see signs that Meta’s advertising business is improving as it finds ways to route around issues created in recent quarters by Apple’s privacy push for iPhone users, which made targeting harder. Investors also will be looking for signs of better monetization at Reels, the company’s TikTok clone. Another key will be commentary on how the company plans to make money from its considerable…