Big Tech earnings next week will offer investors a dose of reality following this year’s impressive gains in the sector that were powered by hype over artificial intelligence.
Also in focus will be how cost-reduction measures, including headline-grabbing mass layoffs by the likes of Alphabet, Meta and Amazon, have helped ease margin pressures.
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Tuesday: Alphabet (GOOGL US) is due post-market. Top-line growth is likely to remain muted with a pullback in ad spending, particularly by the financial sector, adding to headwinds. Though its core search-ads business remains pressured by macroeconomic uncertainty, Alphabet’s Cloud segment could reach breakeven margin after its targeted layoffs, BI says.
Wednesday: Meta Platforms (META US) reports after the close. Aided by cost cuts, including multiple rounds of layoffs, the Facebook parent’s operating margin is set to expand sequentially by 18%, returning to growth after four quarters of declines. Despite increasing contributions from Instagram Reels, WhatsApp and messaging ads, weak engagement on the Facebook app remains a drag on Meta’s ad-impressions growth. The loss-incurring Reality Labs division will be a key focus on the earnings call as it’s so far been mostly insulated from the cost-reduction push, BI says.
Thursday: Caterpillar (CAT US) is expected to post declines in first-quarter sales and profit from the prior period when it reports before the opening bell. The heavy machinery maker, often considered a global economic bellwether, could see demand momentum slow and provide a glimpse of the impact of tightening credit conditions on construction activity. Nonetheless, healthy pricing, higher year-on-year volume and improved manufacturing efficiencies could still drive a consensus beat, Bloomberg Intelligence says.
Friday: Chevron (CVX US) and Exxon (XOM US) are due pre-market. The slump in commodity prices during the first quarter likely ended the companies’ recent streak of record-smashing profits. Exxon has announced a hit to profit of as much as $1.8 billion in the quarter, while slower earnings are expected to be seen most in Chevron’s upstream operations. Cash flows remain solid and should adequately cover dividend and buyback commitments, Bloomberg Intelligence notes. And while Chevron has downplayed the possibility of a merger involving international oil supermajors, Exxon could face investor questions on the theme following a media report that it held preliminary talks on a deal with Pioneer Natural Resources.
Exxon and Chevron will hold earnings calls at 8:30 a.m. and 11 a.m. New York time, respectively. The companies are also working separately on low-emissions gasoline alternatives that could keep internal-combustion engines relevant longer, challenging the presumed future dominance of EVs. To read more, see the ESG Stock Watch.