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As the tech giants prepare to release their quarterly earnings, investors are eagerly awaiting the impact of artificial intelligence (AI) on their financial performances. Over the next two weeks, Big Tech companies will provide a glimpse into the future of AI and its potential to drive growth and profitability.
All eyes on AI to drive Big Tech earnings
By Thomas URBAIN
New York (AFP) July 21, 2024
Over the next two weeks, the quarterly results of Big Tech giants will offer a glimpse on the bankability of artificial intelligence and whether the major investments AI requires are sustainable for the long haul.
Analysts at Wedbush Securities, one of Wall Street’s biggest believers in AI’s potential, expect “growth and earnings to accelerate with the AI revolution and the wave of transformation” it is causing.
The market generally agrees with this rosy AI narrative. Analysts forecast double-digit growth for heavyweights Microsoft and Google, in contrast to Apple, a latecomer to the AI party, with only three percent growth expected.
The iPhone maker, which releases its results on August 1, unveiled its new Apple Intelligence system only last month and plans to roll it out gradually over the next months, and only on the latest models.
CFRA analyst Angelo Zino believes that the impact of these new features will not be felt until the iPhone 16 launches in September, the first to feature the new AI powers built-in across all options.
But he expects Apple’s upcoming earnings to show improvement in China sales, a black spot since last year.
“Apple’s forecasts for the current quarter will be important” in assessing the company’s momentum, said Zino.
But “if there’s one that we were maybe a little bit more concerned about, versus the others, it would be Meta,” he said.
He pointed out that Mark Zuckerberg’s company raised its investment projections last April as it devoted a few billion dollars more on the chips, servers and data centers needed to develop generative AI.
CFRA expects Meta’s growth to decelerate through the end of the year. Combined with the expected increase in spending on AI, that should put earnings under pressure.
As for the earnings of cloud giants Microsoft (July 30) and Amazon (August 1), “we expect them to continue to report very good results, in line with or better than market expectations,” said Zino.
‘Crucial’ bet
Microsoft is among the best positioned to monetize generative AI, having moved the fastest to implement it across all its products, and pouring $13 billion into OpenAI, the startup stalwart behind ChatGPT.
Winning the big bet on AI is “crucial” for the group, said Jeremy Goldman of Emarketer, “but the market is willing to give them a level of patience.”
The AI frenzy has helped Microsoft’s cloud computing business grow in the double digits, something that analysts said could be hard to sustain.
Conclusion
In conclusion, the upcoming quarterly earnings of Big Tech giants will provide valuable insights into the impact of artificial intelligence on their financial performances. As investors eagerly await the results, it is clear that AI has the potential to drive growth and profitability in the tech industry.
Frequently Asked Questions
Question 1: What is the expected growth rate of Big Tech companies?
Analysts forecast double-digit growth for heavyweights Microsoft and Google, while Apple is expected to experience only three percent growth.
Question 2: When will the impact of Apple’s new AI features be felt?
CFRA analyst Angelo Zino believes that the impact of Apple’s new features will not be felt until the iPhone 16 launches in September.
Question 3: What is the current market sentiment on AI?
The market generally agrees with the rosy AI narrative, with analysts expecting growth and earnings to accelerate with the AI revolution.
Question 4: What is the expected impact of generative AI on Microsoft’s cloud computing business?
Analysts expect the AI frenzy to help Microsoft’s cloud computing business grow in the double digits, although this growth may be hard to sustain.
Question 5: What is the current outlook for Meta’s growth?
CFRA expects Meta’s growth to decelerate through the end of the year, due to the expected increase in spending on AI.
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