Big tech look ahead: Alphabet, Microsoft, Meta and Amazon shares in focus
THE RACE to exploit the potential of artificial intelligence will dominate investor chatter around big tech this week, with all the big players set to release results to Wall Street.
Ads supremo Sir Martin Sorrell said he expects higher than anticipated revenue growth across the board, albeit down on the go-go years of the last decade and the pandemic.
Alphabet and Microsoft are taking the stage on Tuesday evening in the UK with their second and fourth quarter results, respectively.
Google’s parent company, Alphabet, has been somewhat sluggish in the AI race, marked by its underwhelming initial release of chatbot Bard, while Microsoft is rapidly gaining steam. The productivity giant’s shares surged after its recent announcement of a $30 monthly charge for its generative AI features.
Commenting on Google’s AI prospects, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The search engine giant is in a tricky spot when it comes to capitalising on AI. While it has a lot of potential, the path to profits from this venture are arguably less clear cut than other giants, with the likes of Microsoft and Amazon in strong positions at different parts of the AI infrastructure chain.”
Investors’ positive response to Microsoft’s generative AI launch suggests “an incoming flood of revenue uplift,” Lund-Yates continued.
She added: “It speaks to the strength of demand for all AI products, and with its finger firmly in that pie already, Microsoft has a lot of growth potential.”
On Wednesday, Meta will reveal its second-quarter results, after a busy period birthing its new Twitter competitor, Threads. Although Threads hit 100 million users just five days post-launch, Wall Street analyst Youssef Squali warned that “much work remains for it to become consequential” to Meta’s earnings.
Especially as the flurry of activity appears to have calmed down, with daily active users dropping to around 13m down from 44m during its peak on 7 July, as per data from research company Sensor Tower.
On the AI front, Meta has been “very woolly” on details, said Lund-Yates, and “investors will want to see some concrete progress and planning before too long.”
Despite substantial investment in AI, Meta’s focus on operating efficiency should encourage margins, according to Squali.
Wrapping up the week, Amazon will release results on Thursday.
The e-commerce giant cautioned that demand for its AWS cloud services might lag as businesses trim down tech budgets amid the economic slowdown.
Lund-Yates said AWS will steal the spotlight next week after missing expectations in Amazon’s previous quarter.
“The vast bulk of profit has been coming from AWS, and the potential for weakness there could see margins under pressure as the international retail arm looks to claw out of loss-making territory,” Lund-Yates explained.