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Taking Stock Of Tech Earnings Thus Far

Michael Brown
Senior Research Strategist
31 Jan 2024
The busiest week of Q4 US earnings season rolls on, as markets move past disappointing results from Alphabet, and a beat from Microsoft, while looking ahead to reports from behemoths Apple, Amazon, and Meta, after the market close on Thursday. More broadly, major indices continue to trade within touching distance of all-time highs, as the ‘path of least resistance’ seemingly continues to lead higher, albeit with hurdles in the form of the Treasury quarterly refunding announcement, and first FOMC decision of the year, for markets still to navigate.

To get the bad news out of the way first, Alphabet – Google’s parent – delivered a beat on both top- and bottom-lines, though a notable miss on Google ad revenue, at $65.2bln in Q4 vs. consensus $65.8bln, with this segment making up the majority of the firm’s revenue. Alphabet fell as much as 7% in after-hours trade on Tuesday, while also dragging the Nasdaq 100 future around 1% lower, to a new day low, with Alphabet’s combined weight in the index amounting to around 5%.


Alphabet’s results point to an interesting theme that is likely to run through earnings season more broadly, especially for ‘big tech’ names. At face value, the results were far from disastrous, with earnings generally being rather healthy. However, given the rally that the sector has enjoyed YTD, gaining around 7%, along with steadily rising expectations, the bar for an upside earnings surprise, and thus positive stock reaction, has become a relatively high one.

This was well-evidenced by Microsoft’s report, with the largest stock by weight in both the S&P 500 and Nasdaq reporting a strong revenue beat – $62.0bln vs. $61.1bln consensus – along with a strong 30% rise in cloud sales, a key growth driver for the business. Nevertheless, while representing the 6th straight upside EPS surprise, earnings did not appear healthy enough to reach the aforementioned high bar investors have set, with the stock down around 1% after hours, perhaps due to the vast majority of cloud growth stemming from AI, implying that the rest of the revenue line continues to slow.


As mentioned, at an index level, this dragged the Nasdaq marginally lower in after-hours trade, with the index pulling back under the 17,500 handle. The recent highs at 17,750 stand as the most obvious resistance to the upside – as markets head into the plethora of upcoming event risk including the QRA, FOMC, Friday’s jobs report, and the earnings covered below. Nevertheless, even with the modest post-earnings decline, the index remains well within the uptrend in place since the market bottomed last October; not coincidentally, a bottom which came on the day of the Q4 23 quarterly refunding announcement.


Looking ahead, and sticking with earnings, a jam-packed slate of reports awaits after the market close on Thursday.

Highlights include:

  • Amazon (AMZN – 9pm GMT/4pm ET): Bezos’ behemoth trades just shy of 5% higher YTD, while standing as the 3rd largest stock in the S&P 500, and 4th largest in Nasdaq 100. Headline EPS has surprised to the upside compared to consensus in the last 4 quarters, with shares rallying post-earnings for the last 2 reports running. Options imply a move of +/- 6.9% over the earnings release, with consensus seeing quarterly EPS at $0.80, and revenue at $166bln.
  • Meta (META – 9:15pm GMT/4:15pm ET): Having slumped in 2022, rallying around 350% from the low in November of that year, including a gain of around 13% over the first month of this year, leaving Zuckerberg’s empire as the 12th best performer in the S&P 500. In terms of weightings, Meta stand as the 6th biggest stock in both the US benchmark, and the Nasdaq 100. As for pedigree, Meta have beat consensus EPS expectations in the last three quarters running, while options imply a move of +/- 6.8% over the report. Consensus expects quarterly EPS to print $4.94, and revenue to come in at $39.1bln.
  • Apple (AAPL – 9:30pm GMT/4:30pm ET): Rounding off the week of tech earnings will be Apple, whose stock has underperformed this year, trading around 2.3% lower YTD, amid ongoing demand concerns, particularly relating to weakness in China, and a handful of broker downgrades, a marked contrast to the 11% gain the stock had notched at this stage in 2023. Apple has missed consensus EPS estimates just three times since the first quarter of 2016, though the reaction to said beats has been changeable, with AAPL having fallen post-earnings on the last 2 occasions. Consensus sees quarterly EPS at $2.10, with revenue set to print just shy of $118bln.

As always, caveats around past performance not being a reliable predictor of future results must apply. However, earnings released thus far this week have shown that post-results upside likely requires a combination of strong earnings beats, along with optimistic guidance upgrades.

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