AI Takes Center Stage in Big Tech Earnings Forecasts

AI’s Impact on Big Tech Earnings: What to Expect

New York: Over the next two weeks, the quarterly results from major Big Tech firms will shed light on the effectiveness and sustainability of their artificial intelligence (AI) investments. Analysts are particularly eager to see if AI's potential can translate into significant earnings growth. Wedbush Securities, a leading advocate of AI, predicts that the AI revolution will spur both growth and earnings acceleration.

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The market’s optimism is reflected in forecasts of double-digit growth for tech giants Microsoft and Google. In contrast, Apple, which is newer to the AI scene, is expected to see only 3% growth. Apple is set to release its quarterly results on August 1 and recently introduced its Apple Intelligence system, which will be rolled out gradually on new models. Analysts like Angelo Zino of CFRA believe the impact of these AI features will become more apparent with the iPhone 16 launch in September. However, Zino also anticipates improved sales figures in China, a market that has been challenging for Apple.

Meta, on the other hand, faces more uncertainty. The company, led by Mark Zuckerberg, has significantly increased its AI investment, pouring billions into developing generative AI technologies. Despite these investments, CFRA forecasts a slowdown in Meta's growth through the end of the year, potentially putting pressure on its earnings.

Microsoft and Amazon, which will report on July 30 and August 1 respectively, are expected to deliver strong results. Microsoft has made substantial moves to integrate AI across its products, including a $13 billion investment in OpenAI. This positions Microsoft as a leader in AI monetization, though analysts caution that maintaining double-digit growth in its cloud computing business may be challenging.

Amazon’s cloud division, AWS, is also expected to perform well. Investors are keen to see if AWS can sustain the growth seen in the first quarter and capitalize on the AI wave. According to Matt Britzman of Hargreaves Lansdown, AWS is well-placed to meet the increasing demand for data-related services driven by AI.

Google’s results, due first, may present a more complex picture. The company’s new AI Overviews feature, introduced in May, has faced criticism and user skepticism. This feature, which aims to provide text-based search results above traditional links, has had a rocky start with some users reporting problematic responses. Despite this, analysts like Evelyn Mitchell-Wolf from Emarketer believe Google’s dominant position as a search engine will keep it a major player in search and ad spending.

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