Tech investors emphasize AI earnings following layoffs. A quarter after historic layoffs, investors in U.S. tech titans will evaluate if the cost cuts increased profitability as the businesses underline how artificial intelligence will be their next growth engine.
This week, Microsoft Corp (MSFT.O), Alphabet Inc (GOOGL.O), Instagram owner Meta Platforms Inc (META.O), and Amazon.com Inc (AMZN.O) publish quarterly results.
They own almost $5 trillion in market capitalization or 14% of the S&P 500 (.SPX) index.
Refinitiv expects Microsoft, Alphabet, and Meta’s earnings to grow 4.5% over the previous quarter, led by Meta’s 11.8% increase. However, profit is predicted to fall roughly 16% from a year earlier, with Microsoft expected to do best with a 0.5% drop.
After a pandemic-driven hiring boom, these three corporations and Amazon announced they would cut 70,000 positions between November and March amid a deteriorating economy. Meta has been laid off twice.
Amazon.com Inc. (AMZN.O), which reported a big drop in fourth-quarter profit due to valuation losses from its investment in money-losing E.V. maker Rivian Automotive (RIVN.O), is expected to post an eight-fold increase in first-quarter profit.
Amazon’s first-quarter North American sales will exceed Wall Street expectations, according to YipitData.
Since last quarter, CEOs have been discussing A.I. in earnings calls.
“If last quarter’s message from Big Tech was all about efficiency and bottom line improvement, this quarter’s is likely to be more forward-looking around the massive potential of artificial intelligence,” said Insider Intelligence analyst Andrew Lipsman.
Bing uses OpenAI’s ChatGPT technology to compete with Google.
Google has released its chatbot, Bard.
Amazon’s AWS cloud business, the world’s largest, has provided a suite of tools to assist other firms in building AI-powered chatbots. At the same time, Meta has published an A.I. model that can identify particular items in images.
“It’s sort of a double-edged sword because there is also pressure for these companies to improve cash flow in an economy that is decelerating,” Itau BBA analyst Thiago Kapulskis said.
“There are expectations that companies could create or do even more with A.I… every tech investor is expecting those companies to be in the frontier.”
Analysts also found Amazon, Google, and Microsoft’s cloud operations more reliable.
Microsoft and Alphabet have gained 19% this year. Amazon is up 23%, and Apple 28%. Meta shares rose 77%.
Apple, the world’s largest firm, is struggling to sell iPhones and MacBooks as customers cut down.
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