US tech giants to bag £62bn profit bonanza
- Revenues generated by the giant companies are expected to total £324 billion
- Earnings season will likely prove to be an eye-opener for Wall Street, sparking a stock market rally
- Amazon’s sales are expected to rise 11% in the three months to the end of September
US tech giants will brave global market gloom this week as they kick off what is expected to be a record season generating £62 billion in profits.
Revenues generated by the giant companies – Meta, Amazon, Microsoft, Alphabet and Apple – are expected to total £324 billion.
It comes at a time when broader markets are roiled by fears over the Middle East conflict and interest rates.
Government bonds are under pressure, causing problems for both government finances and investors.
But Dan Ives of Wedbush Securities said tech earnings season would likely prove to be an “eye-opener” for Wall Street, sparking a stock market rally.
“The tech universe is primed for a strong earnings season,” Ives said. ‘The macro story overshadows the biggest technological revolution in thirty years.’
Ives argues that developments in artificial intelligence (AI) are creating a new ‘1995 moment’ – when it became clear that the internet would have a major impact on business and society. Companies such as Amazon and Alphabet that offer cloud services that enable remote access to computing resources will benefit by making products AI-enabled.
Companies such as Alphabet and Microsoft are also directly involved in AI platforms, with Microsoft being a major investor in OpenAI – which operates the AI platform ChatGPT. Alphabet-owned Google has created its own AI tool called Bard.
Technological progress is not without hurdles for the companies involved. Sophie Lund-Yates of Hargreaves Lansdown said growth at Amazon’s cloud division AWS has slowed and markets would be “hunting for indications that performance will accelerate again” when the company reports results on Thursday.
Forecasts from Refinitiv suggest Amazon’s revenues will rise 11 percent to £116 billion in the three months to the end of September, boosting profits to £5 billion.
And Amazon seems optimistic, hiring 250,000 workers for the Christmas season in the US.
“This suggests management is confident about the consumer outlook,” Ms Lund-Yates said.
For Microsoft, however, cloud computing could “pick up the slack” for a slowdown in the traditional business of selling Windows software, she added.
But growth will be the big picture here too, with revenues of £44.7bn and profits of £16.3bn estimated by analysts.
Meta – which owns Facebook, WhatsApp and Instagram – is expected to reach a quarterly profit of £7.6 billion, while Alphabet will rake in profits of £15.1 billion.
But Apple, which reports next week, is expected to see sales fall to £73bn, although operating profit will continue to outpace the rest by almost £18bn.