With the world of artificial intelligence growing ever more influential, few company earnings are as eagerly awaited as those of America’s biggest technology companies this week.
Given the hype, not to mention the stock market valuations related to AI, results from Google owner Alphabet, Amazon, Apple, Meta Platforms and Microsoft in just a few days may indicate whether the hype is justified, and show the scale of the phenomenal investment outlay on infrastructure needed to get it off the ground.
The performance of these five companies will give the market a sense of whether the bubble is about to pop. Alphabet, Meta Platforms and Microsoft report results today, followed by Amazon and Apple tomorrow.
Here are five key things to watch:
Capital expenditure — aka Big Tech’s big spending spree
Spending on AI infrastructure by Silicon Valley heavyweights is unprecedented and shows no sign of slowing. Together, the five are expected to spend hundreds of billions of dollars this year, on cloud, data centres and chips. This year Alphabet has raised its full-year capital expenditure forecast to $85 billion, and Amazon to over $100 billion. Meta does not have a cloud business, but is to spend up to $72 billion.
These numbers will be closely watched. The companies argue bigger infrastructure now could mean bigger profits later. Sceptics worry about whether the investment will pay off, as companies take on debt to fund this expansion, and say it raises the spectre of the dotcom boom and bust era.
Revenue: the rush for AI returns
We may get some answers to these key questions: do the returns from AI sales justify all this investment? Is AI being widely adopted? And is it delivering real value to customers? A recent study from MIT (Massachusetts Institute of Technology) found a 95 per cent failure rate for AI projects. Forecasts point to the overall revenue numbers rising at a clip, but investors will want to know how much of this is related to AI.
Advertising figures are key at Meta, which is expected to deliver revenue growth of 22 per cent to $49 billion, as people spend more time on Instagram and on its increasingly popular TikToklike, Reels feature.
Advertising spending at Alphabet has been resilient, although there are concerns about this being eroded by AI-driven answers it is generating to its own search results, not to mention a drift of users towards rival chatbots or “answer engines”. Revenue growth of 13 per cent is expected, or $100 billion.
Amazon should see a 12 per cent rise in sales to $177 billion while Microsoft is forecast to report revenue growth of 15 per cent to $75 billion.
The cloud: a fight for the world’s data Microsoft and Amazon, lagged by Google, are the world’s dominant cloud providers and enterprise spend here for these behemoths are ones to watch. So far, the demand for cloud resources continues to outstrip supply. Forecasts suggest Microsoft’s Azure could see about 38 per cent growth, Google Cloud about 30 per cent and Amazon’s Web Services about 18 per cent.
Any commentary on demand that can justify their enormous valuations will be significant. Analysts will want to see if Amazon will comment further on its web outage, when an error in one of its US data centres knocked out a chunk of the world’s internet for a day.
Hardware: the gadget arms race
Meta has continued its foray into wearable technology with its AI-powered Ray-Ban Display glasses and analysts will be watching for an update on sales.
Apple launched its iPhone 17 at the start of September and demand for the new handsets has boomed. It was the only brand in China to grow smartphone shipments in the third quarter. But analysts at Jefferies bank, noted that delivery lead times were trending down. Investors will be waiting to see what forecasts are for the Christmas holiday season and whether consumers are opting for the cheaper versions.
As always with Apple, what happens on the iPhone is as important as the handset itself and numbers from its massive services division, including the App Store, Apple TV and Apple Music, will be interesting, in the wake of pressure from competition regulators.
Finally, there may be updates about delays to key Apple Intelligence features and there are rumours about an announcement of a foldable phone.
China: the tech trade wars
Tech is being weaponised in the US- China trade wars. As President Trump and President Xi convene for talks, the Big Tech companies remain in the eye of the storm. Are they seeing any impact on their operations, any supplychain constraints or any penalty from tariffs and trade restrictions?
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