Tech Giants Robust Q3 Revenues: U.S. IT giants are poised to record their greatest quarterly revenue growth in over a year, indicating that their traditional operations have stabilized. However, those expecting a big AI enhancement may be disappointed.
Microsoft, Alphabet, Meta Platforms (formerly known as Facebook), and Amazon are all anticipated to showcase robust financial performance in the wake of a recovery in their enterprise software and digital advertising sectors. This rebound has been propelled by the unwavering spending habits of both professionals and consumers, even amid the backdrop of a tumultuous global economy. The combined market value of these four giants now exceeds a staggering $6 trillion, making them key players in the broader market as well.
Despite the solid performance in their legacy businesses, the much-anticipated AI revolution appears to be taking its time. While enterprise demand for traditional products has steadied, the same can’t be said for cloud computing, a cornerstone for Microsoft and Amazon. The growth rates for cloud services haven’t significantly improved from the previous quarter.
Microsoft, however, is likely to highlight some achievements resulting from its strategic investments in OpenAI and the seamless integration of AI technology across its product range. It’s worth noting that the company has been quite assertive in this regard, promising substantial spending to meet the growing demand for AI products. RBC Capital Market predicts that Microsoft will generate over $3 billion in revenue from its generative AI offerings this fiscal year.
For some of their counterparts, these AI investments, including costly acquisitions like Nvidia chips, may have some short-term financial repercussions. The impact on revenue may not become significant until 2025, as enterprises are still navigating the complexities of developing their AI strategies.
As earnings season kicks off, Microsoft is expected to announce nearly a 9% rise in first-quarter revenue, fueled by the strength of its enterprise productivity software division. However, it’s worth noting that costs are estimated to have surged by 8.4%, marking the most significant increase in a year.
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On the same day, Alphabet is projected to reveal a 10% increase in quarterly sales. Revenue from Google Services, encompassing YouTube, Search, and app sales, is anticipated to have grown by 8.5%. Both Alphabet and Meta Platforms are poised to benefit from an upswing in digital advertising sales, particularly with the holiday shopping season around the corner.
Media research and investment firm Magna recently revised its forecast for U.S. ad spending growth, predicting a 5.2% increase for 2023, up from the previous 4.2% estimate. In this period, digital ad sales are expected to surge by 9.6%.
Meta Platforms, in particular, is projected to report a substantial increase in quarterly revenue, the most significant growth in two years. The company is also set to unveil its AI plans, following the introduction of a series of AI-powered advertising tools last month.
However, when it comes to cloud computing growth, there might not be a significant uptick. Clients are exploring ways to optimize their infrastructure costs, and this might translate into only minor improvements in this area.
Market leaders Amazon Web Services and Microsoft Azure are expected to expand 12.4% and 26.2% in the quarter. These stats may be up somewhat from their previous quarter, but Google is likely to dominate with 25.7% growth. Amazon is expected to survive due to high retail sales and a strong labor market. The e-commerce behemoth is likely to report 11.3% revenue growth on Thursday.
In the coming days, Meta Platforms will unveil its earnings, and Apple will wrap up the Big Tech earnings season with its results next week on November 2. It’s a pivotal period for these tech giants as they navigate the ever-evolving landscape of digital innovation and business stability.
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What are the earnings for magnificent 7 Q3?
According to the latest S&P 500 Earnings Scorecard published on October 13th, Mag-7 is expected to see a significant increase in earnings and revenue growth for Q3. The forecasted earnings for this quarter are $72.3 billion, which is a 35.9% year-over-year increase and a 5.2% quarter-over-quarter increase. Additionally, the revenue forecast for Q3 is $364.5 billion, which is an 11.3% year-over-year increase and a 4.4% quarter-over-quarter increase. These impressive numbers indicate a strong performance for Mag-7 in the upcoming quarter.