Amazon, Apple and Meta – what to expect in upcoming earnings

This week Amazon, Apple, and Meta (Facebook) will report their latest results, but what could be in store for investors and could we see any surprises?

Here’s a closer look at what to expect.

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Amazon

Sophie Lund-Yates, Lead Equity Analyst

Amazon is dealing with plenty of unhelpful headwinds. High inflation and a shaky economic outlook means retail sales were lower than we’d hoped last quarter. Slowing retail sales are a problem because Amazon’s costs are too high. Volumes aren’t strong enough to offset the costs of gargantuan expansion efforts after the pandemic accelerated demand. The net effect is poor profit performance. Despite double digit rises in revenue last quarter, profits almost halved to $2.5bn.

With the economic climate still highly uncertain, there’s a real chance the outlook statement might not please the market.

Amazon’s under the spotlight where labour’s concerned. It could be forced to factor in new pay rises, which could spell further trouble for margins. If the projected 18,000 job cuts also come true, there will be considerable severance costs.

It will be equally crucial to see how the cloud business, AWS is holding up. Microsoft has reported a strong showing in its cloud division, as companies look for ways to unlock long-term efficiencies. This should have a positive read-across for Amazon.

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Apple

Matt Britzman, Equity Analyst

Apple's expected to see revenue drop for the first time in 15 quarters when it reports first quarter earnings. Having held up relatively well over the last earnings season, we’re cautiously optimistic about the coming results.

A weaker US dollar and price hikes pushed through toward the end of last year should both act as tailwinds. But significant production disruptions in China due to Covid restrictions, riots and walkouts were a challenge.

Our main concern is that short-term disruptions could be compounded by weakening hardware demand. iPhone sales were already a little weaker than expected back in October.

The Christmas period will be a crucial barometer for the health of the consumer. There’s also a concern that upward pressure on costs is likely to be a lingering bugbear, especially as Apple looks to accelerate production diversification away from China. It’s the right move in our view for the stability of long-term production, and something we’ll be looking out for any updates on.

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Meta

Matt Britzman, Equity Analyst

Meta finds itself in somewhat of a downward spiral. Costs are rising, advertising spend is falling and markets are expecting to see another profit decline in next week’s fourth quarter results. These aren’t small declines either, with operating profit expected to come in around $7.7bn – that’d be down 39% year on year.

Steps are being taken to reign in some damage, and Meta joins the list of mega cap stocks to start major layoffs – to the tune of 11,000 jobs in November.

For investors, though, the real issue seems to be the stubborn approach to investment in Reality Labs. The business unit responsible for bringing the Metaverse to life. Here in the real world, operating losses from the division are mammoth – to the tune of $4bn a quarter.

It’s certainly possible Meta gives the market what it wants, a reign in on spending. But until that happens, or Reality Labs conjures up some magic, we don’t see sentiment changing too much.

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Unless otherwise stated, estimates are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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