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Meta, Microsoft and Alphabet – what to look out for in upcoming earnings

With the US tech giants due to report financial results soon, we preview three technology bellwethers and share what we’ll be looking out for.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

The first quarter of 2023 has been anything but uneventful. We've had the second-biggest banking failure in the history of the United States. Meanwhile, inflation has surprised many with its stickiness. With oil prices on the rise, this causes central bankers a real headache as they fight to push inflation down.

Higher rates for longer might be necessary to curb inflation, but at the same time will weigh heavy on economic growth, as could higher oil prices. And it seems global economic output isn't getting quite the support some had hoped for from China's re-opening. While this delicate equation is now that much more difficult to call, there is some hope that interest rate stability is in sight.

Investors in technology companies seem undeterred. And year to date, the tech-heavy NASDAQ composite has surged ahead, outperforming global stock markets and recovering some but not all of its 2022 losses.

The next few weeks promise to deliver key financial readouts from most of the big names in the US markets. We preview three technology bellwethers and share what we’ll be looking out for.

Investing in individual companies isn’t right for everyone. That’s because it’s higher risk, your investment depends on the fate of that company. If that company fails, you risk losing your whole investment. If you cannot afford to lose your investment, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.

This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments will rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future.


Meta Platforms was one of the highest profile casualties of the tech sell-off in 2022. Investor sentiment was soured by a 38% drop in operating profit as revenues stalled and costs expanded by 23%.

2022 saw Meta's advertising prices fall sharply while audience engagement bumped in the right direction. This could help boost the appeal of its platforms to customers, but further price cuts could be risky given that margins have already taken a big hit.

With that in mind, we'll also be keen to hear if Meta's plans to cut staff and office costs are starting to have an impact when it reports first-quarter numbers. This year's strong rebound in the valuation suggests the market likes the renewed efficiency drive. But there's increasing pressure to deliver a recovery.

Meta's been betting big on branching out into new adventures, with ambitious plans to dominate the metaverse yet to have a significant effect on revenues. It's still an area of focus, but Mark Zuckerberg's attention appears to be moving toward Artificial Intelligence (AI).

Investors will be keen to see some sign of a financial return from either future-facing technology, but this will take some time and huge investment. Even after trimming the capital expenditure budget, guidance remains over $30bn this year. Any signs of further prudence in research and development (R&D) are likely to be well received.




It's been difficult to escape the hype surrounding recent breakthroughs in AI. Earlier in the year, Microsoft emerged as an enthusiastic adopter of these developments, confirming a $10bn investment in OpenAI, the company behind ChatGPT.

The intelligent chatbot can almost instantly create human-like content with just a few simple text prompts. It's already integrated the technology in its Edge web browser, and it's being rolled out across more of Microsoft's business applications.

This hasn’t gone unnoticed by investors, and Microsoft's valuation is now back above the long-term average. Given the mixed guidance for upcoming third-quarter earnings, we hope to hear more details on how these initiatives will be monetised.

Consensus forecasts expect personal computing revenues to decline over 15%, reflecting expectations of continued declines as the PC market returns to pre-pandemic levels.

Microsoft’s main growth driver, the Azure cloud business, grew at over 30% in the second quarter. Guidance suggests that growth is set to decelerate by about 5 percentage points, and given the declines elsewhere, we think there’s little tolerance for further slippage.

In short, this year won't generate the double-digit revenue growth we've been accustomed to. We wouldn't be surprised to hear more cost-cutting measures following the proposed 10,000 reduction in headcount announced in January.

Microsoft's proposed $68.7bn takeover of gaming rival Activision has cleared some key regulatory hurdles. We hope for clarity on whether completion by June this year is still on the cards. That's more than Microsoft's last reported net cash position of $51.4bn. However, with analysts forecasting $61.3bn in free cash flow this financial year, there's a good chance the coffers will quickly refill.




The recovery in Alphabet's valuation over the last six months has lagged the wider sector, and the price-to-earnings ratio is still below the long-term average. That perhaps reflects broader concerns about advertising spend as global recessionary fears mount.

Microsoft's integration of generative AI into its search engine Bing also raises the prospect that the dominance of Google could be on the wane. The launch of its own AI chatbot, Bard, has had some well-trailed teething problems. Alphabet has deep pockets, and we're hoping the first quarter update will provide some detail on how it plans to defend Google's market leadership.

With Google still accounting for over 90% of global search traffic, we still think Alphabet offers resilience over its peers both in search and other forms of digital advertising like social media.

YouTube advertising revenues have also not been holding up, although that's been partially offset by subscriber growth. We'll be looking to see if that trend continues.

Google's cloud business has been growing incredibly quickly, although it remains heavily loss-making. Clarity on its path to profitability should be well received. A recently leaked memo suggests aggressive cost cuts are on the cards across the business, and we'd like to see Alphabet put some numbers to this.



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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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