It’s earnings season again, and for the tech sector, it’s shaping up to be one of the most interesting in a while.
Global technology giants, which fueled the bull market to its highest heights earlier this year, are suddenly being assailed from all sides. A brewing trade war between the U.S. and China is imperiling mergers and threatening the global interconnectivity that has helped the industry thrive. A crisis has been spreading over how political-data firm Cambridge Analytica got access to millions of Facebook users’ personal information, upending the assumption that consumers will blithely give up their private details as a fair trade-off for using free services like Facebook, Google and Twitter. And don’t forget U.S. President Donald Trump’s Twitter tirades against Amazon and founding CEO Jeff Bezos.
All this has made for a seriously volatile few weeks for tech stocks, with some investors fearing a profit-draining regulatory clampdown, and others jumping in to take advantage of the discount on shares that have been expensive for years. With most of the biggest names about to report results for the March quarter, the market will finally get a chance to figure out whether the concerns plaguing big tech truly pose a threat to the bottom line.
Some clues about how things could go have already emerged. Wall Street analysts have mostly held the line that a divided U.S. Congress won’t come down hard on data-gathering business models like Facebook or Google anytime soon. Only one of the dozens of equity analysts that cover Facebook has cut the social network’s rating since the Cambridge Analytica situation came to light. Most, like Goldman Sachs’s Heather Bellini, expect “little to no impact” on advertising spending.
Still, investors will be intently focused on any commentary from executives about user engagement, writes UBS’s Eric Sheridan. Even if revenue and profit numbers are good, the question remains whether positive results can outshine the “wall of worry,” he said.
Also this week, Taiwan Semiconductor Manufacturing Co., the leading smartphone chip manufacturer, sent shivers across the semiconductor sector and weighed on Apple stock when it issued a disappointing growth forecast. That rekindled concerns that the handset boom is waning.
Amazon gave investors something to get excited about. Bezos disclosed for the first time on Wednesday that 100 million people now pay up for an Amazon Prime subscription. Netflix, which kicked off technology earnings earlier this week, proved again that the world is rushing headlong into online streaming. The stock rose 9.2 percent to a record the day after the company said it added 7.41 million users in the quarter despite raising prices.
Here’s a rundown of what to look for from each of the biggest tech companies reporting in the coming weeks:
Alphabet
A growing concern for Alphabet investors is the possibility that internet-search and digital-ad behemoth Google will be a casualty of public backlash against Facebook. Regulation placing restrictions on data collection and privacy in online advertising could handicap the $95.4 billion business. But for the first quarter, investors are more focused on how quickly costs are rising.