Meta and Microsoft report earnings on Wednesday, what investors should pay attention to | Wilnesh News
Wednesday begins another busy day of big tech earnings, with Meta Platforms and Microsoft reporting after the bell. Capital spending remains at the top of investors’ minds this earnings season after concerns about the return on investment in artificial intelligence dented investor confidence and put pressure on the giants earlier this year. Those concerns haven’t gone away, with DA Davidson analyst Gil Luria noting that capital expenditure data is “the best indicator of NVDA demand.” However, Citibank’s Ronald Joshi believes these forecasts may be conservative. Wall Street expects Meta Platforms to earn $5.25 a share in the third quarter, up from LSEG’s $4.39 a share a year ago. Revenue is expected to be US$40.29 billion, an annual increase of 18%. For Microsoft, first-quarter earnings per share and revenue are expected to reach $3.10 and $64.51 billion respectively. Revenue is expected to grow approximately 14% compared with the same period last year. Meta-platforms For meta-platforms, analysts are looking for signs that artificial intelligence is continuing to drive companies’ core products and advertising spending. Citi’s Josie ranks it as a top pick due to strong participation trends, profitability and growing product portfolio. Evercore ISI’s Mark Mahaney expects the social media giant to beat expectations, in part due to a strong online advertising environment. He also believes Wall Street’s operating margin expectations are “reasonable.” It also expects the company to maintain its full-year 2024 total spending and capital spending guidance, and does not expect Meta to provide a 2025 outlook. META Stock Price Year-To-Date Rosenblatt’s Barton Crockett believes the high end of Meta’s third-quarter guidance is achievable, thanks to a continued push for innovation in artificial intelligence and improved advertising ROI. He noted that over the past year and a half, the company has been within 1% of the upper end of its guidance for the next quarter. “Meta has replaced Google as a once-and-for-all blue-chip stock, offering investors (1) a growing, healthy core business, (2) an AI winner story with lower end-point risk, and (3) a shareholder-friendly management team,” Bernstein’s Mark Shmulik writes. The analyst reiterated his outperform rating and raised his price target to $675 per share, about 14% higher than Tuesday’s closing price. Shmulik dismissed market concerns about capital spending as “overdone” and said the company could achieve solid returns on investment even as it ramps up investment. Along with new artificial intelligence tools and higher ad spending, Bank of America’s Justin Post expects the growth of Reels and message monetization to bring benefits. Political advertising ahead of the election cycle could also drive a 100 to 200 basis point gain, he added. Microsoft Corp. faces a tougher test ahead of print, with many analysts leaning toward caution as the company lags some of its larger peers and underperforms the Nasdaq Composite Index. Shares are up about 16% this year, while the Nasdaq has soared nearly 25% and hit a recent high. Earlier this month, BMO Capital Markets removed the stock from its preferred stock list, citing limited near-term upside. Capital spending and commentary around AI monetization and insights into Azure’s re-acceleration will take center stage as investors demand more signs of returns. “Feedback on M365 Copilots remains lackluster, which we believe limits PBP (pre-reclassification) revenue growth,” BMO analyst Keith Bachman wrote. “Additionally, as we have written previously, we believe capex and depreciation are Increases will limit margin expansion.” Citigroup’s Tyler Radke lowered his price target on the company to $497 from $500 a share, a 15% upside from Tuesday’s closing price. He viewed the report as a potential “liquidating event” for the stock, given subdued expectations ahead of print. In fact, as Azure grows and demand stabilizes, subdued sentiment and underperformance create an attractive environment for the company, said Morgan Stanley’s Keith Weiss. “We remain confident in the magnitude of the estimate upside driven by Azure as risks to legacy workload growth appear to be more reduced after last quarter’s volatility and AI demand is steadily building ahead of F2H capacity unlocking,” Weiss wrote. Goldman Sachs analyst Kash Rangan also remained optimistic on the stock and raised capital expenditure forecasts, saying the company is accurately “matching investments with tangible needs.” The company’s segment changes also lowered Azure’s re-acceleration risks. and increased willingness to pay will drive outperformance.
