Matteo Colombo/Getty Images
- Big tech stocks have surged this year, rebounding after a tough 2022.
- Alphabet, Amazon, Meta, and Microsoft are all set to report their first-quarter results this week.
- Cost cuts, the economy, and AI are likely to be the key themes for tech stocks this earnings season.
Some of the largest blue-chip tech stocks in the US face a moment of truth this week.
Microsoft, Google-parent Alphabet, and Amazon have all posted double-digit share-price gains this year – while Meta Platforms' stock has rebounded from a dismal 2022 to surge 78%, making it one of the market's biggest success stories so far.
All four companies are set to report their earnings for the first quarter this week.
Earnings season offers investors a chance to check in on listed companies' financials. The 10% slump in Tesla shares last week served as a timely reminder of how a disappointing report can shift Wall Street's view on a stock.
The EV maker's share price plunged after it disclosed that its net income had fallen 24% year-on-year in the three months ending March 31. Tesla's profits are under pressure in part because of its aggressive cuts to the prices of its cheaper, high-volume Model 3 and Model Y cars.
Microsoft and Alphabet will be the first two Big Tech giants to release their first-quarter earnings this week, with both set to report after Tuesday's closing bell.
Amazon and Meta are slated to publish their earnings in after-hours trading on Wednesday and Thursday respectively.
Apple will be the last of the so-called "GAMMA stocks" to release a quarterly report, with earnings due to be published next week on May 4.
Investors should also pay particular attention to how the tech companies' first-quarter earnings reports address cost cuts and AI, according to Wedbush managing director Dan Ives.
Big Tech giants Alphabet, Amazon and Meta have all announced layoffs affecting tens of thousands of workers in recent months, in a bid to cut costs with the US economic outlook worsening.
Meanwhile, Microsoft unveiled a new version of its search engine Bing in February that it promised would be "more powerful than ChatGPT" – while Google launched its own Bard AI chatbot to the public last month.
"Cost-cutting is a key trend seen across the Valley as the tech sector reduces expenses across the board to preserve margins in a very unpredictable economic backdrop for 2023," Ives wrote Sunday in a research note seen by Insider.
"We also believe a major narrative of tech earnings season will be the AI arms race and each Big Tech player updating investors on their own AI ambitions and monetization strategy as Redmond battles Google and other tech stalwarts for the AI trophy case," he added.
The four stocks that report this week, plus fellow big tech giants Apple and Netflix, have accounted for $1.6 trillion of the S&P 500's $2.4 trillion worth of gains this year, according to data from AJ Bell – so their results this week could also determine whether the index can maintain its own early-year rally.
A strong earnings performance from Microsoft, Alphabet, Amazon, and Meta could "help US equity markets maintain the run that began last October", the UK firm's investment director Russ Mould said Monday. The S&P 500 is up over 15% since bottoming out six months ago.
Read more: ChatGPT has sparked an epic 'Game of Thrones battle' over AI in Big Tech, Wedbush analyst says