Alphabet (GOOG, GOOGL) will report earnings after the bell, kicking off Big Tech earnings with Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), and Apple (AAPL) to follow. Barclays head of US equity strategy Venu Krishna sits down with Seana Smith and Brad Smith on Morning Brief to discuss what investors need to see from Big Tech companies’ quarterly results and the broader market impact.
The strategist explains that he expects Big Tech companies’ earnings to moderate from their recent rapid growth. “Everybody keeps focusing nowadays on [the] broadening of earnings and how Big Tech moderating is not necessarily bad. That’s the half-glass-full kind of situation.”
“Historically, when Big Tech multiples have corrected, correlations have increased with the rest of the market. So, in other words, you’re not immune outside.” He notes that the expectations for Big Tech have been set high, given their overperformance in recent quarters.
Krishna says an earnings beat 5% to 6% above Wall Street estimates is “reasonable,” while “Anything less than that, I would be disappointed. Anything above that is phenomenal. They will be back in complete control compared to the rest of the market.”
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
This post was written by Naomi Buchanan.
Video Transcript
The height, then surrounding a I.
It sounds like it might be a bit overdone at this point, just given the return on investment, the fact that that might not come for years to come.
If we do see these big tech earnings over the next several days, just meet expectations not necessarily, uh, exceed them by a substantial amount.
What does that mean, then, for the broader market?
How big could we be seeing a correction As a result?
I would say that, uh so that’s a very good question.
And you know what everybody keeps focusing nowadays is a broadening of earnings and how big moderating is not necessarily bad.
So that’s the half glass, full kind of situation.
The reason, I say that is historically when big tech multiples have corrected correlations have increased with the rest of the markets.
In other words, you’re not immune outside.
And don’t forget that, just like I told you in three Q.
It’s the numbers for the rest of S and P, which have been cut, and for the big it has been left relatively unchanged.
So to your question of if they just meet expectations, that’s not good.
So if you look at last quarter collectively as a group, they beat earnings by about 5.5 6%.
But for the four quarters before that, the range was anywhere from 8.5 to 14%.
So I think the scale of surprises in the 5 to 6% is reasonable.
Anything less than that, I’ll be disappointed.
Anything above that is phenomenal.
They will be back in complete control compared to the especially the rest of the market.
So I think that’s where the rubber meets the road in terms of their mature businesses, which you were pointing to, how well they they holding up.
And that’s been a mixed bag for Amazon, for example.
The retail has been reasonably strong for Google.
The YouTube, I think, was weak, but search was relatively strong for me.
Digital ads were great.
So it’s been a mixed bag where some parts have done well, some parts, not that well, right?
So But all these companies are telling you that this phenomenon is so huge that none of them is going to back away from the spending they are undertaking right now because they do not want to be left out of the race.