Tech investors focus on profits after layoffs; companies to highlight AI

After a quarter of record layoffs, investors in American tech juggernauts will examine if cost savings increased earnings to their satisfaction, despite the companies’ claims that artificial intelligence will be their next growth driver.

This week sees the release of quarterly results from Microsoft Corp (MSFT.O), Alphabet Inc, the parent company of Google (GOOGL.O), Meta Platforms Inc, the owner of Instagram, and Amazon.com Inc (AMZN.O).

More than 14% of the value of the S&P 500 (.SPX) index, or more than $5 trillion, is held by them collectively.

According to Refinitiv, analysts predict that Microsoft, Alphabet, and Meta’s profits would all increase by an average of 4.5% from the most recent quarter, driven mostly by a profit increase of 11.8% at Meta. Microsoft is anticipated to perform the least poorly, with a 0.5% decline in earnings, from a year earlier, as the industry average.

In a fast deteriorating economy brought on by a pandemic-driven employment boom, these three corporations announced, together with Amazon, that they will eliminate 70,000 employees between November and March. Layoffs in two stages have been announced by Meta.

Amazon.com Inc (AMZN.O), which reported a significant decline in fourth-quarter profit due to valuation losses as a result of its investment in loss-making EV maker Rivian Automotive (RIVN.O), is expected to report a first-quarter profit that will more than double from the previous quarter.

YipitData, a research firm, predicts that Amazon’s North American first-quarter revenues will surpass Wall Street forecasts. The firms will probably provide an update on their AI initiatives, continuing a recent trend that was started by chief executives who crammed earnings conferences with references to the technology during the previous quarter.

According to Andrew Lipsman, an analyst at Insider Intelligence, “if last quarter’s message from Big Tech was all about efficiency and bottom line improvement, this quarter’s message is likely to be more forward-looking around the massive potential of artificial intelligence.”

Bing, a search engine from Microsoft, now competes with Google, the market leader, thanks to the integration of OpenAI’s ChatGPT technology.

The Bard chatbot from Google has started to go public.

The largest cloud company in the world, AWS from Amazon, has unveiled a set of tools to assist other businesses in creating their own chatbots powered by AI, and Meta has revealed an AI model that can identify certain things in a picture.

The demand on these enterprises to increase cash flow in a slowing economy makes it somewhat of a two-edged sword, according to Itau BBA analyst Thiago Kapulskis.

“There are expectations that companies could develop or accomplish even more with AI… every tech investor expects those companies to be at the forefront.”

Additionally more solid than anticipated, experts noted, were the cloud businesses of Amazon, Google, and Microsoft.

Each of the stocks of Microsoft and Alphabet has increased by 19% so far this year. Amazon is up 23%, while Apple is up 28%. Nearly 77% more people now own Meta shares. The largest firm in the world, Apple, which is expected to announce profits on May 4, is coping with a declining demand for iPhones and MacBooks as consumers cut down on their spending.