All eyes are on the technology sector today ahead of Big Tech earnings reports from three of the major players. The Nasdaq 100 Technology Index lost 0.26% on Monday.
The three — Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) — represent about $6.5 trillion in combined market capitalization. The tech trio lead a big week of results, with more than a third of the S&P 500 index companies scheduled to report.
And while Wall Street waits, here’s a look at what to expect when it comes to Big Tech earnings:
It’s likely to be all about the cloud when the Redmond, Washington company reports its fourth-quarter results. Here’s what analysts are expecting from the company, versus how it performed in Q4 2020. The following data is from Bloomberg:
- Revenue: $44.25 billion expected vs. $38 billion in Q4 2020
- Earnings per share: $1.92 expected vs. $1.46 in the comparable quarter
- Productivity and Business Processes: $13.9 billion forecast vs. $11.8 billion previously
- Intelligent Cloud: $16.4 billion expected vs. $13.4 billion in Q4 2020
- More Personal Computing: $13.8 billion forecast vs. $12.9 billion in the prior quarter
Investorplace contributor Mark Hake tells readers to keep an eye on what he expects will be “huge free cash flow (FCF) and high FCF margins.” In his July 16 write-up on Microsoft, he wrote: “Most companies are lucky if they can get a 20% FCF margin. About 41% of every Microsoft sales dollar ends up as pure cash profit.”
With its second-quarter earnings, Google parent Alphabet will likely reflect a rebound in digital advertising as the world’s economies bounce back from the pandemic. Last year’s period was one that management and investors would rather forget and strong numbers for Q2 2021 would help.
For the company’s advertising business, Wall Street expects gross revenue of $44.9 billion, including YouTube’s roughly $6.3 billion contribution. The company has a near-monopoly in the search engine and online advertising market.
Analysts expect Q2 earnings of $19.35 a share on revenue of $56.2 billion. If the company hits that number, it would reflect earnings growth of 91% and a near-50% increase in sales. For the year-ago period, per-share profit was down 13%, as revenue was down 1.7%.
The story of Apple’s earnings could also be about its powerful free cash flow, which the iPhone maker uses to repurchase shares, make acquisitions, reduce debt and simply accumulate in its bank account.
For the third quarter ended in June, analysts expect Apple to earn 98 cents per share on revenue of $77.1 billion. This compares to the year-ago quarter when earnings came to 64 cents per share on revenue of $58.31 billion.
Services revenue could rise 20% to $15.8 billion, according to Wall Street forecasts, on the strength of an installed base of 1.65 billion devices.
“Apple is well-positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue,” Canaccord Genuity analyst T. Michael Walkley said.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor.