Microsoft, Google parent Alphabet, Meta and Amazon are all reportedly set to release new quarterly earnings this week after a massive 70,000-person layoff. Currently, these companies are evaluating how to use artificial intelligence (AI) to drive their future earnings growth. For investors, they are more concerned about whether the latest round of major layoffs has driven profit growth for these companies.
These four technology companies are significant, with an overall market capitalization of more than $5 trillion, or more than 14 percent of the overall market capitalization of the S&P 500.
According to analysts surveyed by financial information service Refinitiv, Microsoft, Alphabet and Meta are expected to post an average profit increase of 4.5% in the first quarter of this year compared to the previous quarter. Among them, Meta’s profit will rise the most, to 11.8%. But compared with the same period last year, analysts expect the three companies’ profits to decline by an average of nearly 16%. Among them, Microsoft’s performance is the best, will decline 0.5% year-on-year.
As we all know, these three companies, together with Amazon, in November last year and in March this year carried out massive layoffs, the total number reached about 70,000 people. Among them, Meta has announced two rounds of major layoffs.
In contrast, Amazon’s profit in the first quarter of this year is expected to increase 8 times, mainly because of a sharp decline in profits in the fourth quarter of last year. The decline in profits in the fourth quarter last year was due to heavy losses from an investment in electric car maker Rivian.
Research firm YipitData expects Amazon’s North American sales in the first quarter of this year to exceed Wall Street analysts’ expectations.
The companies are expected to update on their AI progress during their upcoming earnings call this week. During last quarter’s earnings call, the companies’ CEOs began talking about technology.
Insider Intelligence analyst Andrew Lipsman said: “Last quarter, these large technology companies focused on efficiency and profit improvement. This quarter, however, they are likely to be more forward-looking and will be talking around the huge potential of artificial intelligence.”
Microsoft has integrated OpenAI’s ChatGPT technology into its search engine, Bing, to compete more fiercely with market leader Google. Not to be outdone, Google has also released its own AI chatbot, Bard.
Amazon’s cloud division, AWS, the world’s largest cloud provider, has released a suite of technologies designed to help other companies develop their own AI chatbots. Similarly, Meta has released an AI model that can recognize specific objects from images.
“It’s a double-edged sword because these companies are also under pressure to improve cash flow in a slowing economy,” said Thiago Kapulskis, an analyst at investment research firm Itau BBA.
When it comes to the cloud business, analysts say Amazon, Google and Microsoft have also been more stable than expected.
This year, these major technology companies have had a respectable performance in the stock market. So far, Microsoft and Alphabet shares are both up 19 percent, Amazon is up 23 percent and Meta is up nearly 77 percent.
In addition, Apple shares are up 28 percent. Apple will report earnings for the second quarter of fiscal 2023, which ends in March, next week, about a week later than in previous years.