If you’re into financial markets, stocks, or CFD trading, you’ve probably heard about “earnings season.” Today, we take a closer look at what it is, what traders should know, what to expect in the coming weeks as the earnings season unfolds, and the companies you should keep an eye on as their reports roll in.
What is Earnings Season?
Earnings season is a period when many publicly traded companies release their quarterly results. It typically begins two weeks after the end of a quarter (in the middle of January, April, July, and October) and lasts for about a month. This is when investors and analysts scrutinize the numbers to evaluate a company’s financial health and plan their next steps accordingly. The final earnings season of 2024 just kicked off this week.
What to Expect from This Earnings Season?
As we’re just at the beginning of the earnings season, there are multiple predictions that it will be a strong one. For instance, Wedbush, a reputable Los Angeles-based financial services firm, has forecasted a strong third quarter. The results, according to Wedbush, are driven by solid enterprise spending and a rebound in digital advertising. The firm believes the ongoing “AI revolution” will drive tech stocks higher through the end of the year.
Analysts predict that the primary narrative of this earnings season will be the beginning of the next phase of the AI revolution. Cloud computing leaders such as Microsoft, Google, and Amazon are expected to deliver robust growth, surpassing Wall Street expectations as more workloads migrate to the cloud. This will set the stage for numerous AI enterprise use cases and models to be deployed by 2025.
However, cloud strength is not confined to the Big Three. Companies like Oracle, SAP, IBM, ServiceNow, and Dell are also identified as “foundational cloud stock players” that should experience increased strength as enterprises accelerate their AI and cloud deployments. Wedbush sees this trend laying the groundwork for what it describes as the “second derivative” of the AI revolution.
What Does “Good Earnings” Mean?
Before earnings reports come in, analysts set expectations for a company’s revenue and profit from the last quarter. If a company beats expectations, it’s considered a good sign of its financial health.
What is “Outlook” During the Earnings Season?
“Outlook” refers to a company’s future expectations and is just as important as past performance. Even if a company misses expectations, it can still maintain a positive outlook, which could help balance out its stock price.
Top 10 Companies to Watch This Earnings Season
- Apple (AAPL)
Why Do We Care? Apple is one of the world’s largest companies by market cap, so it’s no wonder its earnings are a crucial indicator for the tech sector. Traders will focus on iPhone sales, particularly the new iPhone 15, and the company’s services segment (Apple Music, iCloud, etc.). - Tesla (TSLA)
Why Do We Care? Elon Musk’s EV brainchild often drives volatility in the markets due to its significant fanbase and high valuation. Traders will want to see production and delivery numbers, profit margins, and how the company is dealing with increasing competition in the EV market. Any comments on their AI capabilities and new product lines, such as the Cybertruck, will also be scrutinized. - Amazon (AMZN)
Why Do We Care? As an e-commerce and cloud giant, Amazon’s earnings offer insights into both consumer spending and the cloud computing industry (AWS), especially with the new wave of the “AI Revolution” in mind. Watch for signals on how inflation is impacting online shopping habits and whether AWS continues to drive significant revenue growth, especially with competition from Microsoft and Google in cloud services. - Microsoft (MSFT)
Why Do We Care? Microsoft has been heavily investing in AI, particularly through its partnership with OpenAI. Traders will be keen to see how these investments are translating into revenue growth, especially in their cloud business (Azure). Given its massive size and leadership in tech, Microsoft’s results often set the tone for the broader market. - JPMorgan Chase (JPM)
Why Do We Care? JPMorgan is the largest U.S. bank by assets, making it crucial for the economy. Watch for their insights on interest rates, loan demand, and credit quality. Any signs of a slowdown in consumer or corporate lending could be seen as negative indicators for the broader economy, especially as we head toward the U.S. presidential elections. - Meta Platforms (META)
Why Do We Care? Mark Zuckerberg’s Meta is in the middle of its pivot to the metaverse, but progress remains to be seen as it still relies heavily on its advertising-driven business. Any impact of AI-driven ad targeting or competition from platforms like TikTok will be critical. - NVIDIA (NVDA)
Why Do We Care? NVIDIA has become a success story as it rides the wave of the AI boom with its graphics processing units (GPUs). Traders are watching its role in powering AI platforms and cloud infrastructures, as well as continued growth in data centers. The company’s guidance on future chip demand will be a key market mover. - ExxonMobil (XOM)
Why Do We Care? With geopolitical tensions escalating, ExxonMobil will be closely watched for how rising oil prices affect their earnings. Additionally, analysts will look for commentary on the company’s investment in renewables and future energy projects. - Procter & Gamble (PG)
Why Do We Care? Maybe not as “edgy and cool” as AI companies, but P&G remains a consumer staples giant whose earnings offer insights into consumer spending habits during inflationary periods. Traders will be keen to see if the company is able to pass on higher costs to consumers or if they’re feeling margin pressure. - Alphabet (GOOGL)
Why Do We Care? As Google’s parent company, Alphabet dominates the online ad space. Earnings will provide insights into how ad revenues are holding up, especially amid economic uncertainty. Their advancements in AI, including the expansion of Bard and Google Cloud, are important to follow.
