Tech stocks face a major test this week as five of the biggest companies in the market (including four of the increasingly out-of-favor Magnificent 7) report earnings. Microsoft (MSFT), Meta Platforms (META) and Qualcomm (QCOM) report on Wednesday, July 29. Apple (AAPL) and Amazon (AMZN) follow on Thursday, July 30.
These reports come at an important time. The Nasdaq is down about 8% from its June 2 high and approaching correction territory. Investors have grown increasingly worried about elevated valuations, heavy spending on artificial intelligence and how long it will take for that spending to pay off.
Because of that, simply beating Wall Street’s estimates may not be enough. Investors also want clear signs that AI investments are leading to faster growth, higher profits, or, at a minimum, a return on investment that in any way justifies the hundreds of billions of dollars of spending by hyperscalers. As we’re seeing in AI infrastructure stocks, the AI narrative alone isn’t enough to continue driving growth.
To wit, the Roundhill Memory ETF (DRAM) has shed 40% since its June 22 highs, while South Korea’s KOSPI Index is lower by 34%, and former AI build-out darling Corning (GLW) has fallen 53% in exactly a month (including a 16% one-day decline as I write this).
The order backlogs, data center plans and hyperscaler CapEx projections haven’t changed in a month, but what the market is demanding most assuredly has.
So let’s take a closer look at the five tech darlings reporting in the next few days and see what, if anything, they can report to satisfy the market’s scrutiny.
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5 Tech Darlings Reporting This Week
1. Microsoft
Microsoft reports after the market closes on Wednesday. The biggest question is whether growth in its Azure cloud business can support the company’s huge spending on AI.
Microsoft doesn’t break out spending on its AI tools, so Azure is one of the best ways to measure demand growth. Azure’s growth rate will offer some hard (if imperfect) numbers for investors to latch on to, while management’s commentary about data center demand will also play a role.
Microsoft 365 Copilot will also be in focus. The AI assistant has a lot of potential, but investors want proof that more companies are paying for it and using it across their teams (as opposed to just being counted as users because it’s been shoehorned into so many Microsoft products).
As with so much of the AI trade of late, spending is the key issue. Microsoft is plowing tens of billions of dollars into data centers, computer chips and energy. If spending keeps rising while cloud growth slows, the stock could come under pressure. Strong Azure results, however, could help lift the wider software sector.
2. Meta Platforms
Meta also reports Wednesday. The company must show that its AI spending is improving its main advertising business, not just raising costs.
For all of its futuristic framing (remember the Metaverse?), Meta remains an ad sales company at heart. Thus, investors are going to want to see improvement in advertising sales, user activity and engagement across Facebook and Instagram.
And while AI integration may bolster those metrics, the key question is whether that’s enough. Given the massive spending by Meta, it’s likely that investors are going to want to see more evidence that it’s becoming a legitimate platform for AI access or deployment.
For Meta, it may not be enough to just pick up a few percentage points of productivity improvement, given their massive expenditures.
3. Qualcomm
Qualcomm reports after Wednesday’s closing bell. While the results should offer us some clues about demand for smartphones, cars, computers and other connected devices, the real question boils down to AI-driven growth.
Qualcomm announced in late June that it expects to generate $15 billion in sales from its data center business by 2029 as the company strives to become competitive in areas outside of smartphones.
At the same time, comments surrounding the company’s Snapdragon chips (which help power both AI-native personal computers and AI wearables) offer a unique insight into whether AI-powered tech is making inroads with consumers directly.
4. Apple
Apple reports Thursday. Unlike some of its competitors, Apple has taken a slower and more
deliberate approach to AI spending, renting access to models and capacity rather than building it out. It’s helped make Apple the most valuable publicly traded company in the world.
The iPhone will remain the main focus. Investors will watch sales in China, where Apple faces
strong local competition. They will also look at Services growth, profit margins and the company’s forecast for the next quarter.
Apple Intelligence may be one of the biggest topics on the earnings call. While Apple’s spending restraint is making it a darling at the moment, that hasn’t always been the case. If management takes the wrong stance on Apple Intelligence now, that restraint may end up making Apple looking like they’re simply late to the party.
5. Amazon
Amazon wraps up our list with results on Thursday. Its report will give investors more insight into cloud computing, online shopping, digital ads and consumer spending.
Amazon Web Services, or AWS, will likely get the most attention. As with Meta and Microsoft, it comes down to whether Amazon can show a clear path from the company’s huge AI spending to meaningful revenue growth.
As with Meta, Amazon needs to demonstrate more than just efficiency gains or marginal earnings improvement. At this point, investors really seem to be looking for evidence that these moonshot bets are actually paying off.
Amazon may have the easiest road here, as increased business spending on AWS would show evidence that businesses are continuing to spend on AI tools, even if the products and services that are being built haven’t fully trickled down to the consumer level.
Together, these five reports will give investors a broad look at the health of the tech sector. After the Nasdaq’s recent decline (and the AI trade specifically), the market wants proof that large AI investments are leading to real financial results.
If these companies don’t deliver, it’s worth asking what, if anything, will convince investors that the AI trade is back on track.
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