Microsoft and Alphabet Earnings: Market Movers in Focus

Key Points:

• Microsoft and Alphabet are on deck for earnings on Tuesday after the bell. 
• Big Tech’s results have the influence to move the S&P 500. 
• Microsoft could be facing a lawsuit from Elon Musk in the current quarter. 

Big tech is in the lineup for quarterly earnings this week, including multi-trillion-dollar market cap companies Microsoft and Google parent Alphabet. All eyes will be on how artificial intelligence (AI) fuels results. Both tech giants are expected to report their results on Tuesday after the closing bell and have the potential to move the markets, so here’s a preview. 

Microsoft Preview 

Microsoft will be reporting its fiscal Q3 results, and Wall Street is mostly bullish. Investors are anticipating that Microsoft will exceed earnings expectations, while analysts are targeting revenue in the $51.1 billion range compared to $49.4 billion in the year-ago period. 

Microsoft could come under some pressure in its operating margin, resulting in EPS of $2.24 vs. $2.22 in the year-ago period. A trend to observe is whether Microsoft’s IT clients are spending on IT, which could be a gauge for the broader economy. 

While MSFT shares are trading at 27x EPS, analysts expect that it has more runway for gains. In recent days, Raymond James maintained its buy rating on the stock with a price target of $310. 

Microsoft could be in a heap of legal trouble in the current quarter. Twitter boss Elon Musk appears to be gearing up for a lawsuit against the software make as the AI wars heat up. According to Musk, Microsoft “trained illegally using Twitter data,” in response to which he said, “Lawsuit time.” 

MSFT investors will also watch to see what UK regulators decide on the company’s planned Activision Blizzard acquisition. 

Google Preview

Google parent company Alphabet is gearing up for its Q1 results. All eyes will be on the mega-tech company’s ad sales. According to Mark Mahaney, an analyst at Evercore, Alphabet comes to come up short on ad sales based on mixed “intra-quarter checks” for search. 

In addition to ads, investors will be closely watching the Google Cloud Platform, the sales for which are widely expected to slow. 

Wall Street is looking for EPS of $1.08, down slightly amid a shrinking operating profit margin despite job cuts. Revenue is pegged at approximately $68.9 billion, marginally better vs. year-ago results.