The Impact of Artificial Intelligence on Big Tech Earnings Reports

Key Takeaways

• Artificial intelligence (AI) is expected to be a key theme of upcoming big tech earnings.
• Meta Platforms is set to report earnings on Wednesday, while Google parent Alphabet and Microsoft will report on Thursday.
• Analysts anticipate that Meta will give updates on how the company is leveraging AI to power its platform’s recommendation and ranking engines, as well as touch on its recent AI assistant expansion, Llama 3, and its new AI chip.
• Google is expected to provide updates on its initiatives like AI monetization across its enterprise offerings as well as other indications of how the company is leveraging AI.
• Microsoft likely will offer investors insights into the company’s AI projects through its OpenAI partnership, including Copilot and cloud impacts.

As excitement around artificial intelligence (AI) has captured investors’ attention, the emerging technology is expected to be top of mind during big tech’s impending earnings reports. Meta Platforms (META) is set to report earnings on Wednesday, while Google parent Alphabet (GOOGL) and Microsoft (MSFT) will report on Thursday.

Nvidia (NVDA) has established itself as an early leader of the AI era, even recording the largest single-day jump in market capitalization, but analysts expect the next wave of AI optimism to benefit a variety of tech stocks.

“While the first wave of the AI Revolution is being led by the Godfather of AI Jensen and Nvidia along with Nadella/Redmond…now the 2nd/3rd/4th derivatives of this $1 trillion of spending over the next decade is hitting the shores of the tech sector,” Wedbush Securities analysts wrote.

The analysts noted that the firm expects that “1Q earnings will be a major positive catalyst for the tech sector,” naming Microsoft, Alphabet, and Meta, among others, as standouts.

AI-Powered Recommendation and Ranking Engines Updates From Meta After AI Assistant and Chip News

Meta, which is set to report on Wednesday, is expected to offer updates about its AI-powered recommendation and ranking engines as well as its new AI initiatives.

CFRA analysts wrote that the firm anticipates the company’s upcoming earnings report will showcase strong engagement driven by AI. “META has a host of opportunities tied to AI,” the analysts wrote, highlighting the way the company has leveraged the tech for content discovery on its platforms, its AI model, Llama, and its AI assistant, Meta AI.

Meta announced expansions to Meta AI a week ahead of its earnings report. The AI assistant is integrated into Facebook, Instagram, and WhatsApp, and runs on Meta’s most advanced AI model, Llama 3.

The company also recently unveiled its latest custom AI chip, the Next Gen Meta Training and Inference Accelerator (MTIA), which could support its efforts to compete with Microsoft, Google, and Amazon (AMZN) in the ongoing AI race.

Google Updates on AI Monetization and Initiatives Like Gemini and Custom Chips

Google’s parent company, Alphabet, will report on Thursday, with analysts watching for any AI-related updates.

Alphabet shares recently reached a record high during the Google Cloud Next conference as the company made a flurry of AI-related announcements, including Gemini updates, its new custom chip, the Google Axion Processor, and Nvidia Blackwell coming to Google Cloud.

CFRA analysts said they “see incremental opportunities tied to AI monetization” for the company through cloud, search, YouTube, and Google’s other businesses. AI monetization through enterprise business segments was a key theme of big tech’s earnings last quarter.

Bank of America analysts said that AI is a tailwind for Google, noting that while “AI use does pose long-term competitive risks for Google,” in 2024 “Google (and peers) are likely to see AI monetization improvements.”

AI Integrations Expected to Boost Microsoft’s Cloud Sales, Expand Enterprise Customer Offerings

Microsoft also is expected to provide updates about its AI projects and their impacts on the company’s financials. The tech giant has positioned itself as an early AI leader with its partnership with ChatGPT maker OpenAI.

Analysts said that they expect a boost coming from AI contributions for Microsoft. CFRA analysts said that the firm anticipates greater AI contributions and momentum, writing that AI “will support double-digit growth through CY 2025 and multiple expansion potential.”

They added that Microsoft is well-positioned for AI-driven growth, as the company “can monetize AI-related revenue quicker than any other cloud/software provider,” especially with the company’s OpenAI partnership.

Bank of America analysts said the “next catalyst for the stock will be evidence of key AI product cycles ramping such as M365 copilot in coming quarters,” adding that the firm views Microsoft as a “top pick.”

Wedbush analysts said that they “strongly view this as Microsoft’s ‘iPhone Moment’ with AI set to change the cloud growth trajectory in Redmond the next few years.” They added that they believe deployment of Copilot, Microsoft’s AI assistant, could add between $25 billion and $30 billion to the company’s top line by 2025.

In conclusion, as big tech companies prepare to report their earnings, all eyes are on how they are leveraging artificial intelligence to drive growth and innovation across their platforms. The future of technology seems to be increasingly intertwined with AI, and investors are eagerly awaiting updates on how these companies are harnessing this powerful technology to stay ahead in an ever-evolving digital landscape.

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