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Will Cloud Computing Achievements Help Big Tech Earnings?

Cloud computing has become a major focus in the market in recent years, with the technology enabling businesses and consumers to achieve digital feats that otherwise seemed impossible.

And with many tech companies releasing quarterly results in the coming weeks, market participants will no doubt focus on cloud computing spending trends among the recent headwinds.

For the technology sector as a whole, Q2 earnings are expected to be down -4.4% on revenues down -0.1%. This is illustrated in the graph below.

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Image source: Zacks Investment Research

For those interested in an in-depth analysis of Q2 earnings, check out our most recent earnings preview -> Will Big Tech’s earnings keep the rally going?

How expectations currently stack up for some of the major cloud players, such as Amazon (AMZ extension Free Report) , Alphabet (GOOGL Free report) and Microsoft (MSFT extension Free report) ? Let’s take a closer look.

Amazonia

Amazon has enjoyed a dominant position in cloud computing due to the rapid growth of Amazon Web Services (AWS). AWS generated $21.4 billion in net sales during the recent quarter, improving 16% year over year and exceeding the Zacks Consensus estimate of 1.4% after two consecutive errors.

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Image source: Zacks Investment Research

Operating income within AWS took a hit during the recent quarter, reporting $5.1 billion from a year-ago figure of $6.5 billion due to higher expenses within the segment. The upcoming press will give us a better idea of ​​AWS’s profitability picture, a development investors have been watching closely amid the headwinds of tech spending.

As for our expectations, the Zacks Consensus estimate for AWS net sales is $21.5 billion, up 9% from year-ago sales of $19.7 billion. Analysts were moderately bullish for the quarter to report overall, with the estimate of $0.34 per share up 3% since April and implying a 240% year over year improvement.

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Image source: Zacks Investment Research

Alphabet

For investors, Google Cloud made its first-ever profit in the first quarter of 2023, reporting revenue of $7.4 billion and reflecting 27% year-over-year growth. The company has consistently surpassed the Zacks Consensus estimate for cloud revenue lately, chaining three consecutive beats.

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Image source: Zacks Investment Research

And for the next release, our consensus estimate for Google Cloud revenue is $7.7 billion, implying 22% growth and reflecting a slight cooling from recent year-over-year sales growth rates.

Additionally, many will be closely tuned to Alphabet’s advertising results and commentary on current spending trends within. We expect the tech titan to report $56.9 billion in ad revenue, reflecting a modest 1% improvement over the year-ago quarter.

Microsoft

In Microsoft’s latest third-quarter release, the strength of the cloud helped deliver better-than-expected results, with Intelligent Cloud revenue growing 16% year over year to $22.1 billion.

Following the better-than-expected cloud results, CEO Satya Nadella said: “Across the Microsoft cloud, we’re the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.” Given that AI is Wall Street’s shiny new toy, it’s reasonable to expect the company to spend a lot of time discussing the technology in a cloud context.

For the next release, Zacks Consensus estimate for Intelligent Cloud revenue stands at $23.7 billion, suggesting a 13% improvement over the year-ago quarter. Like those above, the company has experienced a slight cooling in regards to year-over-year cloud revenue growth rates.

Bottom line

With big tech earnings looming, many have focused on cloud spending trends.

And this week we have Microsoft (MSFT extension Free report) and Alphabet (GOOGL Free Report) on the agenda, both scheduled to reveal quarterly results on Tuesday, July 25thafter the market closes.

Next week, August 3rdrdwe will hear from Amazon (AMZ extension free report).


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Image Source : www.zacks.com

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