Source: Wall Street News Author: Yuan Wei

At a time when the S&P 500 index is experiencing its worst week in more than a year, the highlight of the US stock earnings season is about to begin.

Next week, about 178 S&P 500 companies will announce their results. The market capitalization of these companies accounts for more than 40% of the total market value of the index. However, the biggest expectations still come from large technology companies. Tesla, Meta, Microsoft, and Google's parent company Alphabet, which are among the “Big Seven” in US stocks, will all release financial reports next week.

According to data from a media think tank, the profits of the “Big Seven Tech” are expected to soar 38% in the first quarter. If these seven companies are excluded, the profits of the remaining companies in the S&P 500 index are expected to fall by 3.9%.

But Wall Street expects this trend to reverse as this year progresses. According to data from a media think tank, the profits of these seven companies are expected to increase by 17.5% in the first quarter of 2025, while the profits of the remaining companies in the S&P 500 index are expected to increase by nearly 18%.

Wall Street is less optimistic about this earnings season

During the first quarter of this year, the S&P 500 index had a cumulative increase of 10.16%. However, according to data compiled by the media, Wall Street strategists were less optimistic about the performance of US stocks in the first quarter: the overall profit of S&P 500 companies is expected to increase by only 2.4% year over year.

However, this situation can also be interpreted as positive in reverse: in a context where the market already has pessimistic expectations, if the performance of US stock companies is impressive, it will give the market confidence to grow further — in fact, this scenario was already happening three months ago: at the time, the market anticipated poor performance of US stocks in the fourth quarter of last year, but the actual earnings performance far exceeded expectations, thus driving up the market.

Analyst Wendy Soong said, “As traders expect the Federal Reserve to cut interest rates later this year, this may lead to stronger consumer spending and economic activity, which in turn will lead to better profit growth and higher share prices.”

Four of the Big Seven tech companies are about to debut

Currently, US technology stocks are being sold off, and the Nasdaq 100 Index recorded its biggest weekly decline since November 2022. Even Nvidia, the darling of artificial intelligence, was not spared. The stock price plummeted 10% on Friday, and the market capitalization evaporated by $21.2 billion.

Under this climate, the performance of tech giants will also be tested by the market next week. The first to debut is Tesla, one of the Big Seven, which will announce its financial results for the first quarter of 2024 next Tuesday.

Barclays analyst Dan Levy predicts that Tesla will show its first negative free cash flow since the first quarter of 2020, and gross margin after deducting supervised credit may drop to 14.6%, down 2.6 percentage points from month to month.

Meta's new first-quarter earnings report will be released early Thursday morning. The market expects Meta's revenue to grow 26% in the first quarter, with net profit almost double that of the same period last year.

Microsoft will release its earnings report in the early hours of Friday morning. The market expects Microsoft's revenue and profit to grow by more than 15% in the first quarter.

Google's parent company Alphabet will also release financial reports on Friday. Although Google's artificial intelligence plans are facing doubts, the market still expects its first-quarter revenue to increase by nearly 14% and net profit by more than 30%.

Additionally, Amazon is expected to release its first quarter earnings report at the end of April, and Apple and Nvidia will release earnings in early and mid-May, respectively.

edit/lambor