With a quarter of the layoffs recorded, investors in U.S. tech companies will examine if they are satisfied if cost cuts boost profits, while companies emphasize how artificial intelligence will be their next growth driver.
Microsoft, Google parent Alphabet, Instagram owner Meta Platforms and Amazon.com all report quarterly results this week.
Together, they command more than $5 trillion in market capitalization, or more than 14 percent of the value of the S&P 500 index.
Between Microsoft, Alphabet and Meta, analysts expect average profit to rise 4.5 percent from the prior quarter, with Meta's bottom line rising 11.8 percent, according to Refinitiv. On average, profits are expected to fall nearly 16 percent from a year ago, with Microsoft expected to underperform with a 0.5 percent decline.
The three companies, along with Amazon, said they would cut 70,000 jobs between November and March in a rapidly weakening economy following a pandemic-led hiring boom. Meta has announced two rounds of layoffs.
Amazon.com, which posted a big drop in fourth-quarter profit due to valuation losses on its investment in money-losing EV maker Rivian Automotive, is set to post first-quarter profit that is expected to jump eightfold. In the immediately preceding quarter. According to research firm YipitData, Amazon's North America sales will beat Wall Street estimates in the first quarter.
Graphic: Big Tech Stocks from the Last Six Months - https://www.reuters.com/graphics/BIGTECH-STOCK/zgvobzmoqpd/Pasted%20image%201682082335284.png
Companies are likely to provide updates on their AI efforts, a trend noticeable since last quarter when chief executives packed earnings calls with references to the technology.
"If last quarter's news from Big Tech was about efficiency and bottom-line improvement, this quarter's news will be more forward-looking around the massive potential of artificial intelligence," said Andrew Lipsman, analyst at Insider Intelligence.
Microsoft has integrated OpenAI's ChatGPT technology into its search engine, Bing, to compete against market leader Google.
Google has started the public release of its chatbot Bard.
AWS, the cloud division of Amazon, the world's largest, has released a suite of technologies aimed at helping other companies build their own AI-backed chatbots, and Meta has released an AI model that can pick out individual objects from an image.
"It's a double-edged sword because these companies are under pressure to improve liquidity in a declining economy," Itau BBA analyst Thiago Kabulskis said.
"There are expectations that companies can create or do more with AI ... Every technology investor expects those companies to be on the frontier."
Analysts said the cloud businesses of Amazon, Google and Microsoft were also more stable than expected.
Shares of Microsoft and Alphabet are up 19 percent so far this year. Apple and Amazon are up 28 percent and 23 percent, respectively. Meta shares are up nearly 77 percent.
Graphic: Big Tech Stocks from the Last Six Months - https://www.reuters.com/graphics/BIGTECH-STOCK/zgvobzmoqpd/Pasted%20image%201682082335284.png
Apple, the world's largest company, is scheduled to report earnings on May 4, dealing with declining demand for iPhones and MacBooks as consumers curb spending.
With a quarter of the layoffs recorded, investors in U.S. tech companies will examine if they are satisfied if cost cuts boost profits, while companies emphasize how artificial intelligence will be their next growth driver.
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