Written by Norman Isaac Mwambazi

What to expect this week: Apple, Microsoft, Google, Facebook, Amazon set to release glittering earnings reports

This is arguably going to be the biggest week in the stock market this quarter as Big Tech companies like …

This is arguably going to be the biggest week in the stock market this quarter as Big Tech companies like software and hardware manufacturer Microsoft Corporation (ticker: MSFT), iPhone and Mac maker Apple Inc. (ticker: AAPL), social media giant Facebook (ticker: FB), e-commerce and cloud computing trendsetter Amazon.com Inc. (ticker: AMZN), Google parent company Alphabet Inc. (tickers: GOOGL, GOOG), and automaker Tesla Inc. (ticker: TSLA) among other big companies will be releasing their earnings report for the second year of the 2021 fiscal year (Q2 FY2021).

These big companies almost set the tone for the stock market’s performance due to their huge volume and multibillion-dollar market caps; their earnings reports send shockwaves throughout the broad stock market as investors rush to add these stocks to their portfolios with the expectation of significant returns. Big Tech companies go big in their reports, and so do consensus analysts for their expectations.

The five Big Tech companies (Apple, Microsoft, Google, Amazon, Facebook) are not called “Big Tech” for nothing. These giants make up an enormous one-fifth (22% to be exact) of the market capitalisation of the benchmark S&P 500 Index as of the end of Q2 FY2021. In Q1 FY2021, Big Tech companies provided 9.7% of the total sales of the S&P 500 index and 17.8% of the total profit of the index. However, this profit was a slight decrease from 2020, in which year they contributed 23.8% of S&P 500’s full-year earnings and accounted for 9.1% of the total sales of the index.

An analysis of how these stocks have been performing in the past three months shows that these five companies are expected to report significant earnings and sales for Q2 FY2021. According to FactSet, Wall Street analysts expect Big Tech to collectively report nearly $60 billion in profit on sales of more than $310 billion.

These are big expectations, and if they are achieved or beaten, they will be an addition to the 88% of S&P 500 companies that have surpassed consensus analysts’ estimates for Earnings Per Share (EPS); and 86% of them have beaten revenue expectations with almost a quarter of the index reporting, according to data provided by FactSet.

Facebook, which joined the trillion-dollar club last month, and search giant Google are broadly expected to outperform estimates after fellow social media ad-sales companies and microblogging service: Twitter Inc. (ticker: TWTR) and Snap Inc. (ticker: SNAP) released earnings reports last week on Thursday that exceeded expectations. The release of their Q2 FY2021 reports sent their shares surging in late-hours trading on Thursday and pre-market trading on Friday morning and led to the rally of Facebook and Alphabet’s stock to record highs in the same period.

Investors have deemed company forecasts and estimates more vital in the previous quarter as they wait to see how long corporate earnings will keep flourishing. During the COVID-19 pandemic, Big Tech companies have been careful with their forward-looking financial statements, with Apple stopping the release of guidance during the pandemic. This decision will obstruct the annual investor discussions and consumers that rotate around the upcoming release of the company’s flagship product, the iPhone.

Like Apple, Microsoft is also expected to provide official financial guidance for the next quarter instead of the entire year like the company has been doing for the previous years.

In the recent past, analyst forecasts about Big Tech have undershot their actual performance, and in the end, these companies have highly beaten expectations.

One of the companies that fall in this category is retail giant Amazon, which exceeded its sales forecast by a whopping $2.5 billion in Q1 FY2021. This was 2.3% more than what analysts expected the company to make in the first quarter of the 2021 fiscal year. That was the closest the company came to accurately meet the prediction in Big Tech’s $1.2 trillion pandemic year. Previously, Amazon had beat its own quarterly guidance by 3.8%, 3.4% and 9.8% in the previous three quarters.

Apple, Google, and Microsoft report their Q2 FY2021 earnings tomorrow, Tuesday, July 27, 2021, after the close of markets. This will be followed by Facebook on Wednesday, July 28, 2021, coming off an outstanding performance in June, and Amazon will wrap up the Big Tech earnings week by releasing its report on Thursday, July 29, 2021.

Another company that is releasing an earnings report that investors are highly anticipating is automaker Tesla. Since January, when it hit an all-time high that briefly made CEO Elon Musk the richest man globally, Tesla’s stock has been steadily tumbling, which recently signalled a death cross. Musk has been ridiculed and asked to focus more on Tesla than cryptocurrency because his tweets about Bitcoin and Dogecoin have caused enormous price fluctuations.

When Tesla releases its earnings report later today in after trade hours, it is expected to be about its performance in the past three months. However, Musk may throw in a comment or two about the company’s decision to abandon bitcoin as a mode of payment for Tesla cars. Whether he does or not, investors will be at the edge of their seats in anticipation of the release of the company’s results.

In addition to that, there is plenty else to comment on with regards to Tesla; there’s the departure of Jerome Guillen, whose tenure spanned over 10 years.  Also, the fact that the gross-margin effects of the continuing semiconductor shortage need to be addressed is currently an issue across the automotive industry.

Recently, Musk announced that Superchargers would be made available to electric vehicles (EVs) from other manufacturers, the details of which are expected to be divulged today. He will also address the company’s competition in China.

Notable companies releasing their earnings this week are; 

Monday: Tesla, Hasbro Inc. (HAS), 

Tuesday: Apple, Google, Microsoft, Visa Inc. (ticker: V)

Wednesday: Facebook, Ford Motor Co. (ticker: F), Qualcomm Corp. (ticker: QCOM), Mattel (MAT), Boeing (ticker: BA)

Thursday: Amazon, Merck & Co. Inc. (ticker: MRK)

Friday: Caterpillar Inc. (ticker: CAT), Chevron Corp. (ticker: CVX), and Proctor & Gamble Co. (ticker: PG).

This week is going to be a busy one. Apart from Big Tech reporting, fast food companies like McDonald’s Corp. (ticker: MCD), Shake Shack Inc. (ticker: SHAK), and Yum Brands Inc. (ticker: YUM), and Wingstop Inc. (ticker: WING), among others, are all reporting this week.

In total, a third of the 30 Dow Jones Industrial Average (DJIA) companies and more than a third of the benchmark S&P 500 index are expected to report earnings this week.