Key Takeaways
Tech giants Microsoft, Apple, Tesla, and Meta are set to report earnings , with strong growth expected despite recent challenges.
Earnings season is starting amid the DeepSeek turmoil and after ASML showed steady demand for semiconductor manufacturing despite rising costs.
Microsoft‘s cloud business is driving growth, while Apple’s services continue to expand despite weaker iPhone sales in China. Tesla stock may be volatile, while Meta will benefit from AI-driven advertising growth.
Analysts expect a strong quarter for Microsoft despite a slowdown in growth. Revenue is projected to reach $68.9 billion, up by 11% from last year, while earnings per share (EPS) are expected to rise 6.8% to $3.13.
The Intelligent Cloud segment, including Azure, will drive significant growth with a projected revenue of $25.9 billion, a 20% increase.
However, these results would mark Microsoft’s slowest earnings and sales growth in several quarters. The acquisition of Activision Blizzard is expected to boost its gaming division, which saw a 61% surge in Xbox content and services revenue last quarter.
Investors will be focused on whether AI tools like Copilot can maintain their momentum and translate into substantial revenue. This includes Azure’s performance amid tough competition from AWS and Google Cloud and an update on Microsoft’s diversification strategy, particularly in gaming and productivity software.
Apple’s upcoming earnings report is expected to show revenue of $124.2 billion and EPS of $2.35. Services revenue is projected to continue growing, making up about 20% of total revenue, with a 0.6% improvement in gross margins.
However, weaker growth in iPads, wearables, and iPhones may affect overall performance. The company will also be looking to offset weakness in China’s iPhone sales, which have dropped by 18%, with potential growth in regions like the US, Europe, and Asia.
Despite challenges in hardware sales, Apple’s services segment has shown resilience, with consistent double-digit growth. Markets will closely monitor the company’s AI initiatives, such as generative AI integration, to see if they can enhance the user experience and drive further revenue.
Apple has been the underperformer among the Magnificent Seven stocks this year, posting a 5.5% negative return . Still, its valuation remains attractive compared to peers, and investors will be watching for signs of recovery.
The market is expecting a significant price move for Tesla stock, with an implied volatility of 9% this week. Tesla has only beaten EPS and revenue estimates once in the past three quarters. However, expectations are higher for this earnings report, with an estimated EPS of $0.77 and $27.14 billion in revenue.
Tesla’s stock surged after Trump’s 2024 election win, driven by speculation about Musk’s government involvement. However, uncertainty remains about Tesla’s future growth plans, with executives promising new affordable vehicles in 2025 and continued development of a Robotaxi product.
Implied volatility suggests a stock price move of around $33.74 this week, and the March options cycle shows an expected move of $67.83, indicating potential for significant stock price fluctuations following the earnings release.
Meta Platforms will release its Q4 2024 earnings after today’s market closes. Following a 45% surge in its stock price over the past year, fueled by investments in AI and strong advertising performance, investors are eager to see if Meta can maintain its growth amid new competitors like DeepSeek.
Analysts expect Meta to report revenue between $45-48 billion, up 17-20% year-on-year, and earnings per share of $6.75, marking a 27% increase. Advertising revenue, which makes up 98% of total sales, may remain strong, bolstered by AI-driven tools and higher ad prices.
Meta’s ongoing investments in AI are reshaping its advertising business. Tools like Advantage+ and generative AI improving ad targeting and effectiveness.
The company also saw a 5% increase in daily active users and benefited from a focus on cost efficiency, positioning it well for continued success despite growing competition.
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, said:
“I was clearly not alone thinking that Monday’s AI selloff triggered by DeepSeek news was overdone. Investors rushed back to the market to buy Nvidia shares at a discount. There was a strong dip in buying below the $120 per share. And the stock price closed the session 9% up.”
“The DeepSeek shock is probably behind without further damage until investors and the Big Tech leaders get more clarity on whether DeepSeek managed to create a model this cheaply,” he said.
Together, Amazon, Meta, Alphabet, and Microsoft will spend up to $300 billion on AI this year . Earnings growth may slow to less than 20% in 2025.
Derren Nathan, head of equity research, Hargreaves Lansdown: “Given the emergence of DeepSeek investors, minds will be on the longer-term outlook for advanced semiconductor manufacturing equipment.”
For instance, the demand for ASML’s machines should benefit from the growing appetite for computing power. “But how much of that comes from the cutting edge ‘High NA’ machines remains to be seen,” the expert said.
“Export controls are one thing high on people’s minds. But, for now, the impact feels well-baked into guidance. Any weakness in China will likely be offset by strength in the U.S., Taiwan, and beyond,” Nathan added.
ASML Holding reported a decline in net income for 2024 despite “record” fourth-quarter revenue, as research and development expenses rose.
Net income for 2024 dropped by 3.5% to €7.57 billion, compared to €7.84 billion in 2023. This was despite a 2.5% increase in total net sales, reaching €28.26 billion from €27.56 billion.
Cost of sales rose by 2.6%, and R&D costs increased by 7.7% to €4.30 billion.
Fourth-quarter revenue surged by 21% to €9.26 billion, driven by upgrades and shipments of High NA EUV systems.
ASML proposed a final dividend of €1.84 per share, bringing the total dividend for the year to €6.40. This represents a 4.9% increase from 2023.
CEO Christophe Fouquet highlighted AI growth as a key industry driver while noting that market dynamics do not benefit all customers equally.
For Q1 2025, ASML expects net sales between €7.5 billion and €8 billion. Total 2025 net sales may range between €30 billion and €35 billion, reflecting up to 21% annual growth.
“ASML’s fourth-quarter results should provide an island of calm amidst a sea of panic for investors in the semiconductor industry[…] Given the downward revision in the 2025 outlook in the third quarter, a further cut was never really on the cards. The strong order inflow in the final part of 2024 provides some hope that 2025’s guidance can be beaten.”