Trevor Jennewine, The Motley Fool
5 min read
The five largest AI hyperscalers — Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Oracle — reported about $414 billion in capital expenditures last year, up 70% from the prior year. Those companies expect capital expenditures to climb nearly 70% to $700 billion this year.
However, whether or not that spending ultimately leads to greater profitability depends on the extent to which customers adopt AI software and services. Investors will get insight into that situation today, because four of those hyperscalers report financial results. Good news could drive the S&P 500 (SNPINDEX: ^GSPC) higher, and bad news could drag the benchmark index lower.
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Here’s what investors should know.
Four hyperscalers at the center of the AI boom report quarterly earnings today
Alphabet, Amazon, Meta Platforms, and Microsoft account for about 18% of the S&P 500, which means the index’s performance is heavily influenced by those four hyperscalers. Here’s what Wall Street expects when they report earnings after the stock market closes on Wednesday.
Alphabet
The consensus estimate says Alphabet’s revenue will increase 19% to $117.2 billion and GAAP earnings will drop 7% to $2.62 per share. Investors will watch the core advertising business as a gauge for the broader economy, but they will focus on Google Cloud, where sales growth has accelerated in three straight quarters because of strong demand for Gemini models and custom artificial intelligence chips called tensor processing units (TPUs).
Amazon
The consensus estimate says Amazon’s revenue will increase 21% to $188.9 billion and GAAP earnings will increase 3% to $1.65 per share. Investors will look for margin expansion in the e-commerce division, which should materialize over time because of investments in AI and robotics. Investors also want to see strength in the cloud computing division, where revenue growth accelerated to 24% in the fourth quarter, the fastest growth in three years.
Meta Platforms
The consensus estimate says Meta Platforms’ sales will increase 31% to $55.5 billion and GAAP earnings will increase 5% to $6.74 per share. The company’s investments in AI have so far boosted engagement across its social media properties, leading to strong demand from advertisers, but investors want to see that trend continue or even intensify. They will also want to know how Meta’s newest AI model, Muse Spark, might move the financial needle.
