The Big Tech earnings problem is that estimates can be too high

The last time Big Tech gained earnings, Donald Trump had just begun his term, stocks increased the expectations of the pro-Creation government agenda, and the main concern of investors was the time it would take to turn their artificial intelligence costs into benefits.

Three months later, they face a much more unpleasant image.

Quarterly results this week of Microsoft Corp., Apple Inc., Meta Platforms Inc. and AmazonIncluding will land in a market obsessed with each turn of a trade war that has been erased $ 5.5 trillion from the S&P 500 index. AI’s concerns have had a later place to angry at the possibility of a recession induced by rates, while safe paradises like gold have become the jour’s trade for the investors too ruined to buy actions at a good price.

Even with all the uncertainty, Wall Street does not offer the estimates of the companies very Wiggle Room. Analysts expect the so-called magnificent seven, which also includes Google-Parent Alphabet, Tesla Inc. and Nvidia Corp. – To get a profit growth of 15% on average by 2025, a forecast that has almost not been launched since the beginning of March despite the flame in commercial tensions.

This increases the bets of the four megacaps that report this week, which have almost 20% weighting in the S&P 500. Traders are unlikely to forgive the shortcomings of gains in an already fearsome market climate, despite the fact that strong decreases in the prices of shares of the shares and improved assessments. Industry’s ominous prospects would also be misunderstood, especially if they reinforcedfearsof corporate expenditure silenced in advance.

“Any modicum of a weaker number than expected will cause another wear and tear on concern about rates,” said Phil Blancato, a market strategist in Osaic Wealth, who believes that this year’s weakness in Megacaps is a shopping opportunity.

The markets obtained an early reading about the large amount of technology that could come out last week. Tesla reported -NeThe worst quarterIn years, although traders encouraged signs that CEO Elon Musk intends to separate from government work and focus more on the electric vehicle manufacturer. Alphabetexceeded expectationsBut it offered little future orientation. The Bloomberggg Inx magnifying 7 jumped 9.1% last week in the middle of a larger market rebound, although it still has 15% in 2025.

Benefits and expenses

A deeper look occurs during a two -day stretch that begins with the meta and Microsoft results on Wednesday. Although many executives have declined to predict how their background lines can affect the rates, Wall Street has been doing their own mathematics. From a 22% rate rate modeling by Bloomberg Economics, the lower gross margins could lead to a net contraction of net income of about 7% in 2025 for the S&P 500, compared to the current estimate of consensus of almost 12% growth, Gina Martin Adams wrote.

Another key area of ​​focus will be the expense: the four largest expenses (Microsoft, Alphabet, Amazon and Meta) is expected to pour over $ 300 million in capital expenses in their current tax exercises. While companies have pledged to keep this rate by 2025, Microsoft’ssudden decisionIn order to pause in some data centers, it suggests that cloud computing suppliers can re -evaluate expenses.

Apple, one of the most exposed companies in tariffs due to their dependence on the supply chain in China, can benefit from a promotion of consumer demands that seek to avoid higher prices. However, these sales look like a unique benefit, with rates with demand for demand in future barracks. Amazon faces fares risks for their e -commerce and advertising companies, although a success of profits could affect revenue on their Alta Marge Web Services Unit, according to Jefferies analyst Brent Thill.

That said, there is little expectation for executives to give estimates with any degree of confidence, given the high level of macroeconomic uncertainty. American Airlines Group Inc and Skechers uses Inc. are among the companies they haveabandonedIt foresees this quarter.

Michael Shaoul, founder of Ion Macro Fund, said it will be difficult for executives to convince the market that they have a real view of financial performance in the coming quarters.

“I think the most experienced management will not even try,” he said.

An upward argument, of course, is that the dominant positions of the industry of technology giants and robust balances make them more suitable for supporting an economic fall than other companies, even if the earnings image is cloudy. The SEVEN Magnificents are also less rich after the recent sales: Alphabet, for example, is listed at 17 times estimated benefits over the next 12 months, compared to an average of the last decade of 21 times, according to data collected by Bloomberg.

This could drive the attractiveness of the SEVEN magnificent to Dips buyers, especially if signs of relief in the world trade. Once this came last week, when stocks increased after Trumphe saidAn agreement with Beijing would significantly reduce the rates he has published in the Chinese goods.

But for Keith Lerner, co-head of investment and market strategist at Truist Advisory Services, everything refers to the denominator in the Pre-Year’s relationship.

“The ratings are more interesting here, but we have not yet taken the trigger,” he said. “There are many questions on the electronic side of the equation.”

This story originally presented to Fortune.com

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