Mega Cap Tech Stock Earnings Spur Market Optimism

This week’s earnings reports from the world’s biggest technology companies show that they are navigating a more challenging economic environment and boosting market sentiment for the rest of the year.  Results late Thursday from Amazon.com (AMZN) and Apple (AAPL) were better than expected and added to this week’s gains in U.S. equity markets.

This week's earnings from Amazon.com, Apple, and Microsoft (MSFT) have boosted the Nasdaq 100 ($IUXX) (QQQ) by 11% this month and added about $1.5 trillion to the index’s market value.  That puts the Nasdaq 100 on pace for its largest monthly gain since November 2020, despite weak earnings results from Meta Platforms (META).

Amazon.com delivered a blowout report and gave a strong sales forecast, easing concerns about inflation's impact on consumer spending.  Amazon reported Q2 net sales of $121.23 billion, better than the consensus of $119.53 billion, and forecast Q3 net sales of $125 billion-$130 billion, the midpoint above the consensus of $126.97 billion.  Amazon is up more than +12% today on the news and is on track for its best monthly performance since April 2020.

Apple’s quarterly results beat expectations, even giving concerns over supply chain issues and falling consumer spending.   Apple reported Q3 revenue of $82.96 billion, stronger than the consensus of $82.76 billion.  Apple also said it is seeing signs of supply chain improvement in China, which bodes well for the coming months, which are seasonally its biggest quarters.

Although the earnings results from Microsoft were mixed, with both sales and earnings coming in below expectations due to foreign exchange headwinds, the stock still managed to move higher after it gave a robust forecast for the fiscal year, with revenue and operating income seen increasing at a double-digit pace. Winslow Capital said, “in this uncertain environment, we’re narrowing our focus to the stock names that can beat expectations or guide in line.  That means names like Alphabet, Amazon, or Microsoft.”

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