Big tech stalwarts Microsoft Corp., Meta Platforms, Inc., Intel Corp. and Amazon, Inc. reported better-than-expected results last week, and, recently, an analyst at Wedbush weighed in on the outlook for the tech sector against the backdrop of the companies’ performances.
Despite the skepticism heading into the first-quarter earnings, the “narrative for the tech sector is becoming clearer and clearer,” wrote analyst Daniel Ives in a note.
Ives noted that cloud growth has been stable and very resilient, digital advertising has been holding up and seeing moderating tailwinds, and enterprise IT budgets have been showing modest growth despite some glaring weak spots. Amazon’s AWS has been losing its share of the cloud space to Microsoft as more enterprises align with the latter company, he added.
The analyst shrugged off last week’s softer earnings from cybersecurity names such as Tenable Holdings, Inc. and Cloudflare, Inc.
Citing channel checks, the analyst wrote that demand trends have been more or less stable. He said cybersecurity stalwarts such as Palo Alto Networks, Inc., Crowdstrike Holdings, Inc., Fortinet, Inc. and others are likely holding up well.
Ives also reiterated his view that the tech sector is poised for another 10% this year.
The Street is looking past the near-term period of macro uncertainty and trying to zero in on tech winners on the other side of the valley, Ives wrote.
Despite aggressive cost cuts, companies are still splurging on artificial intelligence. Over the next decade, the AI space will represent an $800 billion market opportunity, he added.
Microsoft is leading the AI arms race, while Alphabet, Inc. is just behind, he added.
“This week, all eyes on the Street will be on Apple’s earnings Thursday night,” Ives wrote.
“Apple will be a telling tale around consumer demand trends seen in the U.S. and especially China which remains a very debatable point on the Street,” the analyst added.
Apple reported first quarter earning at $117.2 billion that was down 5% from a year ago. The board of directors had declared dividends of $0.23 per share of the company’s common stock.
Meanwhile, iPhone units appear very stable and will likely beat estimates, and the services business is showing strength from Apple’s “golden installed base,” he wrote.
Other produces have included Macbooks, iMacs, AppleTV, and software as a service subscription that includes Apple Music.
“As we all continue to navigate a challenging environment, we are proud to have our best lineup of products and services ever, and as always, we remain focused on the long term and are leading with our values in everything we do,” said Tim Cook, Apple’s CEO. “During the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base.”
Produced in association with Benzinga
