Analysts' Ideas of the Week
Earnings Preview: Amazon, Apple, Microsoft, and Meta - Key Indicators for the Tech Landscape
ByFRC Analysts
Disclosure: Articles and research coverage are paid for and commissioned by issuers. See the bottom for other important disclosures, rating, and risk definitions, and specific information.
Highlights
This article examines the upcoming Q1 2025 earnings reports from Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Meta (META), scheduled between April 30th and May 1st, 2025. These industry leaders are expected to provide crucial insights into the evolving landscape of artificial intelligence (AI), cloud computing, and consumer behavior. The following analysis details consensus forecasts, potential positive surprises, and possible negative surprises for each company.
- Consensus Forecasts: For Q1-2025, the market is projecting revenue of US$155.11B (up 8.2% YoY) and EPS of $1.36 (up 38.8% YoY), fueled by steady e-commerce growth, and accelerating demand for Amazon Web Services (AWS) driven by AI adoption.
Potential Surprises:
- AWS Outperformance: Building on its 19% YoY growth in Q4 2024, AWS could exceed expectations if AI adoption accelerates further. Stronger-than-anticipated demand for generative AI services from enterprises expanding their cloud infrastructure could significantly boost revenue.
- Advertising Strength: Amazon's advertising segment, which grew 18% YoY to US$17.3B in Q4 2024, might surprise positively if AI-enhanced ad targeting improves user engagement, potentially pushing Q1 revenue beyond US$18B.
Potential Misses:
- Forex Headwinds: Recent weakness in the US$ could negatively impact international revenue.
- Rising Costs: Increased costs from tariffs or supply chain disruptions may compress profit margins
- Consensus Forecasts: For its fiscal Q2 2025 (corresponding to calendar Q1), Apple is expected to report revenue of US$95B, a modest YoY growth of 0.8%, with services offsetting flat iPhone sales. EPS is forecasted at US$1.60, up 4.6% YoY, reflecting strength in high-margin services like Apple Music and iCloud. Services are expected to grow 14% YoY.
Potential Surprises:
- Services Surge: Services could outperform if Apple Intelligence drives subscription growth beyond the 14% YoY forecast.
- Mac and iPad Recovery: New Mac and iPad releases (e.g., iPad Mini in Q1) could boost revenue above expectations, following the 15% YoY growth seen in both segments in the previous quarter.
Potential Misses:
- iPhone Weakness in China: iPhone revenue, which fell 1% YoY to US$69.14B in Q1 2025, faces risks in China due to competition from Huawei and economic slowdown.
- Wearables Decline: The Wearables, Home, and Accessories category (e.g., Apple Watch, AirPods) dropped 2% YoY to US$11.75B in Q1, and could underperform if Vision Pro sales lag.
- FOREX headwinds
- Consensus Forecasts: For fiscal Q3 2025 (calendar Q1), Microsoft is projected to achieve revenue of US$68B, a 9.8% YoY increase, and EPS of US$3.22, up 9.5% YoY. Growth will be led by the Intelligent Cloud segment, with Azure expected to record 33% YoY growth, contributing 45% of total revenue .
Potential Surprises:
- Azure AI Growth: Azure could beat forecasts if AI services accelerate further. Strong demand for Azure Open AI and enterprise adoption might push revenue past US$28.9B.
- Productivity Gains: Productivity and Business Processes (e.g., Office 365 Commercial) could outperform if LinkedIn or Dynamics 365 sees an unexpected uptake.
Potential Misses:
- Cloud Capacity Constraints: Limited data center capacity, noted by CFO Amy Hood as a Q2 issue, could cap Azure growth, and raising concerns about meeting AI demand.
- Personal Computing Weakness: The More Personal Computing segment could falter if Windows or device sales soften.
Consensus Forecasts: Q1 2025 revenue is estimated at US$41.3B, a 13.2% YoY increase, with EPS of US$5.24, up 11.3% YoY. Growth will be propelled by the Family of Apps (Facebook, Instagram, WhatsApp), with advertising revenue bolstered by AI-driven engagement.
Potential Surprises:
- Ad Revenue Boost: AI-optimized ad algorithms could drive revenue in the U.S. and Europe, where ad revenue per daily active user (DAU) is rising.
Potential Misses:
- User Growth Stagnation: Daily active users, at 3.29B in Q4 2024, may fall short of the 3.31B expected, signaling saturation in key markets like the U.S. and Europe.
- Regulatory Pressures: Ongoing regulatory scrutiny in the EU or U.S. could dampen ad performance, particularly if privacy rules tighten, impacting AI-driven targeting.
Takeaways
Q1 earnings from Amazon, Apple, Microsoft, and Meta will set the tone for the tech sector, with AI and cloud services as focal points. Exceptional performance in these areas could signal resilience against economic headwinds like tariffs or currency fluctuations, potentially stabilizing valuations. Conversely, misses or signs of overinvestment in CapEx without clear returns might heighten volatility.
