As technology giants gear up to report quarterly earnings, analysts will be monitoring key trends in cloud computing, device sales and privacy.
Microsoft Corp. kicks off earnings season for tech companies, reporting after the market closes Oct. 24. Alphabet Inc. is set to report results a day later, while Apple Inc. will offer up its earnings report Nov. 1.
Microsoft's cloud boost
Wedbush Securities analyst Daniel Ives expects Microsoft's cloud business to fuel both top-line and bottom-line growth, which could enable the firm to reach a $1 trillion market valuation in the coming months.
Microsoft has been aggressively expanding its cloud portfolio for the past several quarters. Revenue in the company's commercial cloud segment grew 53% to $6.9 billion year over year in the June quarter, driven by the Azure cloud computing platform, which saw an 89% year-over-year jump in revenue. The Office 365 cloud-based subscription service, another key cloud segment, reported a 38% revenue increase during the June quarter.
"Cloud strength on Azure and Office 365 continues to be the fuel in the tank with strong field checks indicating the company could beat commercial cloud expectations by 3%-5%," Ives wrote Oct. 23, saying this could help Microsoft "join the trillion dollar club over the coming months."
If Microsoft reaches the $1 trillion threshold it would join Apple, which became the first public U.S. company to hit the mark Aug. 2, and Amazon.com Inc., which came in as the second publicly traded U.S. company to achieve the valuation Sept. 4.
Google's new devices
Alphabet analysts, meanwhile, will be looking for updates on the company's new smartphone and smart speaker device.
Alphabet's unit Google LLC in October unveiled the Pixel 3 and the Pixel 3 XL, its latest smartphones, which include more advanced photo-taking capabilities and provide access to Google's artificial intelligence-powered tools such as Google Assistant, Playground and Google Lens. Pricing for the Google Pixel 3 starts at $799, while the Pixel 3 XL starts at $899.
Google also debuted the Home Hub, a smart speaker with a smart display that allows access to content on Google's YouTube LLC platform.
Ivan Feinseth, chief investment officer at Tigress Financial Partners, said in an interview that the Home Hub will be crucial in giving Google an edge in the smart speaker market, currently led by Amazon's smart assistant Alexa.
Privacy matters
Google might also need to discuss its delay in disclosing a recent glitch on its Google+ social platform that impacted hundreds of thousands of users. The company said it discovered and fixed the vulnerability in March but did not alert the public at that time since there was no evidence that any of the exposed data was misused and there was no way to determine which users were impacted.
The breach will likely have no impact on advertising revenue and usage on the platform, Feinseth said. While people could "mentally try to digest" potential impacts to their personal data as a result of the breach, he said, it should not "stop them from searching on Google."
Google derives the majority of its total revenue from advertising. During the quarter ended in June, advertising revenue came to $28.09 billion, up from $22.67 billion in ad revenue a year earlier, comprising 86% of Google's consolidated quarterly revenue.
Apple's iPhones and more
For Apple, all attention will be on iPhones.
At its product launch in September, Apple revealed the iPhone Xs, iPhone Xs Max and the iPhone Xr, which resemble the company's flagship iPhone X but vary in size and pricing. The iPhone Xs, starting at $999, has a 5.8-inch screen, which offers more protection against water damage than any other iPhone. The iPhone Xs Max, which starts at $1,099, has a 6.5-inch display, making it Apple's largest iPhone to date. The iPhone Xr is cheaper than its "X-gen" peers, starting at $749. The device has a 6.1-inch screen that uses updated LCD technology.
Apple's services business could also show upward momentum, especially for the iCloud computing service and Apple Music, said Mike Paxton, an analyst with Kagan, a media research group within S&P Global Market Intelligence.
Although recent trading volatility in major tech stocks has raised some doubts about their long-term viability, Paxton overall sees reasons to be optimistic about the industry.
"If I'm an investor and I'm looking at where I want to park my money for growth, technology seems like a good bet," Paxton said.
