AI trade takes center stage as Big Tech earnings season kicks off

Tech earnings season kicks off in earnest on Wednesday, when Google parent Alphabet (GOOG, GOOGL) reports its results after the bell. And Wall Street’s two favorite letters will once again dominate the conversation: AI

From continued capex spending to questions about if and how those huge cash outlays are driving new revenue streams, AI will seemingly be all investors and analysts talk about. But Big Tech companies are also facing a variety of additional challenges this quarter, ranging from Google’s antitrust trial to Microsoft’s (MSFT) relationship with OpenAI (OPAI.PVT) to Apple’s (AAPL) ongoing AI troubles.

And while AI darling Nvidia (NVDA) won’t report its earnings until Aug. 27, leaving the most anticipated disclosure of the season more than a month away, there will be plenty of news and announcements to track in the interim. And it’s certain to make for a busy earnings cycle.

Big Tech’s billions of dollars in investments into AI data centers helped power Nvidia’s massive growth over the past few years, but Wall Street is looking to see how much that spending is paying off.

During Amazon’s (AMZN) last earnings call, CEO Andy Jassy said the company’s AI business “has a multibillion dollar annual revenue run rate, continues to grow triple-digit year-over-year percentages, and is still in its very early days.”

What’s more, Jassy said prior to the latest generation of AI, Amazon believed AWS had a chance to be a multi-$100 billion run rate business, and now the company believes it can grow even more beyond that. But Amazon will need to show off how exactly it plans to get there to keep investors happy when it reports on July 31.

Google, which reports today, and Microsoft, which reports July 30, will also have to prove their AI plans are paying dividends. Google has added its Gemini model to its Workspace productivity software and across its search products, including its AI Overviews and AI Mode.

Read more: Live coverage of corporate earnings

During the company’s Q1 earnings call, senior vice president and chief business officer Philipp Schindler said AI Overviews searches monetize at the same rate as standard search queries, which leaves room for improvement. The company said its AI expansion and Google Cloud Platform Core products also helped power a 28% increase in its Cloud segment revenue.

But questions remain about how it will successfully monetize its AI Mode offering and fend off challenges from OpenAI, Anthropic (ANTH.PVT), and Perplexity (PEAI.PVT).

Microsoft has benefited handsomely from its early investments in ChatGPT creator OpenAI. The company attributed 16 percentage points of growth in its Azure and other cloud services revenue to its AI offerings.

It’s not all sunshine and rainbows for Microsoft and OpenAI, though. The companies are at odds over how OpenAI should move forward with its plan to transform into a public benefit corporation and what that means for Microsoft’s equity in the new organization.

Then there’s Meta (META), which said it’s already seeing positive signs from its AI investments, including longer user engagement and its advertising business.

“We’re testing a new ads recommendation model for Reels, which has already increased conversion rates by 5%,” CEO Mark Zuckerberg said during the company’s last earnings call. “And we’re seeing 30% more advertisers are using AI creative tools in the last quarter as well.”

And the company isn’t letting up on spending. Last week, Zuckerberg said Meta will spend hundreds of billions of dollars on data centers, including one that will be as large as a chunk of the island of Manhattan to power what the executive refers to as “personal” superintelligence. What exactly that means remains to be seen. Hopefully, Zuckerberg will add clarity when the company reports its results on July 30.

Apple’s earnings will focus on iPhone sales, as they always do, but investors will also be looking for insights into CEO Tim Cook’s plans to expand his company’s AI capabilities. So far, Apple, which also reports on July 31, has rolled out its Apple Intelligence platform across its various hardware offerings, but it still hasn’t managed to impress Wall Street due to delays in its AI-powered Siri.

According to Bloomberg’s Mark Gurman, the company is considering using third-party AI models to bring Siri up to speed with the latest AI functionalities, but there’s no word from Apple on the potential move.

Apple rivals Google and Samsung, meanwhile, have been releasing ever more advanced AI capabilities via Google’s Gemini AI, putting further pressure on the iPhone maker.

Compounding Apple’s AI issues is the fact that Apple is losing AI talent to its competitors. According to Gurman, Ruoming Pang, Apple’s head of AI models, left the company for Meta. Two other Apple AI employees, Mark Lee and Tom Gunter, followed shortly thereafter.

While Apple is unlikely to announce any big AI plans during its earnings call, it will be interesting to see if Cook provides deeper insights into how customers are using Apple Intelligence and their overall satisfaction rate.

Nvidia CEO Jensen Huang at an event in Paris on June 11. (Sarah Meyssonnier/Pool via AP) · ASSOCIATED PRESS

Nvidia is earnings season’s main event

Nvidia will close out Big Tech’s earnings when it reports after the closing bell on Aug. 27. It’s hard to overstate how big Nvidia’s earnings announcements have become. The company surpassed the $4 trillion market cap mark in July and doesn’t appear to be slowing down anytime soon.

Nvidia continues to power the explosion in AI data center construction, with companies like xAI regularly touting how many Nvidia chips they’re acquiring to build out their supercomputing projects. And with the company expanding into sovereign AI, with plans to sell thousands of AI chips to Saudi Arabia, it’s staring down a broader market opportunity.

It also doesn’t hurt that the Trump administration will greenlight the sale of its H20 chips to Chinese companies after previously barring them. That should help offset the $4.5 billion write-down the company took in Q1 due to the White House’s initial sales ban and the $8 billion hit it projected for Q2.

It all should make for an interesting end to earnings season, and it starts today.