Technology company earnings reporting season once again will be colored by AI, particularly Alphabet Inc.’s Google and Facebook parent Meta Platforms Inc., when it kicks off next week.
unofficially starts the earnings onslaught on Wednesday. Google
is scheduled to report fiscal second-quarter results on July 25, followed by Meta’s
second-quarter report a day later.
The AI hype machine is expected to dominate the commentary for nearly every publicly traded tech company — and the two companies arguably most impacted are Google, which dominates search, and Meta, which is tying its pursuit of the metaverse to AI.
“We expect search to fundamentally change, but change will take time, and our analysis of 3 key AI success factors still put GOOGL in the best position to disrupt/improve its own business,” Morgan Stanley analyst Brian Nowak said in a note Thursday that reiterates an overweight rating on Google shares with a price target of $150.
The immediate influence of AI on Meta won’t be quite as deep, but significant long-term, Nowak said. “We fully expect META to integrate new large language models into its applications to drive new capabilities for users and advertisers, but changing
behavior and material success are less certain, and online advertising doesn’t have to be zero sum,” he wrote. Nowak maintains an overweight rating on Meta shares with a price target of $350.
“It’s important for investors to remain focused on ’23/’24 fundamental earnings power even through the multi-year AI changes ahead,” Nowak wrote.
“AI remains top of investor minds…but remember adoption curves often aren’t
steep or straight lines,” concludes Nowak.