Zacks Earnings Trends Highlights: Alphabet, Microsoft and Meta Platforms

For Immediate ReleaseChicago, IL – February 6, 2025 – Zacks Director of Research Sheraz Mian says, "The picture emerging from the 2024 Q4 earnings season continues to be one of strength and improving outlook, with the companies not only coming ahead of estimates but also providing reassuring guidance."Mag 7 Members Report Strong Earnings, Double-Down on CapexNote: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>Here are the key points:Total earnings for the 245 S&P 500 companies that have reported results are up +11.6% from the same period last year on +5.1% higher revenues, with 80.0% beating EPS estimates and 66.9% beating revenue estimates.The picture emerging from the 2024 Q4 earnings season continues to be one of strength and improving outlook, with the companies not only coming ahead of estimates but also providing reassuring guidance for the coming quarters.For the Tech sector, we now have Q4 results for 68.3% of the index’s market capitalization in the S&P 500 index. Total earnings for these companies are up +23.2% from the same period last year on +8.8% higher revenues, with 88.9% beating EPS estimates and 77.8% beating revenue estimates. This is a notably better performance from these Tech companies relative to other recent periods.Looking at 2024 Q4 as a whole, combining the results for the 112 index members that have come out with estimates for the still-to-come companies, total S&P 500 earnings are currently expected to be up +11.9% from the same period last year on +5.3% higher revenues.Spending Like Drunken SailorsAlphabet GOOGL became the latest member of the Mag 7 club to stick to its ever-rising spending on building out its artificial intelligence infrastructure. This is in line with the trend we saw earlier from Microsoft MSFT and Meta Platforms META, who showed no inclination of having second thoughts on their equally aggressive AI-focused spending plans in the wake of China’s DeepSeek results.Alphabet plans to spend +47% more this year, with a capex budgeted target of $75 billion. Meta and Microsoft plan to spend $60 billion and $80 billion on capex, with many analysts projecting an even bigger final tally for Microsoft.Alphabet shares were down following the release, but the market’s disappointment had more to do with trends in the company’s business. Microsoft had issues in its cloud business as well that weighed on the stock price following its quarterly release.The cloud issue may have been the primary contributor to the market’s negative reaction to the Alphabet and Microsoft reports, but it’s fair to assume that investors would have liked to see some humility and introspection from these Tech leaders, given the uncertain payoff.Capex questions aside, we must remember that the Mag 7 players are extraordinarily profitable and still growing impressively. Alphabet’s Q4 earnings increased +28.3% from the year-earlier period to $26.5 billion on a +12.9% increase in revenues to $81.6 billion. In comparison, Microsoft’s Q4 earnings were up ‘only’ +10.2% from the year-earlier level to $24.1 billion, with Meta earnings also increasing +48.7% to $20.8 billion.In essence, the primary justification that these companies have put forward for these huge capex plans is to ensure their primacy in the coming artificial intelligence world, which will be critical to the sustainability of their enormous earnings power.For Q4, Mag 7 earnings are expected to be up +26.1% from the same period last year on +12.4% higher revenues.Tech to Remain a Key Growth DriverThe Tech sector has been a significant growth driver in recent quarters, and the trend is expected to continue in 2024 Q4 and beyond. For Q4, Tech sector earnings are expected to be up +23.3% from the same period last year on +10.9% higher revenues, the 6th quarter in a row of double-digit earnings growth.This would follow the sector’s +22.7% earnings growth on +11% higher revenues in 2024 Q3.In addition to the Tech sector’s strong growth profile, the sector is also among the few sectors whose earnings outlook is steadily improving. This shows up in the revisions trend for the Tech sector for both Q4 and full year 2025.The Earnings Big PictureTotal S&P 500 earnings for the current period (2025 Q1) are currently expected to be up 8.8% from the same period last year on +4.4% high revenues.The revisions trend is broad-based, with estimates for 15 of the 16 sectors down since the start of January (Medical is the only sector whose estimates have increased). Sectors suffering the most significant cuts to estimates include Conglomerates, Aerospace, Construction, Basic Materials, Autos, and others.The expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.In fact, 2025 is expected to have all 16 Zacks sectors enjoy earnings growth, with 8 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have double-digit S&P 500 earnings growth in 2025, even without the contribution from this mega-cap group.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comZacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. 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