What Wall Street is really looking for in hyperscaler earnings
Following billions of dollars in promised capital spending in the tech sector and soaring valuations on promised expansions, Wall Street is now focusing on revenue pathways and actual profits when so-called hyperscalers report first-quarter earnings. Amazon , Alphabet , Meta Platforms and Microsoft all report profits after markets close Wednesday, and analysts want to see hard evidence that the AI buildout is translating into future returns. “After the sharp recovery in tech multiples, we want harder proof points — whether in the form of better pricing, strong cloud growth, rising engagement levels, improvements in code generation, or other abilities— and new commercial deployments or use cases,” Ulrike Hoffmann-Burchardi, global head of equities at UBS wrote Wednesday. Investors are looking for a combination of strong topline numbers supportive of expansion along with continued investment plans, but the decisive factor for stock movements will be signs of flowthrough to earnings. “The big swing factor will likely be to what extent top line upside flows through to the bottom line,” Peter Bartlett, a managing director and equity trader at Goldman Sachs wrote Wednesday. “Given the sharp rallies, recent inflows, broadly high expectations, and the difficulty of getting paid … it doesn’t feel that controversial to say the positioning bar, in aggregate across the reporting Megas, feels high,” Bartlett added. Across the mega-caps, investors are homing in on both the performance of cloud divisions, where they want to see demand justifying capex spending, as well as deployments of chatbots and other products. They also want to see partnerships and investment initiatives with companies such as OpenAI and Anthropic on a path to bear fruit. Microsoft Microsoft is fighting against some negative sentiment at the moment. “Sentiment feels like it remains deeply bearish (particularly among [the] high-frequency community),” Goldman’s Bartlett wrote. “On Azure, expected to print roughly stable growth in quarter … Commentary on Copilot (M365) and on Capex will be in focus.” While investors will want to see whether Azure and other Microsoft cloud services will continue to grow at about a 40% annual clip, some analysts say it’s not the revenue numbers that matter for Azure so much as whether they’re driving the company’s cap-ex. “If MSFT points to higher cap-ex being driven by Azure demand (and not a need to bring more compute to Copilot) the stock could work,” Barclays tech analysts wrote. “It really just comes down to – Can Azure accelerate and by how much?,” Barclays said. “There is seemingly a lack of positive catalysts in the near-term and there [are] other areas investors would rather be for the AI trade right now.” OpenAI, Microsoft’s primary AI partner, is coming up short on revenue and new user targets, according to a Wall Street Journal report this week , but analysts don’t expect to get any real details on what this means for Microsoft. Alphabet Key areas to watch at the Google parent include fundamentals on ads, YouTube ads and search as well as Gemini AI usage. If Gemini numbers are strong and project expansionary potential, it could propel the stock. Google has the “strongest AI stack & Gemini product infusion,” according to JPMorgan. “Gemini features & tech will continue to be pulled into Google search. Strong Cloud growth acceleration on AI-driven demand & $240B backlog.” Analysts at Goldman said that Google Cloud Platform (GCP) expectations have crept higher. “GCP growth [is] now expected to be closer to be high-50s/ 60% (vs Street at mid 50s) with Search in the high-teens … expected to reiterate CapEx. Options implying a 5% move,” Goldman wrote. Amazon JPMorgan tech analysts are looking at the AWS token pricing scheme as a salient question for Amazon earnings, flagging recent commentary from OpenAI CEO Sam Altman on whether tokens make sense in the long run. “This is a VERY important point,” JPMorgan said, suggesting that token announcements could move the stock. Amazon’s Trainium chips are another focus. JPMorgan raised AWS numbers in late March on “core cloud growth & ramping AI contribution from Anthropic/Project Rainier, OpenAI, & Trainium.” “Investors expect punchy AWS growth of +29-30%y/y (vs +24% last Q) with low 30s AWS margins, though investors are likely to buy the dip on an ‘expectations miss’ as long as there are no negative EBIT surprises,” Morgan Stanley analysts wrote in a report published Wednesday. Meta Platforms JPMorgan analysts want to see more product implications from Meta’s AI investments as well as cooler expenses. “We still want to see more on AI product path on the 1Q call. No increase to 2026 guides for total expenses ($162B-$169B) & capex ($115B- $135B) would be positive,” JPMorgan wrote. Earlier this month, Meta announced Muse Spark, a “reasoning model with support for tool-use, visual chain of thought, and multi-agent orchestration.” Goldman said that Muse Spark has driven some positive sentiment recently but that clarity on operating expenditures and advertising will likely prove more important. “MuseSpark release [is] helping to drive recovery in sentiment (demonstrated tangible progress on AI strategy). Points of focus will be opex clarity (investors hoping for signs of operating leverage) and ads outlook into 2Q,” Goldman wrote. “Options implying a 6.5% move.”
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