Meta vs Microsoft earnings call: What to expect as AI rivalry intensifies

The battle for AI supremacy rages on as Meta and Microsoft prepare to release their Q1 2024 earnings reports. With Meta’s report slated for April 24 and Microsoft’s on the 25th, the reports will reveal their financial health and potentially offer some clarity about their future plans. This article dives into their strategies, recent developments, and analyst predictions ahead of the earnings call.

Meta and Microsoft’s AI approaches in brief

While both companies recognise the boundless potential of AI, they have taken different paths in leveraging the technology – mirroring their unique business models.

Meta is zeroing in on the here-and-now of its social platforms. AI is the engine that personalises news feeds, combats misinformation, and, in the future, might make avatars more life-like within the metaverse.

For Microsoft, AI serves as a broader technological accelerator. It’s embedded in Azure’s infrastructure, powering tools tailored for businesses to build and deploy AI solutions at scale.

Billions pumped into AI

In a January 18th Instagram reel, Meta CEO Mark Zuckerberg outlined the company’s strategic roadmap for AI development, emphasising the need for a “massive compute infrastructure.” This ambitious plan involves acquiring 350,000 Nvidia H100 graphics cards at an estimated price of USD 25,000 per card. This represents a significant investment of approximately USD 9 billion directed solely towards bolstering its graphics processing capabilities.

Aside from building their chip arsenal, Meta is also reportedly ready to spend big on talent. A report from The Information says that Zuckerberg is sending personally written emails to AI researchers as he seeks to woo them to join Meta.

Microsoft, on the other hand, has acquired several AI startups, chief among them being Figure Robotics, a California based Robotics AI company – in a USD 675 million funding round. Just last week, Microsoft invested USD 1.5 billion into Abu Dhabi-based AI firm G42 in a deal that will see G42 run its AI applications and services on Microsoft Azure. The partnership will also see cutting-edge AI solutions delivered to a broad range of clients including global public sectors and large enterprises. It may also set the stage for increased interest in AI investment companies.

Meta’s Q1 earnings report expectations

Analysts expect that Meta’s Q1 earnings will reflect the success of these integrations. There will likely be particular interest in assessing how its AI-driven advertising technologies have performed, given the broader economic challenges and the digital ad market’s volatility.

Meta posted a strong Q4 revenue beat, delivering USD 40.1 billion against analyst predictions of USD 39 billion. Adjusted earnings per share also came in at USD 5.33, exceeding expectations. The Zacks Consensus Estimate for Q1 earnings is at USD 36.15 billion with an expected earnings per share of USD 4.29.

Analysts such as Piper Sandler’s Thomas Champion are optimistic about Meta’s prospects this year, predicting a 25% year-over-year increase in first-quarter revenue, while also increasing his price target for Meta shares to $600 from $525.

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Analysts note that short-term technical indicators suggest a period of consolidation for Meta. The 50-day SMA is gradually approaching the 10-day SMA, while the RSI trends toward the 50 level. They infer that if upcoming reports exceed expectations, the stock could potentially rise to around $540.

Microsoft’s Q3 earnings report expectations

Market analysts predict that Microsoft’s earnings will showcase significant growth in its cloud sector, driven by the widespread adoption of Azure AI services. The performance of its AI enhancements in Office 365 and Dynamics 365 is also anticipated to be a key contributor to its revenue streams.

The Zacks Consensus Estimate predicts revenues of USD 60.63 billion for Q3 with earnings per share estimates of USD 2.81. The company’s share price is up 13% this year and is currently sitting at the USD 421 mark. Buyers have bounced back recently after being knocked back in the last week of March.

Analysts point out that the widening Bollinger Bands suggest rising volatility. They also note that with the SMA hinting at bullish signals and the RSI approaching oversold levels, a further upward trend might be on the way.

The upcoming earnings reports will thus not only reflect current financial health but could also offer insights into how effective each company’s AI strategy is in capturing new opportunities and defending market position. More importantly the reports could help traders make strategic moves while trading these assets.

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