Earnings Watch: Patchy clouds on Trillionaires’ Row? Earnings Watch: Patchy clouds on Trillionaires’ Row? Earnings Watch: Patchy clouds on Trillionaires’ Row?

Earnings Watch: Patchy clouds on Trillionaires’ Row?

Equities 7 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  This will be earnings week that defines the Q3 earnings season and our tilt is still leaning towards an upside surprise overall for Q3 earnings, but the latest earnings misses from Intel and SAP driven by weaker cloud business suggest potential earnings misses from Microsoft, Amazon and Google this week. Snap's latest results were strong suggesting an overall strong quarter for both Google and Facebook in online advertising although the smaller advertising platforms are taking market share.

More than 1,500 companies the global equity market with a market value above $1bn report earnings this week. These companies represent $29trn in market value which is around 54% of the market value in the MSCI World All-Country Index which represents equities in the developed and emerging markets. To say it the least, this is the week that will define the state of global corporate earnings in Q3, and its expected trajectory in the quarters to come. It will be an exciting lead into the US presidential election on Tuesday where Americans will vote about their future amid probably the greatest uncertainty in more than decade across politics and economics.

The earnings beats have been numerous across both US and European earnings suggesting too pessimistic analysts, but earnings beats have generally not been rewarded by the market in a sign that the market was ahead of consensus estimates. Companies that have missed on the other hand have been punished hard by the market adding to the great divergence in equity market performance we have observed this year.

Will big US tech disappoint on weaker cloud business?

This week’s earnings will be dominated of course by the big US technology companies such as Microsoft, Apple, Amazon, Google, and Facebook representing around $8trn in market value and the main thrust for global equity markets since 2010. The main question that comes to mind is whether we will see earnings misses from Microsoft, Amazon and Google driven by a weaker cloud business. Last week Intel disappointed on earnings driven by weaker cloud business and today SAP in Europe cut its FY20 forecast due to weaker cloud demand. Maybe the economic confidence lingering in the US and Europe due to higher Covid-19 cases and new restrictions are finally hitting the cloud business or decisions to move to the cloud. One thing is for sure, the recent earnings release from Snap suggest very strong online advertising markets which should benefit Facebook and Google.

Microsoft (Tuesday): PC sales have been strong with obvious tailwinds coming from mobility restrictions due to Covid-19 which should bode well for OS and Office revenue. Logitech’s recent earnings also suggest strong quarter for gaming which should underpin Microsoft earnings. We are a bit less optimistic on the cloud business given the warnings from Intel and SAP. Analysts are expected revenue at $35.8bn up 8% y/y and EPS at $1.55 up 12% y/y.

Apple (Thursday): earnings are likely to be strong driven by strong replacement cycle of iPhones and which could accelerate in the current fiscal quarter due to the launch of the iPhone 12. The Services segment is expected to post yet another strong quarter. Finally, the Wearables segment could continue to surprise analysts and add to the potential earnings beat. Analysts expect revenue of $63.6bn down 1% y/y and EPS of $0.70 down 8% y/y.

Amazon (Thursday): the big question about Amazon in Q3 is to which extent that consumer behaviour has continued to shift spending online vs offline. One potential headwind for Q3 revenue was Amazon’s decision to move Prime Day to Q4. Analysts remain positive on AWS (the cloud business) despite the Q2 miss, but with the misses from Intel and SAP driven by weaker clous business, Amazon could make a negative surprise driven by yet another cloud miss. If it happens questions over the future growth rate of cloud business will most likely be the central headline from Q3 earnings season. Analysts expect revenue of $92.6bn up 32% y/y and EPS of $11.01 up 160% y/y.

Google (Thursday): the Covid-19 impact was initially thought to be very negative for advertisers including Google, but it turned out to be a blessing with more companies than ever ramping up online advertisers as consumers moved deeper into the realm of online. Snap’s recent earnings suggest strong online advertising which should benefit Google as well, but Snap’s result also highlighted an interesting new frontier in online advertising. The smaller advertising platforms such as Twitter, Pinterest and Snap are taking market share from Google and Facebook. The big uncertainty is the cloud business as we have touched on in our Microsoft preview. Finally, analysts will likely ask many questions about the recent antitrust case filed by the US government against Google.

Facebook (Thursday): It is the same story as Google on online advertising driven by strong mobile advertising across all Facebook’s different platforms. Instagram monetization is likely to continue being a strong catalyst for revenue growth. Key focus for investors will be cost control, outlook for advertising markets and finally any colour related to US elections and technology regulation given the US government antitrust case against Google which puts Facebook in a potential future grim situation.

The table below shows the 30 largest companies on market value reporting earnings this week.

Source: Bloomberg and Saxo Group

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.