By Angela Palumbo

A cloud of uncertainty has been floating over Wall Street as tech earnings season begins and tariffs continue to rattle investor sentiment.

Tech results started rolling in this past week. There was software company ServiceNow, computer products maker IBM, chip maker Intel, and search giant Alphabet. Overall, they offered a mixed view on the current state of tech.

The pace and headlines will pick up next week with Meta Platforms, Microsoft, Amazon.com, and Apple all expected to report within a 24-hour period between Wednesday afternoon and late Thursday. They come with the Nasdaq Composite down 11% on the year.

As investors know well by now, earnings season is kicking off in a very different place than just three months ago. The economic environment has drastically shifted with continuing tariff announcements from the Trump administration. Amid the uncertainty, investors will be more focused on any guidance tech companies provide than on quarterly results.

In reporting its results this past week, Intel CFO David Zisner said "the current macro environment is creating elevated uncertainty across the industry." The company reported solid first-quarter results, but the stock was down 7.3% Friday on the company's weaker-than-expected outlook.

"The U.S. tech industry in particular is front and center in this Category 5 storm as the supply chain has been turned upside down over the last few weeks," Wedbush analyst Dan Ives wrote recently. "What will this unprecedented uncertainty do for AI deployments and overall Cap-Ex plans in the U.S.? Many questions...no answers for now."

These are four key points to look out for as tech earnings begin.

Guidance Uncertainty

Companies and investors have had to keep up with quickly changing headlines regarding tariffs. At first, President Donald Trump placed hefty reciprocal tariffs on goods coming in from countries around the globe. He has temporarily delayed some of those levies, while hiking tariffs on China. There's also been some temporary exemptions on some tech products like semiconductors and laptops, but the ultimate outcome of those tariff decisions are still up in the air.

Companies may struggle to provide updates to their financial guidance amid the uncertainty around the trade environment.

"I would expect most of these companies to try to kick the can down the road and say, 'We don't know -- we haven't seen anything yet -- let's see what happens,'" D.A. Davidson tech analyst Gil Luria told Barron's.

On Thursday, Alphabet didn't mention tariffs once during its earnings call, a time when the Google-parent usually provides commentary around its outlook.

Other companies, across the market, are, in fact, kicking the can down the road. Tesla said on its first-quarter financials on Tuesday that it would revisit guidance when it reports second-quarter results because "it is difficult to measure the impacts of shifting global trade policy." Some companies outside of tech have made similar decisions. Delta Air Lines scrapped its full-year outlook earlier this month. Personal care company Kimberly-Clark cut its full-year guidance on Tuesday and pointed to "potential incremental costs from a more uncertain geopolitical landscape."

Spending Risks for Consumers and Enterprises

As tariffs work their way though the system, companies, including tech outfits, could choose to pass on their increased costs to consumers, bringing the risk that shoppers pull back spending on nonessential items. Companies that sell discretionary products, like Amazon.com, are more directly exposed to those types of risks.

Apple products are temporarily exempt from the highest levies, but broader economic trouble could quickly imperil the sale of pricey, iPhones, MacBooks, and Apple Watches.

Then there's the possibility that advertising and software spending may take a hit if enterprises cut their costs if the economic environment slows. That could hurt companies like Meta, which makes most of its revenue from advertising.

Alphabet didn't provide much insight into its expectations on ad spend in the year ahead. CEO Sundar Pichai did say that the company is "not immune to the macro environment, but we wouldn't want to speculate about potential impacts beyond noting that the changes to the de minimis exemption will obviously cause a slight headwind to our ads business in 2025."

The de minimis exemption Pichai was referring to has allowed lower cost packages to enter the U.S. without being subjected to tariffs. President Trump has signed an executive order ending that exemption. This is expected to have a direct impact on inexpensive items commonly bought on Chinese websites Shein and Temu, which could lead the firms to pull back their ad spend with Google.

Will Capital Expenditures Stay Elevated?

Megacap tech companies have pledged to spend billions of dollars on artificial-intelligence related investments this year. Microsoft said it plans on investing about $80 billion and Amazon said it's on track to spend more than $100 billion. Investors will be paying close attention to whether these companies maintain that guidance.

Luria believes it's too early for these companies to cut their AI spending estimates, since the long-term goal of winning the AI race remains in place. That doesn't mean they'll be in a rush to raise these estimates soon, though.

"I don't know that these companies are going to change plans to spend hundreds of billions of dollars based on three weeks worth of analysis in an uncertain environment," Luria said.

Alphabet proved that point and said on Thursday that it still expects to invest about $75 billion in CapEx this year.

Cloud Performance

Cloud performance has been a closely watched part of Big Tech results for several years now, as companies like Alphabet, Microsoft, and Amazon, race to win the hyperscaler race. But Wall Street has grown increasingly concerned about slowing cloud growth, as was the case for Alphabet and Microsoft last quarter.

Alphabet said Thursday that revenue for its cloud unit was up 28% on the year to $12.26 billion, with operating income up 142%. That revenue growth was only a minor deceleration from the last quarter, and the overall performance could be a good sign for fellow cloud providers.

However, Alphabet Chief Financial Officer Anat Ashkenzai said on the earnings call Thursday night that the company's in a tight "demand supply environment" as there's more demand for cloud services than the current infrastructure can support.

"We could see variability in Cloud revenue growth rates depending on capacity deployment each quarter," she said, adding that Google expects relatively higher capacity deployment towards the end the year.

Capacity constraints may be good news about long-term demand, but they're one more wrinkle to throw into Big Tech's big week of earnings.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 25, 2025 13:47 ET (17:47 GMT)

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