Apple and Microsoft Stock to Spark Up the Earnings Calendar with Improved Q2 Reports

This week, investors will be focused on tech stocks as the sector leaders (FAANG) will be announcing their earnings report for the quarter. With analysts expecting these companies to ride on the previous quarter’s performance, let’s take a look at what we should expect from Apple (NASDAQ: AAPL) and Microsoft stock (NASDAQ: MSFT).

Apple stock

Despite posting a revenue of $89.6 billion and its services businesses reaching an all-time high in Q2, the tech giant is expected to see a drop in revenue for Q3 with reports likely to stand at $72.93 billion with EPS to stand at $1.01, indicating a 47% increase compared to last year. During the company’s last earnings call, Apple CFO Luca Maestri said the company is expected to see a sequential decline in revenue from March-June owing it to chip shortages which could have an impact on the business to the tune of about $4billon loss in revenue and also delayed the launch of iPhones which likely to be in September 2021.

Apple stocks rally driven by products and services

Apple stocks had continued to rally to the upside since March 2021, when the stock was trading at $116.31. What has contributed to this performance is Apple’s products and services, which has continued to see the number of users increase.

In Products, the tech giants have continued to net in revenue from the sales of iPhone, iPad, Mac and other accessories. Sales from devices appreciated in the last quarter by 66% YoY, generating $47.9 billion, and it is expected we see such growth reflect in the Third Quarter.

In services, Apple has continued to offer new services and also improved on the existing ones. From entertainment, fitness, and virtual learning, Apple has continued to attract new users, which has proved to be a catalyst for growth. The company’s paid subscribers keep increasing, with its services platform recording over 660 million subscribers in the last quarter, generating a revenue of $16.9 billion.

Microsoft stock

Alongside Apple, Microsoft will also be releasing its Q4 report after market close. It is expected that the tech company keep up with the momentum from the last quarter as analysts expect earnings report to beat estimates. The earnings report is expected to stand at $1.92 per share, indicating a 30% improvement from the previous year. In contrast, revenue is expected to report $44.30 billion, suggesting a 15% growth from the previous year.

Microsoft, which has continued to surprise investors by beating estimates, has benefited from the Covid-19 pandemic by providing remote work and learning solutions through its application Microsoft Teams which has seen daily active users increase to about 145 million.

The company generated revenues from its cloud computing services as it has witnessed growth due to the pandemic, which has accelerated the use of digital communication. Also, revenues from adverts on the LinkedIn platform has contributed immensely as it was announced that the company made $3 billion in ad revenue last year, outpacing Snap and Pinterest.

Despite a disappointing Q3 for the gaming sector as supply issues had a negative impact on Xbox series X and S, it is likely the sector will benefit in this quarter from Xbox live subscription as gamers continue to adopt new ways to engage due to social distance guidelines still in effect. In its latest dealings, Microsoft announced the acquisition of Nuance Communications for $19.6 billion inclusive of its debt with the board of directors’ approval and could see the deal concluded by the end of the year.