Welcome back to earnings season. This article functions to set the table for my expectations heading into this important period. Obviously, that entails offering a lot of predictions about an inherently uncertain future. That means some of these educated guesses will be right and some will be wrong. That is true every single quarter and will be consistently true going forward.
That said, markets seem to be cooperating much better for consumer internet and enterprise software companies. These stocks have found their footing while estimates have remained stable or rising and AI disruption sentiment has improved. With the coinciding multiple expansion that has taken place, expectations for what is considered a “successful quarter” naturally rise. Beats generally need to be bigger to be rewarded and mistakes are more easily punished. It’s not like these sectors have become notably expensive again. It’s more so that they’ve moved from historically cheap to more fairly priced in the space of a couple months, as some names in the coverage network have doubled from their local lows.
While delivering explosive earnings reactions likely will be more difficult this quarter, that’s not overly important to me. As always, I’ll fixate on company-specific data to gauge whether or not a company is executing and continuing to earn my time and attention. Here’s how I see things shaping up for each holding.
Over the next several weeks, subscribers will get 40+ earnings reviews, ongoing fundamental news coverage and real-time updates of my own portfolio/performance. They've already gotten reviews on Taiwan Semi and Netflix, alongside a robotics industry primer in the last week.
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1. Meta (META)
The core business trends should again look elite. Ad channel checks have been very good from our sell-side friends. They’ll inevitably discuss using AI to deliver more engagement and monetization gains and will again likely do so while delivering an impressive acceleration at massive scale. Despite the recent news of Meta entering the public cloud arena, I think CapEx for them will continue to be higher than the lofty consensus estimates. They’ve made it clear that this decision is a byproduct of the especially juicy offers they've gotten from potential customers. With that added context from the company, it’s clear that this is not a red flag for overall AI infrastructure demand.
To me, Meta negatively surprising people with a massive CapEx guide for next year is significantly more likely than any other mega cap. That means their 2027 CapEx commentary could spook investors as some still grapple with the uncertainty surrounding how well Meta can monetize all of this spending. I think that doubt is ridiculous, as META has been the best hyperscaler at using this spend to boost its core business (outside of GPU renting). They can use all speculative spend to keep extracting more value from that core or to rent to others for easy monetization opportunities that way. Just read an earnings review, skeptics. Still, despite me thinking the mistrust is unwarranted, it exists and could easily keep existing if Meta discusses aggressive 2027 spending plans.