A (3:26)

I mean I think this is going to be across the board with not just big tech companies. I think it we're going to see a lot of companies continue to spend more in AI. As you know, AI is, you have to think of it as like a backbone for your company and your technology that runs your company. If you don't spend and utilize it, your company might fall behind in their industry and with competitors. So you know, something like a dual lingo I could imagine is going to spend more money on AI. Something, you know, like a toast would probably spend more on AI. So lots of other non big tech companies are using AI in all aspects of their business, not just their core businesses. So I definitely see this increasing across the board.

B (4:05)

Definitely. Especially the companies that are the most disrupted by AI seem to be the ones that stand the most to gain by embracing it. A lot of these smaller companies, obviously they won't be spending as much on a dollar basis as these five big tech companies, but definitely something to watch. I'm watching you Apple, you know, stop putting the MIA and AI and get out there. Coming up next, earnings, earnings, earnings.

C (4:27)

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B (4:57)

Wake up. It's earnings season. So earnings season picked up a couple weeks ago, actually about a week and a half ago. And while it was just the financial companies that first reported, now we're getting to the meat of the matter. The market moving companies. Some of the most valuable tech companies in the planet are reporting this week. We have Apple, we have Meta, we have Microsoft, Sanmet. Let's, let's start with Apple here. They're reporting their fiscal first quarter reports and again the iPhone 17 came out in September, mid September in most of the country, then the final week of September in another 22 different countries. But clearly that fiscal fourth quarter wasn't the quarter. This is the quarter, the first full three months of Apple 17 supposed to be a strong quarter. What are your thoughts looking into this Apple report that we're about to get.

A (5:37)

In a couple of days? Yeah, you know, people tend to forget about Apple because all they're kind of behind in the AI race, but they're still a dominant tech company. You know there a lot of analysts across the street are expecting a major super cycle if you may, or major upgrade cycle with the iPhone 17 coming out fueled by pent up demand and kind of new AI features that are still so trickling in and getting better. We could see iPhone revenue potentially exceeding $70 billion. You know, their services business continue to, to move. You know, you have your app store, your iCloud, your Apple TV plus all of those are doing great. You know they have such a built in install base of users of their iPhone that these services businesses just are always added to each iPhone user's arsenal there. So you know, we'll, we'll look to see some more AI strategy updates with Google and Gemini Power, their Siri and, and whatnot. And you know with China, China remains a little bit of a battleground for Apple. You know, while it's kind of recently claimed the top spot in the Chinese smartphone market, we're going to want to see if you know, revenue growth is still sustainable against a lot of domestic competitors in that market.

B (6:43)

Yeah, and you mentioned the whole upgrade segment with the iPhones. Like back to fiscal 2021, we had this cool three year cycle where every three years you'd have double digit growth. When Apple would put out a revolutionary iPhone release then it'd be single digit positive or negative growth in the next years but then we'd be back to double digit growth. Revolutionary. It's been a little slow now. We've had four years in a row, four fiscal years in a row of single digit revenue growth. But here we are with Apple expecting 10 to 12% revenue growth in the fiscal first quarter that's going to report this week. Unfortunately they also, they think for the analysts think for the full year it'll be 9%. So it could be the fifth year. But I think this is going to be a very important report for them because if this guidance is something special I think it could be something because I think right now Apple, which used to be the undisputed market cap gold medalist for years, it's now the bronze medalist and it's pretty much a bad quarterly report away from falling off the podium entirely with Microsoft going back and forth and getting back on the podium for a change. So but yeah it's services, incredible product for them, high margin business for them. And it's not just iCloud plus iTunes in the app store when you buy a new iPhone it's just easy to sell. The dive into subscriptions for Applecare is you want that phone and sure to be cracked the screen even though the new phone I saw him sliding it on a new commercial across the table I guess now three times more scratch resistant. Apple Arcade, Apple Fitness plus Apple Music, Apple News plus Apple TV plus if you put a plus on it Apple's going to find a way to make money out of it. So yeah, I'm hoping for a good report. Let's talk meta. Meta, the company formerly known as Facebook has delivered double digit revenue growth in 14 of the last 15 years. So it's clearly growing pretty well. A much stronger double digit revenue growth streak than Apple is. What are your thoughts about Meta heading into this report?

A (8:18)

You know Meta's underperformed the market by about 16 and a half percent over the last year. If Apple's bronze then Meta might be in the fourth place. Although they're, they're spending tons and tons of money on AI and you know some of the things to watch are going to be obviously their, their capex spend. You know they had guided for full year in quarter three. They guided for full year CapEx 2025 CapEx to be 70 to 72 billion. Investors really want to see where that lands. Also to see if there's any sort of revenue bump coming from all this spending in AI. Now we have to parse it out because, you know, Meta has a huge ad business and that's the meat and potatoes of their business. And AI assists them with that business and enhances it. So sometimes you can't parse it out as easily with Meta. So they'll be reporting on the holiday ad spend. Were there still big spend from Chinese exporters like Tim and Sheen? Did AI improvements, you know, capture more of the kind of holiday e commerce budget, obviously monetization. And then the thing that sometimes sticks out is the reality Lab losses. It might be a $4 to $5 billion quarterly loss that we'll see in what was their Metaverse division. And what's going on with that sometimes weighs down on the stock and what people perceive of why do they spend so much money, what's going on with that? But I'm positive on Meta in terms overall long term. Yeah.

B (9:39)

And they have good momentum. The last quarter for September, they had 3.54 billion average daily active users. They call them daily active people, but come on, they're users. Come on, we can call them users. It's not a taboo word. Meta up 8%. So 8% you go. Okay, all right. The audience is growing. That's fine. Ad impression is up 14% year over year, which tells me engagement is rising. And average price for ad, which is the real special sauce here, it's up 10 per impression. You know, so this is plus 20 revenue growth on the ad side for a business where the audience is growing about, you know, a third of the way there. So I think that's very nice to look at. And to me, the one thing that I think curious heading into this report is that of the three companies that we're going to talk about, this is one where for the fourth quarter, which is what they're going to report on this week. In the last three months, earnings estimates have been moving higher, but for all of 2026, earnings estimates have been moving lower. So I don't know if this is just the fear that there'll be a more ramp up in AI spending, which you sort of mentioned, or just other factors eating away at the margins. But again, this is a quality company and the whole metaverse thing, I think I'm not worried about the Metaverse losses. I think it's not moving the needle and that's great. The Oculus may as well be branded innocuous. It's not moving the needle. I have a first gen Oculus that I haven't used in like two years. It's that sad. But I did pick up some Ray Ban metaglasses a few months ago and they're pretty nice. These are the first gen ones. I don't have the new ones but it's definitely an interesting product. But I want to see what you know, obviously Google with their AI glasses that are coming out with soon. I'm curious as to how that plays out. So let's move over to Microsoft. So Sandmeath is a company where you and I, we may not follow as closely as the other two companies, but I want to get your take on it. You have to go back to 1999 to find the last time that Microsoft posted better than 18% revenue growth. So I guess you can say that it has a Y2K problem after all. I'm starting with that because Microsoft did post 18% revenue growth for the fiscal first quarter of 2026 that ended in September. Can it keep improving on that and break through the 18% top line ceiling on Wednesday with its fiscal second quarter? Sami, what do you think? What do you see looking into Microsoft's upcoming report?

A (11:34)

Yeah, you know, Microsoft's stock has also underperformed the market by about 8.6% over the last year. And Microsoft strikes me as one of the more broader companies in the tech space, at least in terms of some of the ones we've been talking about. Things we'll be looking at is Azure, their cloud services businesses. In quarter one it grew about 40. The whisper number on Wall street is looking for this to kind of wholesale or slightly accelerate. If we see any drop below 38 or 39% that could severely punish the company. Microsoft 365 copilot, that's their big AI initiative. Seeing how it's being adopted and what the adoption curve on that will be interesting to see as we kind of are enterprise moving from pilot programs to full deployments. Where's the growth in commercial office365seats and revenue per user to gauge all this capex spend? Obviously they, they have a, a big capex spend going on but also they have gaming and hardware. You know, they have the Xbox, they have the content services with the Xbox. So that's something that we'll be looking at to see how that kind of cushions any sort of shortfalls elsewhere.

B (12:39)

When we come back. Samita and I bring it all home.

D (12:42)

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B (13:13)

Tim Byers wanted a game here and I'm going to take his game. Basically, we have these three reports we talked about. I want you to tell me if you think it's going to be a beat, a raise so they're going to beat and a raise for their guides or a miss. So let's start with Apple. Where do you stand?

A (13:27)

I think they're going to be a beat and raise.

B (13:29)

I think a beaten race is in order. Yeah, yeah. I'm concerned that maybe margins may take a hit, whether tariffs or any other things are just weighing in because it's going to be a very hardware driven quarter. So the margins may not be as nice as a pure services driven quarter. But yeah, I'm with you on the beaten raise. How about Meta?

A (13:44)

I think they could be a a beat but no raise. That capex spending is just going to continue to tamp down on that.

B (13:49)

I agree with you. I'm mostly because this is the end of their fiscal year. So I mean I don't think they've even issued guidance for 2026. But even then, yeah, I think I'm comfortable with just saying a beat, not a raise. But ideally, hopefully, you know, guidance that's not problematic. I'm encouraged with that. Let's close with Microsoft. Ms. Beat or Raise?

A (14:02)

I want to get a little spicy here. I think they're going to miss.

B (14:05)

I'm not trying to cheat off you. I swear I have a miss too. I think they're going to miss. Unlike the other companies they've been beating just by a little bit, by just a couple pennies. I think if they're going to prove moral, this may be a good time for it to prove moral. Especially after that strong quarter. Especially one trend that I noticed about Microsoft. And not that we follow analysts necessarily, we like to be our own thinkers. But in the past week, six analysts have lowered the price targets on Microsoft and all those price targets are higher than where the stock is now. But it does make me wonder why they're trying to get these notes ahead of the report. Unless they think something's going to happen. So, yeah, I'm with you on a potential miss. So that's it. That's our look at three very big earnings reports you're going to hear about this week. For Tuesday's show, Emily Flippen will be back with more guests and more chatter as we enter the meat of earnings season. It's a big week with Tesla, Sofi Technologies and Starbucks joining the big tech names in reporting results. Don't miss it. As always, people on this program have interest in the stocks they talk about and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by Apple advertisers. Advertisers are sponsored content and provided for the informational purposes only. To see our full advertising disclosures, please check out our show notes and we'll see you tomorrow on Motley fool money. This is Sam Mead and Rick Saying Fulani.