Here's the good, bad and ugly earnings surprises that could hit investors' favorite tech stocks

By Michael Brush

Six of the 'Magnificent Seven' companies get ready for Wall Street's reaction as AI excitement cools

With investor sentiment and tech-stock valuations pushed to extremes, this latest earnings season is going to affect the market's favorite companies more than usual.

Here's what you can expect - starting with three big takeaways, followed by quick takes on seven tech stocks.

1. Decent earnings growth should support stocks overall: Earnings growth will be slower than last quarter for tech stocks and the S&P 500 SPX overall, but still good enough to satisfy investors, says Mark Malek, Siebert Financial's chief investment officer. He expects tech earnings growth of a little less than 20% and S&P 500 earnings growth of around 8%. "We are lowering our expectations but those are still outstanding growth numbers," he told me in a recent interview.

2. Signs of cooler AI spending growth could wear on related chip stocks: For the past several quarters, Meta Platforms (META), Alphabet (GOOGL ) (GOOG), Amazon.com (AMZN), Microsoft (MSFT) and Oracle (ORCL) have been significantly raising their AI infrastructure spending projections. "This will be first quarter where capex is more reiterated than sharply raised higher," says Gabelli Growth AAA GABGX portfolio manager John Belton.

For these five companies, this could be a positive sign of capital discipline. But it might be interpreted as a sign that revenue momentum at AI infrastructure-related tech stocks could be close to a peak, Belton says.

If so, it could cool stock price momentum at AI infrastructure stocks including Nvidia (NVDA), Advanced Micro Devices (AMD) and Broadcom (AVGO), among others. That said, Belton does believe AI capex spending will continue higher over the next few years. Nvidia does not report its earnings until late November.

3. Consumer spending trends may signal no recession ahead: Given the concerns about recession, investors will be looking for signs of economic weakness at consumer-facing and economically-sensitive companies such as Meta and Alphabet (because they sell ads) and Visa (V) and Mastercard (MA). Malek at Siebert Financial says he expects to hear evidence of more of the same - continued robust spending from middle and high-end consumers, and weakness among low-end consumers. That'll be a depressing takeaway for consumers struggling with tight budgets. But the results should confirm consumer spending trends remain good enough to keep worries of recession at bay.

Now, here are quick takes on seven tech companies.

Meta and Alphabet: Belton says sales growth at these two digital advertising leaders is tracking ahead of consensus, thanks to decent consumer spending and gains from the use of AI-related content recommendations and ad targeting. Expect top-line beats from these two, and their valuations are reasonable, Belton says.

Microsoft: Microsoft's (MSFT) Azure revenue accelerated nicely last quarter. Belton expects more of the same due to strong demand for AI-related Azure products including Azure OpenAI and Azure AI Search. He expects an earnings beat and raise based on Azure revenue, and adds that the news could drive the stock higher.

"The fundamentals at Microsoft have been on fire, but [the] stock has been a little bit stuck," Belton says. "I think they will report a big quarter especially on the Azure side. I feel good about Microsoft going into earnings." He thinks Microsoft will also reiterate that it does not have enough AI infrastructure to meet demand for these services - a medium-term bullish signal on AI infrastructure plays.

Amazon.com: Investors continue to have doubts about Amazon's growth. The stock is lower than where it was in February, while tech stocks in the Invesco QQQ Trust QQQ are generally much higher. "Concerns about Amazon's business are overblown," Belton says. He thinks the retail side of the business will post solid margins, which will help the stock. He's less certain about Amazon's AWS cloud business. Adds Belton: "In addition to seeing acceleration in AWS revenue, which is a toss-up, we want to hear management talk about how they can stabilize their market share, and how they are differentiating on the AI side." Given the modest investor expectations, reassuring commentary on this front could move the stock higher.

Netflix: Netflix no longer report subscriber counts, so investors will again pay close attention to "engagement," or hours viewed. Second-quarter engagement growth was sluggish, one reason why the stock remains well below its late June high. Siebert's Malek expects Netflix to report that metric has improved. He also thinks Netflix will guide higher on fourth-quarter engagement, citing the impact of World Wrestling Entertainment events and National Football League games. Though advertising revenue is still relatively small, strength here may also increase overall results. The upshot will be a revenue beat, which could boost the stock.

Apple: Apple (AAPL) posted surprisingly strong iPhone sales growth in the second quarter. Investors attributed this to consumer buying ahead of expected tariff-related price hikes. "We will learn more about this in third-quarter results," Belton says.

Sustained stock strength since the July earnings report suggests investors believe that Apple is experiencing a new upgrade cycle. "Expectations are high for Apple revenue in the quarter," Belton says. "I am more cautious going into earnings given those expectations."

Tesla: Tesla (TSLA) saw huge second-quarter car sales growth linked to the surge in demand ahead of the $7,500 U.S. federal tax-credit expiration. Now, investors already expect weaker third-quarter deliveries. So that's priced into the shares.

"The bigger question will be the tone on robotaxi service and approval for self-driving cars," Belton says. Progress on AI efforts and Tesla's Optimus humanoid robot will also be key. "News flow on the AI and the autonomous vehicle front is getting better. The stock could be up on any update on those efforts," Belton adds.

There's also a sleeper Tesla catalyst: energy storage sales to grid operators. Tesla posted a big beat here in the second quarter. Investors could see a repeat, since Tesla batteries help grid operators manage ever-growing data center electricity demand.

Michael Brush is a columnist for MarketWatch. At the time of publication, he owned META, GOOGL, AMZN, MSFT, ORCL, NVDA, AMD, AVGO, NFLX and TSLA. Brush has suggested META, GOOGL, AMZN, MSFT, ORCL, NVDA, AMD, AVGO, MA, NFLX, APPL and TSLA in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks

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-Michael Brush

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10-18-25 0958ET