Microsoft, Shopify and 3 more AI stocks that are favorite Wall Street earnings plays

By Christine Ji

As earnings season kicks off, select tech companies have the opportunity to deliver big positive surprises for investors

Surging demand for autonomous AI agents is emerging as a fresh catalyst across the tech sector.

After a tumultuous week for tech stocks, the artificial-intelligence trade faces another test as companies begin reporting their third-quarter results in earnest next week.

Concerns about whether AI can live up to the hype, combined with rising inflation, have led the Nasdaq Composite Index COMP to decline 6% from recent highs. Adding more uncertainty to the mix is Anthropic, the creator of the Claude chatbot and one of the leading AI labs. Investors are placing increased scrutiny on the company's upcoming public offering as financial concerns and AI safety risks emerge.

But earnings season can drive dramatic stock moves in a short period of time, and analysts see opportunities across select tech names that are benefiting from AI - from major cloud providers to specialized software companies.

One is Cadence Design Systems (CDNS), which has gotten caught up in the recent tech selloff, with shares falling 10% this past week. The company's core Electronic Design Automation offering is used by semiconductor companies to design and test chips.

KeyBanc analyst Jason Celino anticipates "quite a large estimate revision" when the company reports on Oct. 26, meaning that earnings expectations could zoom higher in the wake of Cadence's commentary. He cited strong demand for key products as well as fourth-quarter Wall Street expectations that look overly conservative against the company's organic revenue-growth rate, which is in the high teens.

Cadence could also be a major beneficiary of agentic opportunities, Celino told MarketWatch. As competition in the chip space heats up and design timelines compress, companies will need to supplement their design capacity with AI agents, resulting in greater usage of Cadence's platform, Celino said.

On the consumer side, the popularity of AI agents like Meta's (META) Muse assistant could provide some application software stocks with fresh catalysts heading into third-quarter earnings, according to Stifel analyst J. Parker Lane.

Lane identified Shopify (SHOP) and Twilio (TWLO) as the two biggest beneficiaries, and he expects both companies to beat earnings expectations.

As more transactions are carried out by AI assistants on behalf of shoppers, the e-commerce platform Shopify has has become "a real thought leader around agentic commerce," Lane told MarketWatch. While Amazon.com (AMZN) has blocked Muse on the platform, Shopify has opted to allow seamless agentic checkout across its stores.

Although he believes it's too early for the impact of Muse to show up this quarter, he said, Lane anticipates that Shopify's revenue growth will accelerate to 35%, beating the company's "low-thirties" forecast, thanks to strength in the company's enterprise, international and payments businesses. The company reports earnings on Nov. 3.

Lane described the cloud communications platform Twilio - which allows businesses to add voice, text, chat and other features to their software -as a neutral aggregator of the agent boom. Shares of Twilio have soared 72% since the beginning of the year, which sets a high bar going into earnings, but Lane believes the buildout and scaling of voice agents will be a key tailwind, he said.

No matter which AI agent gains the most market share, automated assistants sending text messages and placing calls will lead to a surge in overall customer communications, and businesses could lean on Twilio to manage that. Lane said he expects management to provide further details on that early AI momentum during the company's Oct. 29 earnings call.

Among the largest tech names, Jefferies analyst Brent Thill favors Microsoft (MSFT), which reports on Oct. 28. Last quarter the company posted an earnings beat driven by expanding Copilot adoption and cloud growth on its Azure platform, and Thill believes Microsoft can keep the momentum going, he said.

In a Wednesday note, Thill wrote that sustained demand for compute, or AI processing power, is allowing Microsoft to charge higher prices. Increased data-center capacity should help Azure pick up its rate of revenue growth.

To support Azure growth, Microsoft plans to spend $175 billion on infrastructure investments in 2026. Thill said he anticipates that the company could announce even higher spending levels in 2027, given the severe supply-demand imbalance for compute.

Microsoft is currently trading at a multiple of 26 times estimated forward earnings, which Thill described as "favorable" compared with a five-year average of 28.

And analysts see room for CoreWeave (CRWV) to become a turnaround play after shares of the specialized cloud-computing company fell more than 26% this week. As of June the company carried nearly $52 billion of total debt, including lease obligations. Concerns that rising interest rates will increase CoreWeave's cost of capital led yields on some of the company's unsecured debt to reach 15%, crossing into distressed territory.

In a Thursday note, Thill called the market's reaction "too harsh and not reflective of fundamentals." He pointed out that while higher rates on future deals could be a risk, CoreWeave's existing debt remain unchanged. And surging demand for AI processing power is allowing CoreWeave to charge much higher rates, more than making up the difference from higher financing costs. Thill reiterated his buy rating and $150 share-price target, which is more than 140% above current levels.

BNP Paribas analyst Daniel Wang also took an optimistic view of CoreWeave in a Thursday note, arguing that as newer, higher-priced contracts take effect across its active data centers, the leftover cash will eventually be enough to fund future infrastructure expansion.

For CoreWeave's upcoming third-quarter earnings call, Wang is looking for further details on the company's roadmap to self-sufficiency, specifically regarding how and when the company can generate enough cash flow to manage its debt obligations without relying on external funds.

-Christine Ji

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10-17-26 0801ET