Leaders and Outsiders: What's important to know before the start of Magnificent Seven reporting

The "Magnificent Seven" companies will start reporting this week - Tesla will be the first to do so on October 22, and Nvidia will be the last to release its quarterly results on November 19.

The financial performance of the "Magnificent Seven" companies - which also includes Meta, Apple, Amazon, Microsoft and Alphabet, Google's parent company - is one of the factors influencing the market and an indicator of the health of the technology sector.

Oninvest, based on LSEG Workspace data and materials from Deutsche Bank, Jefferies, Morgan Stanley, Bank of America and JPMorgan, has compiled the main things you need to know before the "big season" of reporting by the world's largest technology companies.

- Nvidia may have the most impressive growth in revenue and earnings per share among the "Magnificent Seven" companies. Tesla is the top outsider in this group of companies this reporting season.

- Of all the G7 companies, the financial results of Tesla, Meta and Amazon may not match analysts' expectations. The market is not expecting any surprises from the rest.

- Investment in AI will continue to grow, Goldman Sachs believes that in relative terms it is less than it was during previous tech boom times.

- The closed nature of transactions between AI companies is a risk factor, but only bearish investors fear the consequences.

- Microsoft, Amazon and Google are the main beneficiaries of the growth in corporate AI spending this year.

- Google's Gemini AI is the fastest growing in the market. According to BofA, the assessment of Gemini's competitiveness relative to ChatGPT directly affects market expectations for Alphabet.

LSEG SmartEstimate, whose algorithms take into account the historical accuracy of analysts' forecasts, showed that data from the reports of Tesla, Meta and Amazon may diverge from analysts' expectations. The rest of the "Magnificent Seven" companies are not expected to have any surprises in their reports.

For Tesla, for example, the market expects a significant - more than a quarter - decline in earnings per share, but the algorithm shows that the figure may exceed analysts' expectations by 11.3%. Meta and Amazon's earnings per share may exceed consensus by 2.8% and 2.6%, respectively.

According to LSEG, Nvidia will show the highest revenue growth - the market expects revenue and earnings per share to increase by more than 50% year-on-year to $54.7 billion and $1.24, respectively. The next company in terms of growth is Meta, which is expected to increase revenue by 22% to $49.4 billion and earnings per share by 11% to $6.67. Microsoft could be third on the list, with revenue up 15% to $75.3 billion and EPS up 11% to $3.67.

Amazon and Alphabet, judging by market expectations, will show a similar trend of 12% revenue growth to $177.6 billion and $99.7 billion, respectively. Consensus expects Amazon's earnings per share to rise 9.4% to $1.56 and Alphabet's earnings per share to rise 8.3% to $2.3. Apple's revenue will rise 7% year-over-year to $101.6 billion, and earnings per share will rise 7% to $1.76.

Tesla is a major outsider this earnings season, based on consensus forecasts. Wall Street expects the company's EPS to decline 27% to $0.53 and revenue to grow just 4% to $26.1 billion.

Tesla's strong operating performance is not an indicator of good financial reporting, JPMorgan analysts point out. In the third quarter, the company delivered 497 thousand cars, this is 12% above the Bloomberg consensus. But, according to the bank, the success is largely due to the fact that buyers in the U.S. rushed to buy an electric car before the tax credit of $7500. The bank expects sales to fall sharply - by 50-70% month-on-month - starting in October.

The index of the "Magnificent Seven" companies, calculated taking into account the weight of their capitalization, has grown by 19% since the beginning of 2025. The index based on the companies' stock price growth forecast (based on LSEG data) could rise by just 9.6% over the next 12 months. This is lower than the average annual return of the Magnificent Seven, as well as the performance of the S&P 500 and Nasdaq over the past five years.

Although analysts on average recommend to buy shares of companies from this group, but estimate their growth potential on the horizon of 12 months with restraint. The highest is for Nvidia, Amazon, Microsoft and Meta Platforms - analysts expect growth of each company's shares by about 17.5-20% (to the closing price on October 20). Apple and Alphabet have a downside potential of 3.5% and 2%, respectively, and Tesla is expected to fall by 18.6%.

- The bubble in the AI market is the main topic of discussion, including in the run-up to the reporting by the tech giants (besides it, they are also actively discussing whether it is more profitable to buy or develop their own AI solutions).

According to an October BofA survey, 54% of managers believe a bubble is forming in AI, and 60% believe the stock market is overheated. But analysts at Goldman Sachs, JPMorgan and Wedbush believe the growth in AI is sustainable, Fortune writes, citing their materials. In their view, the productivity gains from AI will eventually far exceed its current costs.

Goldman Sachs estimates the capital expenditures of Google, Amazon, Microsoft and Meta alone this year at $300 billion. But the bank believes that in relative terms, investments in AI account for less than 1% of US GDP - this is less than in the times of past technology booms (2-5%). According to analysts' estimates, productivity growth due to AI could bring about $8 trillion to the US economy, and under other scenarios - from $5 trillion to $19 trillion.

JPMorgan predicts that capital spending on AI projects by major companies will grow 60% this year and another 30% next year. That means data center investment will grow by more than $100 billion in 2025, the largest annual jump in history. In 2026, that figure will increase by another more than $80 billion.

Deutsche Bank's team of analysts wrote that they have been talking to the most pessimistic investors, and their main concerns are related to the "closed-loop" nature of recent deals between major AI players. These include Nvidia, the star of "The Magnificent Seven." It is investing about $100 billion in OpenAI to help it build data centers, and these will presumably be filled with Nvidia chips, Deutsche Bank cites an example. Another example is AMD, which has given OpenAI warrants to buy up to 10% of its shares. OpenAI "theoretically could use" the funds from the sale of its rights to the securities to buy AMD chips, the bank cites another example.

"In our view, this may be a concern for long-term fundamental investors, but the market reaction shows otherwise: after the deal was announced, AMD shares rose 24% in a day, and AI-related stocks in general saw gains during the quarter. This indicates that the concerns have so far taken a back seat to the general optimism around the AI market - at least in the short to medium term," the bank said in its materials.

Deutsche Bank itself notes that this "vicious circle" works as a catalyst for capitalization. According to the bank, the current deals are backed by real technological progress and actual equipment deliveries.

- Google's Gemini AI model is one of the fastest growing, according to an October 8 report from Bank of America. Analysts cite Similarweb's latest data, which shows that Gemini's global daily traffic grew 294% year-over-year and 54% month-over-month in September, significantly higher than other platforms. By comparison, ChatGPT's traffic grew 90% year-over-year. According to BofA, the perception of Gemini's competitiveness against ChatGPT directly affects market expectations for Alphabet.

Gemini's growth is attributed to the viral popularity of its new Nano Banana image generator. The bank notes that Google is already working on redesigning the Gemini app with a focus on visual features, which could be the next catalyst for growth.

Morgan Stanley presented the results of a survey of 100 IT directors two weeks before the start of reporting by the tech giants. A third of respondents see Microsoft as the main beneficiary of the growth in corporate investment in generative AI this year, followed by Amazon and Google. 37% believe Microsoft will also benefit most from the growth in AI spending over the next three years.

This article was AI-translated and verified by a human editor