Optimism about artificial intelligence boosting demand for semiconductors won’t be enough to offset the challenges from an oversupply of chips and a murky economic backdrop, when companies such as Texas Instruments, Intel and NXP Semiconductors report earnings this week.
(Bloomberg) — Optimism about artificial intelligence boosting demand for semiconductors won’t be enough to offset the challenges from an oversupply of chips and a murky economic backdrop, when companies such as Texas Instruments, Intel and NXP Semiconductors report earnings this week.
TSMC, the main chipmaker for Apple and Nvidia, projected a 10% drop in annual sales when it reported earnings on Friday in Asia, triggering share-price declines across the sector. There may still be bright spots in the industry, though, such as NXP’s microcontrollers — a type of chip for which there’s a shortage at the moment.
Meanwhile, Coca-Cola and McDonald’s are set to report slower growth, reflecting global economic conditions; the sluggish economy is also weighing on oil prices, setting Exxon and Chevron on course for their first quarterly earnings declines in more than two years.
AI, another dominant market theme, is likely be discussed by Microsoft and Alphabet in their earnings. In addition to contending with Microsoft’s AI-powered Bing, Alphabet’s Google search engine may soon face competition from Apple, which is creating its own large-language model.
- To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS
- Click to see the highlights to watch this week from earnings reports in Europe and Asia
Monday: NXP Semiconductors NV (NXPI US) may report a 3% fall in quarterly sales in its postmarket report. Revenue could stay pressured for the rest of the year, but its microcontroller product offerings will be a source of strength, especially given the shortage of these type of chips, Citi says. NXP is among the chipmakers that automaker Stellantis NV is in talks with to secure supply through 2030.
Tuesday: Sales at Alphabet Inc.’s (GOOGL US) core search segment likely grew 4% in the quarter amid continued competition from the likes of Microsoft’s Bing AI and OpenAI’s ChatGPT, BI says. Apple Inc. could shape up to be another contender in that space. Still, Alphabet is set to report earnings growth of 9% after four consecutive quarters of declines, helped partly by its cloud unit. The merger of its DeepMind and Brain units could also help speed up the rollout of new products tied to large-language models, BI said.
- General Motors Co. (GM US) will see a 51% rise in quarterly earnings per share when it reports premarket. The automaker lifted its guidance for its 2023 earnings before interest and tax expenses by $500 million, prompted by robust US demand for its Chevrolet Suburban, Chevy Trax and Trailblazer models. General Motors retains a firm grip on pricing by reining in vehicle production, which helps keep dealer inventory flat, Bloomberg Intelligence notes.
- Microsoft Corp.’s (MSFT US) adjusted operating margin rose to 42%, up from 40% a year ago, and the company is moving to protect margins as the advent of AI pushes up the cost of processing workloads. Jefferies notes that Microsoft’s recently announced pricing on its new AI tools for corporate clients represented hikes that were more than double what was initially expected.
- Texas Instruments Inc.’s (TXN US) revenue contraction is set to accelerate further to 17%, the third successive quarterly decline, as the global semiconductor industry continues to work through an inventory glut.
- Revenue growth at Visa Inc. (V US) likely grew 11% in the quarter, with services and international revenue gains offsetting weaker consumer spending in the US. The total number of transactions is seen 10% higher versus the same period a year ago.
Wednesday: Meta Platforms Inc. (META US), like Alphabet, is projected to return to growth in the second quarter. Earnings per share is seen rising 19% after shrinking for six consecutive quarters. Engagement trends for Instagram have helped, as have growing contributions from Meta’s click-to-messaging advertising. The pace of adoption for its newly launched “Twitter-killer” app Threads outpaced that of ChatGPT earlier this year, benefiting from Meta’s ready base of Instagram users. The new app could drive billions in revenue for Meta over the next few years, BI says.
- Boeing Co.’s (BA US) loss per share likely more than doubled in the quarter to 84 cents from the same period a year ago, with its commercial-airplanes arm chalking up a loss of $428 million. But the aerospace company is seeing demand accelerate, particularly for its 737 aircraft. Boeing delivered 136 jets in the second quarter, 12% more than a year ago. Supply-chain pressures notwithstanding, it could ramp up production in the months ahead.
- Coca-Cola Co. (KO US) is on track to report its slowest organic sales growth since 2021 when it posts second-quarter results before the market opens. The beverage maker continues to grapple with challenges on the global front, ranging from Russia’s invasion of Ukraine to the currency impact from a strong dollar, BI notes. Inventory levels have risen to unusually high levels, and executives could discuss how they plan to reduce stock in the rest of the year.
Thursday: Despite selling more than 500,000 vehicles in the US for the first time since 2020, Ford Motor Co.’s (F US) quarterly revenue could grow at its slowest pace in more than a year, weighed down by a price war in the electric-vehicle market. Revenue per unit likely fell by 3% in the quarter, the first drop in three years. Ford recently cut prices for its Mustang Mach-e for the second time this year, and has also slashed prices for the electric version of its best-selling F-150 truck. Management’s recent cost-cutting efforts, including workforce cuts, may also come into focus in its postmarket report.
- McDonald’s Corp. (MCD US) same-store sales growth is seen slowing to 9%, from 13% in the previous quarter, with US consumer sentiment remaining tepid. Still, the lifting of pandemic curbs in China should boost the fast-food chain’s international same-store sales. Investors may also seek clarity on a Bloomberg report that Carlyle Group and Trustar Capital are seeking a partial exit from McDonald’s operations in Hong Kong and mainland China.
- Double-digit overseas volume growth likely drove a 12% expansion in Mastercard Inc.’s (MA US) quarterly revenue despite a slump in US consumer spending. A global travel rebound, led by Asia, could continue to offset weakness in the US, with a cheaper dollar possibly strengthening Mastercard’s overseas revenue and volume gains in the second half of the year, BI says.
- Intel Corp. (INTC US) is set to report its sixth straight quarter of falling revenue, with a decline of 22% year-over-year. Capital spending to expand foundry capacity will position the company for long-term growth but, coupled with declining sales, keep its post-dividend cash-flow negative over the next 18 months, BI notes.
Friday: Chevron Corp.’s reported better-than-expected earnings this weekend helped it sustain its record capital return program, and set the stage for Exxon Mobil Corp.’s (XOM US) pre-market results. Earnings for Exxon are forecast to fall at a similar rate as Chevron’s 48% drop, but that shouldn’t deter its share buyback program. Questions remain about the funds for the share repurchases, as Exxon’s free cash flow will only cover about half the buyback amount if it keeps pace with the first quarter, BI said.
- Procter & Gamble Co. (PG US) is poised to report quarterly organic revenue growth of around 7% for its beauty and grooming businesses, and the company is positioned to gain market share thanks its broad range of products and prices, BI says. P&G should also have an easier time budgeting for innovation and execution, with peak inflation past.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.