The first quarter earnings season is approaching its end with 409 S&P 500 members having already reported their quarterly results, as of May 4.
Notably, the Technology sector is one of the top performers this earnings season, despite the many hurdles that it faced during the quarter. The Technology Select Sector SPDR ETF (“XLK”) returned 5.
According to the latest Earnings Preview, 83.1% of the sector’s total market capitalization in the S&P 500 index has reported results, with 90.9% beating EPS estimates and 93.2% surpassing top-line projections.
Moreover, total earnings for these tech companies increased 29.6% year over year on 12% higher revenues. This can be attributed to robust performance of tech giants like Apple, Facebook, Amazon, Netflix, Intel, Microsoft and Google.
Performance of Some Tech Players
Apple’s results benefited from growth in iPhone and Services segment. Strong demand for iPhone in China, despite severe competition, was a key driver.
In spite of growing concerns over data privacy and security issues, Facebook had a superb run on the back of higher mobile ad revenues and expanding user base.
Moreover, expanding customer base of Amazon Web Services (AWS) and Prime helped Amazon crush estimates.
Further, Microsoft’s cloud computing platform Azure continued its solid growth during the quarter.
Additionally, the increasing demand for semiconductor chips that harnesses cloud computing and emerging trends of artificial intelligence (AI) and machine learning drove Intel. Additionally, rising demand for solutions related to self-driving vehicles and Internet of Things (IoT) boost top-line growth.
Earnings Trend Positive
Total earnings for the tech sector are now expected to increase 28.5%, while revenues are expected to grow 12.6% on a year-over-year basis. This is higher than 24.2% earnings growth witnessed in fourth-quarter 2017 on an 11.1% increase in the top line.