The coming week’s earnings will shed light on whether the artificial intelligence-fueled rebound in the technology sector is little more than hype.
Major US tech giants like Alphabet Inc., Meta Platforms Inc. and Microsoft Corp. have topped estimates this quarter, with the burgeoning field of AI emerging as a new battle front in the industry. SoftBank Group Corp. founder Masayoshi Son has said the firm is positioned to win the race to master AI, thanks to its billions of dollars of tech investment.
SoftBank’s semiconductor unit Arm Ltd. is aiming for a valuation of as much as $70 billion in an initial public offering as soon as September, signaling a shift in market sentiment in favor of the tech sector after last year’s rout. Sony Group Corp. may reveal whether the global spending slump for electronics has come to an end.
The AI battle is also being waged between countries. Firms including Semiconductor Manufacturing International Corp., Iflytek Co Ltd. and Foxconn Industrial Internet Co. report amid a backdrop of rising China-US tensions and plans by Beijing to ramp up support for its AI and chip industries.
Whether banks like Commonwealth Bank of Australia will follow HSBC Holdings Plc and Standard Chartered Plc in boosting buybacks will also be a focus.
Highlights to look out for:
Monday: Beleaguered conglomerate Toshiba (6502 JP) may report a first-quarter operating profit after a loss last year, according to BI analyst Takeshi Kitaura. Contributions from its retail and printing unit, and lower losses at its hard disk drives unit, helped, BI said, adding that progress toward the full-year guidance may remain slow. The firm expects the $15 billion buyout offer by a group led by Japan Industrial Partners to begin this month.
Tuesday: SoftBank Group (9984 JP) may see a rebound in net income from the 58 billion-yen net loss last quarter, Bloomberg estimates show. The Vision Fund’s investment loss could moderate amid the tech recovery, while ARM’s revenue might be hurt by mobile-chip destocking, according to BI analysts Marvin Lo and Chris Muckensturm. Analysts see a “reasonable” chance of a new share buyback program as the company may need to keep its price-to-book ratio above 1 to avoid running afoul of Tokyo Stock Exchange listing requirements. A successful Arm IPO would mark a rare victory after an ill-fated foray into startup investing.
- Foxconn Industrial (601138 CH) may see a single-digit increase in second-quarter sales, BI estimates, as increasing demand for AI servers after ChatGPT’s success helped its cloud computing businesses. Networking and 5G-related products probably remained resilient, though demand for smartphone components was lackluster. The company has been identified by Citi analysts, including Andre Lin and Carrie Liu, as an early AI-theme beneficiary. The stock has performed well in recent months, and it should continue to track global AI development trends, they added. Revenue is expected to reach 116.1 billion yuan ($16.2 billion), Bloomberg estimates show.
- Li Auto’s (LI US) quarterly revenue may have tripled to almost 29 billion yuan, as deliveries of its new L8 and L7 SUVs ramp up, according to BI. Greater economies of scale may boost operating profit to about 1 billion yuan. The automotive gross margin might stay flat amid competition and falling sales of its most expensive L9 SUV.
Wednesday: Sony (6758 JP) may post a drop of almost 20% in first-quarter operating profit, Bloomberg estimates show. Sales of image sensors may fall sequentially on weakening smartphone demand, BI analyst Masahiro Wakasugi said. Earlier, a Sony executive testified that Microsoft’s acquisition of Activision Blizzard would harm its console business, particularly regarding the popular Call of Duty franchise. Sony will expand research and development spending for its gaming business to 300 billion yen in the fiscal year ending March, Nikkei reported. In the pictures segment, Sony recently postponed some marquee releases amid the work stoppage in Hollywood. Overall, BI expects Sony to meet its operating profit target of 1.17 trillion yen for fiscal 2024. Goldman Sachs raised its recommendation to buy last month.
- Commonwealth Bank of Australia’s (CBA AU) full-year cash profit from continuing operations probably climbed 4.4% to A$10.1 billion, Bloomberg consensus shows. It will recognize A$212 million of pretax provisions during the half ended June 30. Its healthy position in areas including provisions, funding and liquidity may prompt the bank to announce a further A$1 billion in buybacks, Morgan Stanley analysts wrote in a note. The return on equity could drop below 13% in fiscal 2024 as competition pushes margins below the first-half 2023 possible peak, BI analysts Matt Ingram and Jack Baxter said.
Thursday: SMIC (981 HK) may see a revenue slide with slower global economic growth and US export restrictions over the next 12 to 18 months, analysts from Moody’s including Chenyi Lu wrote in a June note. Bloomberg estimates show second-quarter revenue falling 19% to $1.54 billion. A strong net cash position and good access to funding will help it navigate the short-term challenges, they added. The company got about 20% of last year’s sales from US-based clients despite being blacklisted by the American government.
- Rakuten Group’s (4755 JP) second-quarter operating loss probably narrowed to 50 billion yen. It raised as much as 332.2 billion yen in May, shoring up capital depleted by its unprofitable mobile unit. The mobile business could draw other tech giants as white knights, according to BI analysts Marvin Lo and Chris Muckensturm. Its online brokerage arm applied last month to go public, an effort by Japan’s e-commerce leader to allay concerns over its debt levels. Rakuten’s operating profit could remain negative through 2024, BI added, though management expects to break even in the fourth quarter of 2023.
Friday: Chinese voice-recognition firm Iflytek (002230 CH) said last month that US restrictions would cut first-half net income by as much as 80%. Still, the firm managed to boost revenue and gross profit in the second quarter, with Goldman Sachs seeing strong momentum in its AI learning tablet and recorder sales. In May, Chairman Liu Qingfeng unveiled the AI model SparkDesk, with the aim to exceed OpenAI’s capabilities in Chinese and match ChatGPT’s standards in English.
- To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS on the Bloomberg terminal
- Click to see the highlights to watch this week from earnings reports in US and Europe
--With assistance from Gareth Allan.
Author: Rachel Yeo, Reina Sasaki, Justina T. Lee and Harshita Swaminathan
