By Angela Palumbo

A cloud of uncertainty is floating over Wall Street as tech earnings season begins and tariffs continues to rattle investor sentiment.

Tech's biggest companies will begin to report their latest quarterly results in the days to come. Kicking off earnings season this week are software companies ServiceNow, computer products maker IBM, and search giant Alphabet. Meta Platforms, Microsoft, Amazon.com, and Apple results are all expected to report next week.

The economic environment has drastically shifted in just the last few weeks following multiple tariff announcements from the Trump administration. Given the uncertainty, investors will be more focused on any guidance tech companies provide than on quarterly results.

The tech-heavy Nasdaq Composite has dropped 16% this year.

"The U.S. tech industry in particular is front and center in this Category 5 storm as the supply chain has been turned upside down over the last few weeks," Wedbush analyst Dan Ives wrote on Tuesday. "What will this unprecedented uncertainty do for AI deployments and overall Cap-Ex plans in the U.S.? Many questions...no answers for now."

These are three key points to look out for as tech earnings begin.

Guidance Uncertainty

Companies and investors have had to keep up with quickly changing headlines regarding tariffs. At first, President Donald Trump placed hefty reciprocal tariffs on goods coming in from countries around the globe. He has temporarily delayed some of those levies, while hiking tariffs on China. There's also been some temporary exemptions on some tech products like semiconductors and laptops, but the ultimate outcome of those tariff decisions are still up in the air.

Companies may struggle to provide updates to their financial guidance amid the uncertainty around the trade environment. It's possible management teams reduce their guidance to lower expectations amid the challenging macro environment, or remove their outlooks entirely.

"I would expect most of these companies to try to kick the can down the road and say, 'We don't know -- we haven't seen anything yet -- let's see what happens,'" D.A. Davidson tech analyst Gil Luria told Barron's.

Some companies outside of tech have already made notable decisions when it comes to guidance. Delta Air Lines scrapped its full-year outlook earlier this month. Personal care company Kimberly-Clark cut its full-year guidance on Tuesday and pointed to "potential incremental costs from a more uncertain geopolitical landscape."

Spending Risks for Consumers and Enterprises

Tariffs are taxes put on goods imported from other countries. As companies raise prices to pass on their increased costs, there's a risk that shoppers pull back spending on nonessential items. Companies that sell discretionary products, like Amazon.com, are more directly exposed to those types of risks.

There's also a more indirect impact on companies if consumer spending takes a hit. Apple, for example, could sell fewer iPhones or MacBooks as shoppers feel the pinch from tariffs, even though Apple products are temporarily exempt from the highest levies.

Then there's the possibility that advertising and software spending may take a hit if enterprises cut their costs if the economic environment slows. That could hurt companies like Meta, which makes most of its revenue from advertising.

Will Capital Expenditures Stay Elevated?

Megacap tech companies have pledged to spend billions of dollars on artificial-intelligence related investments this year. Alphabet has committed to capital expenditures of $75 billion, Microsoft said it plans on investing about $80 billion, and Amazon said it's on track to spend more than $100 billion. Investors will be paying close attention to whether these companies maintain that guidance.

Luria believes it's too early for these companies to cut their AI spending estimates, since the long-term goal of winning the AI race remains in place. That doesn't mean they'll be in a rush to raise these estimates soon, though.

"I don't know that these companies are going to change plans to spend hundreds of billions of dollars based on three weeks worth of analysis in an uncertain environment," Luria said.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 23, 2025 03:00 ET (07:00 GMT)

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