Watch for guidance rather than results

Four companies are set to decide the direction of the stock market this week, with guidance – not headline earnings – likely determining whether the AI rally continues or cracks.

As Tesla (TSLA), Meta Platforms (META), Microsoft (MSFT), and Apple (AAPL) report results, investors are focused on what these companies say about the future rather than what they report about the past. Their combined influence on major indices makes this earnings week one of the most important of the year.

A pivotal week for markets and the Magnificent 7

As markets navigate a volatile backdrop that includes new highs in Gold and Silver, a spike in Natural Gas prices above $6 for the first time in over three years, and rising odds of another US government shutdown, investor attention is firmly centered on Wednesday and Thursday. Alongside a Federal Reserve meeting, four of the Magnificent 7 companies will report earnings for the final calendar quarter of last year.

Tesla, Meta and Microsoft report on Wednesday post-market – right after the Fed meeting – while Apple will do the same on Thursday after the close, as well.

These releases are expected to shape short-term market sentiment and could determine whether the broader AI-driven rally remains in place.

Tesla: Earnings pressure and the Optimus narrative

Uncertainty remains high for Tesla heading into its post-market earnings release on Wednesday. The company missed earnings per share consensus in the previous quarter, and analyst expectations are mixed. Polymarket currently places the odds of a Tesla earnings beat just below 30%.

Consensus estimates project Tesla to earn $0.45 in adjusted EPS on $24.75 billion in sales. This would represent a 38% decline from a year ago and nearly a 4% drop in revenue.

Much of the focus is expected to be on Austin, Texas, where Tesla’s Robotaxi testing is underway. Elon Musk recently stated that the Austin Gigafactory will host significant training operations for Optimus humanoid robots. Tesla’s share price remains closely tied to the Optimus project, which Musk has described as “the biggest product of all time” when sales are expected to begin in late 2027.

Meta Platforms: Can AI investment translate into growth?

Analysts are optimistic heading into Meta Platforms’ earnings report, scheduled after the close on Wednesday. Wall Street expects $8.19 in adjusted EPS on $58.41 billion in revenue.

Revenue expectations imply 21% year-over-year growth, which may be more challenging to achieve as the company increases spending on AI data centers. Earnings growth expectations are more modest, at around 2%. Polymarket currently places the odds of an earnings beat at 90%.

Investors are closely watching whether heavy capital expenditures are producing tangible improvements in earnings guidance. Meta executives are also expected to highlight progress from the company’s artificial intelligence lab, which reportedly completed its first high-profile AI model earlier this month. However, the company has not yet announced when the model will be released to the public.

Microsoft: Extending a long streak of earnings beats

Microsoft is aiming for its ninth consecutive earnings beat, continuing a streak that has seen the company outperform consensus expectations for the past eight quarters. Analysts have shown strong confidence heading into this release, with most Wall Street firms raising their estimates.

Current consensus calls for $3.92 in adjusted EPS on $80.28 billion in revenue. Polymarket places the probability of another beat at 94%.

UBS analysts have highlighted progress at Microsoft’s Fairwater AI data center in Wisconsin, which is on schedule and expected to ramp toward its full 500-megawatt capacity by the summer. The flagship site reportedly cost up to $4 billion and houses hundreds of thousands of Nvidia GB200 and GB300-class GPUs.

According to UBS, the rollout of similar data centers could materially increase the revenue growth rate of Microsoft’s Azure cloud service as early as this quarter.

Apple: iPhone 17 demand and China in focus

Apple’s post-market earnings report on Thursday is expected to revolve around demand for the iPhone 17. Initial preorders were reportedly up 25% compared to the iPhone 16, with strong demand appearing consistent across early industry reports.

Particular attention is likely to be placed on the Pro Max model, which has been more popular than the standard iPhone 16 version. Investors will also closely monitor developments in China, where Apple is expected to see its market share increase. Historically, Chinese demand has played a significant role in Apple’s earnings performance.

With global smartphone sales growth slowing, maintaining and expanding market share remains critical for Apple. Wall Street expects earnings to grow 10% to $2.68 per share on $138.47 billion in revenue. These targets are widely viewed as achievable, with guidance for the following quarter seen as the primary risk factor. Polymarket currently places the odds of a beat at 92%.

Why these four earnings matter for the entire market

For broad equity indices, strong performance from these four companies is widely viewed as necessary to keep the AI rally on track. Any collective weakness could trigger a broader market downturn.

The NASDAQ 100, where these stocks hold significant weight, fell out of its six-month price channel in November of last year. Since then, momentum has weakened as the index has begun to level off. Over the past two months, resistance has emerged near the 25,800 level.

Meta, Microsoft, Tesla, and Apple together account for more than 16% of the S&P 500. With that weighting comes considerable influence. Weakness among these stocks would likely be felt across the entire index, making this earnings week one of the most important for the US stock market so far this year.

(This article was written with the help of an AI tool.)