This week’s earnings season promises to be among the most insightful yet. Major players across sectors report, providing critical snapshots of the broader economy and whether fundamentals back company valuations. With ongoing concerns about a potential U.S. and global recession, these reports could help clarify whether corporate resilience is holding up or if a downturn is on the horizon.

At the heart of these updates will be business and consumer confidence indicators, closely tied to economic trends. A key metric to watch is advertising budgets. During economic uncertainty, companies often pull back on ad spend, so ad revenue from giants like Alphabet and Meta will reveal whether businesses are investing in growth or tightening their belts. If companies begin reducing their marketing budgets, it may indicate that they’re bracing for weaker consumer demand, a potential early warning sign of a slowdown.

The AI boom will also be in the spotlight. Sky-high valuations across the tech sector have fuelled investor expectations, but with valuations comes the pressure to deliver. Companies like Alphabet, Microsoft, and Amazon must show how their AI investments are beginning to translate into revenue. Capex guidance around AI infrastructure and updates on AI product development will be crucial in gauging whether AI’s profitability is within reach or remains in a distant future.

Smaller consumer-focused companies will also be essential to understanding economic health. As these companies report, they’ll provide a glimpse of consumer spending behaviour, including whether consumers are continuing to make discretionary purchases or focusing more on essentials. Insights here offer a detailed look at spending patterns, which can be key to assessing the broader economy’s resilience.

Earnings calls this season will likely reveal emerging market trends and strategic shifts that companies plan for upcoming quarters. Listening closely to management commentary on cost-control efforts, pricing strategies, and regional growth areas can uncover promising trade setups. Identifying these trends early on may highlight areas for potential investment, especially where companies show expansion despite macro pressures.

This earnings period goes well beyond just the “Magnificent Seven.” It offers a deep look into the economic landscape, revealing where strength persists, and the risk rises. This is a crucial opportunity for traders and investors to separate high-growth potential from overvalued sectors, especially in AI, consumer, and advertising, helping shape strategies for the months ahead.

An advertising recession, or downturn in ad spending, often reflects broader economic concerns and can serve as a leading indicator of a potential economic slowdown. Here’s how changes in ad revenue reveal insights about the economy:

Advertising Budgets:

Advertising budgets are flexible and often reduced when economic outlooks decline, reflecting tighter spending in anticipation of slowed growth or recession. Cuts in advertising by significant sectors like retail or technology typically indicate lowered sales expectations and reduced consumer spending.

Consumer Demand Signals:

Companies increase ad spending during strong demand and decrease it when they expect a slowdown. A drop in ad revenue can signal weakened demand, while a shift to cost-effective advertising methods indicates efforts to maintain sales amidst slower demand.

Sector-Specific Economic Health:

Advertising trends can reveal thriving or struggling sectors. Cuts in travel or luxury goods advertising may suggest reduced discretionary spending, while continued spending in healthcare or essential goods indicates resilience in those areas.

Economic Pressures and Digital Ad Spend:

The digital ad market is sensitive to economic changes due to lower upfront costs. Declining revenue for major digital platforms may signal widespread caution across industries, while competition for limited ad dollars can drive innovation in targeting and measurement.

Consumer Confidence Reflection:

Reduced consumer spending leads companies to cut marketing budgets. Lower retail ad revenue may indicate a shift towards essential purchases, highlighting weakened consumer confidence. Focusing on value or savings in advertising suggests cost-conscious consumers amid economic pressures.

In short, changes in ad revenue reveal shifts in business confidence, consumer demand, sector resilience, and the broader economic landscape. A drop in ad revenue, especially for digital giants, is often an early sign of cautious spending from companies and consumers, suggesting that businesses are preparing for potential economic downturns. This makes ad revenue a valuable metric as a real-time barometer of the economy.

This week, Alphabet and Meta will be reporting, and we’ll watch these two companies who dominate the advertising space. The main things we’ll be looking at will be:

Advertising Revenue Under Economic Pressure:

Overall Ad Revenue Trends: Alphabet’s revenue still largely depends on ads, so pay close attention to YouTube and Search ad revenue, which made up about 81% of total income last quarter.

Demand Shifts: Look for any mention of decreased advertiser demand or softer Cost-Per-Click (CPC) rates, as these could indicate early recessionary impacts.

Competitive Pressures from TikTok: TikTok’s rapid growth is still a competitive factor. Watch for YouTube’s engagement metrics and ad revenue growth, particularly for YouTube Shorts and whether Alphabet’s ad innovations are capturing market share.

For the upcoming earnings from Microsoft, Amazon, and Alphabet (Google), here are key areas to focus on in cloud storage and data centres. Each company has a substantial cloud business, making these segments valuable industry health and economic resilience indicators.

Revenue Growth and Market Share:

Growth Rates: All three cloud giants (Amazon Web Services, Microsoft Azure, and Google Cloud) have historically seen high growth rates. Microsoft reported 26% growth in cloud services last quarter, while Amazon’s AWS grew around 12%. Watching for any slowdown in these figures can indicate companies are cautious about spending, a potential signal of economic hesitation.

Market Share Dynamics: Check for shifts in market share among AWS, Azure, and Google Cloud. AWS has traditionally dominated but has faced increasing competition from Microsoft and Alphabet. Any changes here can point to strategic shifts, product innovation, or customer preferences, primarily if one provider reports more substantial growth.

Profit Margins and Cost Efficiency:

Profitability Trends: Microsoft and Alphabet’s cloud segments have recently become profitable, while AWS has maintained profitability. Any changes in profitability will be notable, mainly if companies discuss data centre costs, power, and cooling expenses. Rising costs here could impact profit margins, even if revenue remains strong.

Cost Management in Data Centres: Data centres are capital-intensive, with rising energy costs putting pressure on margins. Watch for any mention of energy efficiencies, new data centre builds, or operating cost-saving measures, which could help mitigate these expenses. Alphabet and Microsoft have been focusing on cost efficiencies in their cloud segments, so signs of success here are critical.

AI-Driven Workloads and Capacity Expansion:

Investment in AI Capacity: Each company is expanding its data centre capacity to meet the demand for generative AI services requiring significant computational resources. Microsoft, for instance, has partnered with OpenAI and will likely discuss AI workload growth in Azure. Alphabet and Amazon have also been adding AI-specific services, so keep an eye on whether these companies indicate growth in high-compute workloads.

Capex Guidance for AI and Cloud Expansion: Given the capital-intensive nature of expanding AI data centres, any guidance on Capex for future quarters is essential. For example, Microsoft’s and Alphabet’s recent quarters have shown increased Capex to support AI advancements, and further expansion would indicate continued investment in this high-demand area.

Customer Spending Behaviour:

Customer Cost Sensitivity: Economic pressures can lead companies to scrutinise their cloud spending. Watch for signs that customers are reducing cloud usage, shifting to cheaper plans, or renegotiating contracts. Microsoft recently emphasised flexible pricing, and AWS introduced cost-saving tools for customers, which could reflect customers’ budget-conscious behaviour.

Growth in Small-to-Medium vs. Large Enterprises: Larger enterprises may hold more stable cloud contracts, while SMBs could reduce spending first in a downturn. Observing whether the bulk of cloud growth comes from enterprise customers or SMBs will help gauge economic resilience across different business sizes.

Energy Efficiency and Sustainability Initiatives:

Green Data Centres: With rising energy prices and increasing environmental focus, each company’s efforts in sustainability are noteworthy. Microsoft, for example, is committed to carbon neutrality by 2030, which includes building energy-efficient data centres. Any updates on green initiatives or energy-efficient technology could indicate progress in lowering operational costs and strengthening brand image.

Energy Costs and Location Strategy: Data centres are major electricity consumers. Updates on energy-efficient location choices or power partnerships, like those from AWS’s renewable energy data centres, could suggest cost management strategies amidst rising energy costs.

Security and Compliance Innovations:

Enhanced Security Features: As data privacy and cybersecurity risks grow, customers may prioritise cloud providers with strong security features. Microsoft’s Azure and AWS are known for high levels of compliance and security. Pay attention to any new security or compliance innovations that add value for customers, as this could enhance customer retention.

Regulatory Compliance Costs: Companies expanding cloud services internationally may face differing regulations, such as data localisation requirements in the EU. Compliance can drive up costs, so any increase in regulatory spending or location-specific investments may impact margins.

Ai Expansion and Economic Resilience:

Monetization of AI: Alphabet has been rolling out AI-based products such as Bard and AI-powered Search. If these products contribute meaningfully to revenue, it could indicate that Alphabet is building new income streams even amid economic uncertainty.

Spending on AI and R&D: Alphabet’s heavy investments in AI have increased its Capital Expenditure (Capex). Traders should watch any comments on how Alphabet may balance these costs with other efficiency efforts, particularly in a softer market.

Efficiency and Cost-Cutting Measures:

Operating Expenses and Profit Margins: With Alphabet implementing cost-saving measures, including project cuts and hiring slowdowns, check for decreases in operational costs. The free cash flow (FCF) figure—up to $29 billion last quarter—can explain Alphabet’s financial flexibility.

Stock Buybacks: Alphabet’s share repurchase program has been a critical use of its cash reserves, signalling management’s confidence. Any mention of a continuation or expansion of this program may bolster market sentiment, especially in a cautious economic climate.

With consumer and economic sensitivity in mind, tracking Alphabet’s advertising and cloud revenue health and cost efficiency will reveal the company’s adaptability and growth strategy amid recessionary signals.

Visa and Mastercard’s earnings and trading updates are powerful indicators of economic health, as they provide insight into consumer spending patterns, cross-border travel, and business activity. Here’s what I will focus on in their quarterly updates and how it reflects on the broader economy:

Consumer Spending Patterns:

Transaction Volume and Spend Trends: Visa and Mastercard process trillions of transactions globally, making their data a close reflection of consumer behaviour. I will look for changes in transaction volumes or shifts in spending categories. If spending on discretionary items like travel, entertainment, and luxury goods slows, it could signal consumer caution, especially if essential spending holds steady or increases.

Credit vs. Debit Spending: When the banks report resilient consumer spending but a consumer spending on credit, will Visa and MasterCard tell us the same? A higher proportion of credit spending over debit may suggest consumers increasingly rely on credit to purchase, potentially due to tighter budgets or rising living costs. If credit card debt grows while debit usage declines, it may indicate financial stress among consumers, a potential sign of economic pressure.

Cross-Border and International Transaction Growth:

Travel and Cross-Border Volume: Visa and Mastercard earn higher fees on cross-border transactions, which are closely tied to international travel and commerce. Higher growth here can indicate robust global travel demand, while a slowdown could reflect weakened consumer confidence or economic constraints in certain regions.

Regional Performance: Both companies often break down performance by region. If certain regions, like Europe or Asia-Pacific, show signs of slowing transaction growth, it could reflect economic softness in those areas, potentially driven by factors like inflation, currency volatility, or local economic challenges.

Effects of Rising Interest Rates:

Impacts on Credit Card Spending and Delinquency Rates: Both Visa and Mastercard monitor credit card usage trends, and rising interest rates could increase delinquency or slow down credit spending. If these companies report higher delinquency rates or slowing growth in credit card transactions, it may indicate that consumers are feeling the pinch from higher borrowing costs.

Merchant and Fee Revenue: Higher interest rates might also impact small businesses that rely heavily on card transactions. Watch for any commentary on merchant sentiment or adjustments to transaction fees, which may reflect how rising rates affect businesses’ willingness to absorb costs.

E-commerce vs. In-Store Spending Trends:

Shift in Spending Channels: With the increase in e-commerce, Visa and Mastercard’s insights on in-store versus online spending can reveal changes in consumer habits. A more significant proportion of e-commerce spending might signal consumer preference for online convenience and potential cost savings. At the same time, robust in-store activity might reflect consumer confidence in physical retail.

Category Breakdown: Look for data on specific spending categories, like travel, entertainment, and dining. Strength in these categories could reflect consumer confidence, while a shift to essential spending (like groceries) could indicate belt-tightening.

Digital Payments and Fintech Partnerships:

Growth in Digital Wallets and Contactless Payments: Visa and Mastercard’s updates on digital payment adoption, including partnerships with fintechs, can reveal where the digital payments space is headed. Growth here indicates consumers are increasingly comfortable with mobile and contactless payments, especially as they seek efficient and secure spending options.

New Products and Innovation: As the companies innovate, they provide insights into how they plan to capture new markets, particularly among younger consumers and tech-savvy demographics. Strategic moves in digital wallets or buy-now-pay-later partnerships could indicate future revenue streams and align with shifting consumer preferences.

Inflation and Consumer Price Sensitivity:

Impact of Inflation on Spending: Both companies may comment on the impact of inflation, particularly on how it influences transaction sizes and spending patterns. Higher average transaction values could reflect inflation’s impact, while lower transaction frequency might suggest consumer reluctance to spend amid rising costs.

Regional Inflation Trends: Visa and Mastercard operate globally, and regional updates can shed light on inflation’s differing effects. For example, inflation-driven slowdowns in spending in Europe versus the U.S. may point to varying consumer responses based on local economic conditions.

Spotify’s upcoming earnings are released on tueday. I will focus on several key indicators to gauge the company’s growth, revenue mix, and profitability path. First, I’ll pay attention to subscriber growth and monthly active users (MAUs). The split between premium and ad-supported growth will reveal how well Spotify is converting free users to paying subscribers and expanding its ad-supported user base, which drives ad revenue.

Another critical metric is revenue per user (ARPU) across premium and ad-supported segments. If recent price hikes have led to higher ARPU, it signals strong pricing power. Additionally, Spotify’s advertising revenue performance is essential, especially as it grows audio ads and podcasts. Rapid ad revenue growth could indicate that Spotify’s free tier is successfully monetising.

Spotify’s podcast strategy is also a focal point. Significant investments in exclusive podcasts have the potential to drive ad revenue and new users, so updates on podcast profitability and content engagement will reveal if these investments are paying off. Managing content costs is also crucial, as rising expenses could weigh on margins.

Product innovation, like new features and content types, also plays a role. Spotify’s recent experiments with real-time lyrics, social sharing, and playlist personalisation, along with its foray into audiobooks, could boost user engagement and provide additional revenue streams if well-received.

Finally, I’ll look at Spotify’s guidance on subscriber growth and revenue and any comments on macroeconomic factors like inflation or ad spend sensitivity. This outlook will reflect management’s confidence in the company’s growth and profitability trajectory and provide insights into how Spotify might fare amid broader economic pressures. These factors will help investors evaluate Spotify’s potential for sustainable growth and profitability.

For Chipotle’s earnings on Tuesday, key metrics to watch are same-store sales growth, average check size, digital sales, and profit margins. Even if inflation is high, same-store solid sales and rising check sizes signal customer loyalty and adequate pricing power. However, if sales slow, it could mean consumers are feeling economic pressure and cutting back on dining out.

Digital sales growth will indicate whether customers still value convenience and delivery options while improving profit margins despite higher food and labour costs, which would suggest successful cost management. Expansion plans and the performance of new stores reveal how confident Chipotle is in its growth strategy and whether demand for the brand remains strong.

Together, these indicators provide a look into consumer behaviour. If sales and average check sizes are strong, consumers are still willing to spend on higher-quality, fast-casual dining. However, if we see softening in these areas, it could hint at tightening consumer budgets in response to economic pressures. Chipotle’s results thus give insight into consumer resilience, spending power, and the broader economic climate.

Let’s take a closer look at what’s happening with Royal Caribbean and Norwegian Cruise Line by examining occupancy rates, booking trends, ticket pricing, and onboard spending. When occupancy rates are high and forward bookings are strong, it’s a great sign of robust demand. This shows that people are eager to spend on leisure and travel, even when economic uncertainty is in the air. On the flip side, if we see occupancy or bookings dropping, it might mean that consumers are starting to rethink their discretionary spending.

Another important factor to consider is ticket pricing. If prices are rising but bookings remain steady, the demand is strong, and the companies have good pricing power. However, if ticket prices go down to keep occupancy levels up, that could be a sign of weakening consumer confidence. Onboard spending is also a key aspect to look at. When guests spend generously on dining upgrades, spa services, and excursions, it reflects their confidence in their financial situation. If they start pulling back on these extras, it might signal that budgets are getting tighter. All these metrics help us better understand the overall economic landscape. High occupancy and strong onboard spending suggest people value travel and unique experiences. If these numbers start to slip, it could mean that consumers are becoming more cautious with their spending, which might hint at an economic slowdown or a shift in consumer sentiment.

There are too many companies for me to examine properly. I’ll give just a snapshot of what I’ll be thinking about.

Other companies I’ll be taking an interest in are:

Tuesday

AMD – again, an AI Play. I’ll be watching comments on Data centres and Gaming Revenue. AMD’s forward guidance will shed light on expectations for demand across consumer and enterprise markets.

PayPal – payment volumes, competition Venmo expansion. Forward guidance on revenue, user growth, and spending expectations will provide insight into management’s outlook, especially regarding consumer sentiment and spending trends.

Sofi – the stock price has been performing well lately, I’ll be watching member growth, lending segment performance, deposit growth, financial services revenue, and profitability trajectory.

Wednesday

Starbucks – if people feel the pinch, they aren’t buying those coffees. I want to look at sales growth, average ticket size, digital engagement, international performance (particularly in China), and margin trends.

Coinbase and Robinhood – have become major indicators of retail trading sentiment, especially after the surge in popularity during the market euphoria of recent years. Both platforms provide unique insights into how retail traders are feeling about the market, as they’re favoured by individual investors who typically react more directly to market volatility, sentiment shifts, and trends.

I’ll be watching trading Volume and monthly active users.

For eBay, I’ll focus on critical metrics like gross merchandise volume (GMV), active buyer growth, revenue mix from high-value categories, advertising revenue, and cost management. But competition is a big question here, too. Recently, eBay scrapped listing fees for sellers how is this impacting their business model? Are they making strategic moves to stay competitive, or is this a sign they’re feeling pressured by rivals? The results should reveal whether these adjustments are driving growth or if eBay is facing challenges in holding onto market share.

Thursday

For Apple, I’ll focus on iPhone sales and service revenue, especially in key markets like China. The stock has been volatile lately, with analysts sharing reports of slowing numbers on social media, which seems to be unsettling retail investors, an unusual situation for Apple. The upcoming earnings will be crucial in addressing the uncertainty around the company’s growth trajectory and potentially calming the market.

Amazon – I will focus on key areas regarding Amazon. First, Amazon Web Services (AWS) is the company’s biggest profit driver, so I’ll watch for growth and updates on its AI initiatives to gauge its competitiveness against Azure and Google Cloud.

In the e-commerce sector, Amazon’s North American retail performance will indicate consumer demand trends and the impact of inflation or economic uncertainty on discretionary spending.

I will also monitor Prime membership engagement and cost management, particularly as logistics and wage expenses rise.

Lastly, Amazon’s guidance on holiday consumer demand and commentary on economic conditions will be vital for assessing its outlook. Strong results in AWS, advertising, and cost control would suggest resilience, while weaker performance may highlight broader economic challenges

Intel – once the dominant force in processors has faced repeated disappointments recently, struggling with delays in new chip releases and losing ground to competitors like AMD and Nvidia in both consumer and data centre markets. The company has been held back by production setbacks and slower adaptation to advancements in chip technology, which has dented investor confidence. However, there’s a glimmer of hope on the horizon as Intel focuses on key growth areas, particularly in the AI and data centre space, where demand for high-performance computing is surging. Intel’s ambitious investments in manufacturing (such as its push into advanced chip fabrication)

I’ve run out of time, but I’ll try to update you throughout the week. Check back for my thoughts on the market. Remember to take everything you see on the internet with a grain of salt and do your own research.