Tech stocks are expected to deliver very strong earnings reports for the third quarter led by Big Tech stalwarts Microsoft Corp (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG) and Amazon.com Inc (NASDAQ:AMZN) on robust AI enterprise demand, analysts at Wedbush believe.
Wedbush noted that field checks suggest cloud businesses at these companies experienced significant uptake of AI solutions, contributing to expectations for solid revenue and profit growth.
The firm highlighted that enterprise and government spending on AI technologies is projected to reach $3 trillion over the next three years, creating a broad market tailwind.
The broker expects the earnings reports to confirm continued investment in AI and cloud services, potentially validating projections for further capital expenditure (capex) into 2026.
“While some investors continue to question the valuations and pace of this tech spending trend, we believe to the contrary the Street is still underestimating how big this AI spending trajectory is,” they wrote.
“We expect Q3 tech earnings to be another validation moment with a doubling down on aggressive initial capex numbers into 2026.”
Nvidia and Microsoft were singled out as key players in the current AI expansion, with Nvidia’s AI chip portfolio and Microsoft’s Azure cloud platform cited as central to enterprise adoption.
“The poster childs for the AI Revolution are led by Nvidia Corp (NASDAQ:NVDA, ETR:NVD) and Microsoft as both are foundational pieces of building on the biggest tech trend we have seen in our 25 years covering tech stocks on the Street,” Wedbush wrote.
“While the first steps in AI deployments are around Nvidia chips and the cloud stalwarts, importantly we estimate that for every $1 spent on Nvidia, there is an $8-$10 multiplier across the rest of the tech ecosystem.”
The analysts also highlighted software companies such as Snowflake Inc (NYSE:SNOW) and MongoDB Inc (NASDAQ:MDB) as potential beneficiaries of rising generative AI adoption, while noting that AI deployments are moving from pilot programs to wider enterprise-scale implementations.
“Looking forward its all about the use cases exploding which is driving this tech transformation being led by software and chips into year- end and beyond and thus speaks to our tech bull and AI Revolution thesis further playing out over the next 12 to 18 months,” Wedbush concluded.
Microsoft, Alphabet, and Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) will kick off Big Tech earnings next Wednesday, all reporting after US markets close. Apple and Amazon will follow on Thursday.