Alphabet and Microsoft face AI-driven earnings test

This month, two giants of the so-called "Magnificent Seven," Alphabet and Microsoft, are preparing to report earnings that could shape the future of tech investing in 2025. With billions of dollars at stake, investors and traders are eager to see how these tech leaders navigate high-stakes AI investments, looming tariffs, and evolving market dynamics.

Alphabet's AI ambitions meet tariff turbulence

Alphabet-Google and YouTube’s parent company - will kick things off with its first-quarter earnings announcement on 24 April. Goldman Sachs, bullishly holding nearly $9 billion in Alphabet stock (47.3 million shares), clearly expects big returns from Alphabet’s aggressive AI-focused strategy.

Alphabet recently made headlines with its $32 billion acquisition of cybersecurity leader Wiz, signaling a bold move to dominate cloud and cybersecurity markets. Wiz’s standout feature? Its compatibility with rival platforms AWS and Azure places Alphabet right at the heart of the multi-cloud landscape.

However, Alphabet isn’t immune to turbulence. Increased competition from Amazon’s strategic ad partnerships with Pinterest and Snapchat, especially in appealing to younger audiences, could challenge Alphabet's advertising dominance. Additionally, the company faces growing antitrust scrutiny and potential budget tightening triggered by President Trump’s proposed tariffs. Although tariffs don't directly impact software, broader economic uncertainty could cause companies to reduce spending on Alphabet’s premium AI and cloud solutions.

Analysts remain optimistic about Alphabet’s performance as the earnings call date approaches.

Analysts project:

•  EPS: $2.03 (up from $1.89 last year)
• Revenue: $89.2 billion (up from $80.5 billion last year)

Still, caution prevails. Citi recently lowered its price target from $229 to $195 due to concerns about ad market volatility.

Microsoft quantum computing hype and the OpenAI question

Meanwhile, Microsoft shareholders experienced a recent rollercoaster ride, with the stock falling sharply by over 8.6% after OpenAI’s unexpected $3 billion acquisition of Windsurf, a premier AI coding assistant. With Microsoft's earnings scheduled for April 30, investors are understandably nervous, wondering if OpenAI - once Microsoft's closest AI ally - might be evolving into a competitor.

Interestingly, Microsoft's partnership with OpenAI previously propelled its stock upward. Now, investors worry about resource allocation after OpenAI's massive $40 billion funding round, and they are concerned future acquisitions could divert resources from Microsoft’s AI advancements.

Yet analysts like Mizuho’s Gregg Moskowitz remain confident, setting a robust $475 target and highlighting Azure’s reliability as a recession-resistant growth engine. Microsoft 365 further reinforces this stability with consistently strong revenue.

Quantum computing, Wall Street’s hottest new topic, adds another fascinating dimension. Quantum spending has been growing steadily over the years and is expected to stay on that trajectory in the foreseeable future. Fifty - 60 percent of the spending is expected to come from the public sector, 35 - 50 percent from the corporate sector, and the rest from supply chain spending.

Microsoft has made headlines with its revolutionary Majorana 1 quantum chip, developed using the world’s first "top conductor." While quantum computing remains an emerging technology, the market potential is enormous, with estimates reaching between $90 billion and $170 billion by 2040. Microsoft is strategically positioned to capture this lucrative market with its substantial cloud infrastructure.

Technical outlook: The bottom line 

The upcoming earnings calls from Alphabet and Microsoft will be pivotal. They will clarify AI strategies, quantum computing potential, and how each company plans to tackle economic uncertainties. Investors now face a crucial decision: jump in early, banking on potential upside, or await further clarity from executive insights.

Whichever approach investors choose, one thing is clear: Tech earnings season is shaping up to be exciting - and potentially lucrative - for those paying close attention.

At the time of writing, Google stock is hovering around the $153.86 mark. Prices remain below the moving average, indicating that the trend is still downwards. However, RSI rising steadily indicates that some upside pressure is building. Should the downward trend continue, prices could find support around the $149.18 and $146.34 support levels.

Microsoft stock has also seen some downward movement over the past few days. The RSI pointing up suggests that some upward pressure is building. However, we recently saw a “death cross,” a tell-tale sign of a bearish trend. This is when the 200 SMA crosses over the 50 SMA. 

If the slump continues, prices could find a support floor at the $356.53 support level. Prices could find resistance barriers at the $380.00 and $395.00 resistance levels if we see a significant bounce.

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