The technology sector witnessed growth in the second quarter of 2024, driven by strong adoption of AI and machine learning as well as Generative AI (GenAI).
The sector is riding on the ongoing digitalization wave. The rapid adoption of cloud computing, 5G, the Internet of Things, wearables, headsets supporting augmented and virtual reality technologies, drones and blockchain is expected to have aided sector participants.
AI demand is escalating, and that has increased the need for data center capacity expansion. Leading cloud computing providers like Amazon, Alphabet, Microsoft and Meta platforms have multi-year investment plans to support greater cloud capacity.
The advent of GenAI has further attracted investments. Gartner estimates spending on AI software to witness a CAGR of 19.1% between 2022 and 2027 to hit $297 billion in 2027. GenAI software spending is expected to surge from 8% in 2023 to 35% by 2027. Deloitte expects enterprise spending on GenAI to increase 30% in 2024 from $16 billion in 2023.
Large Language Models that form the backbone of GenAI require significant computational power to process massive amounts of data. The growing proliferation of GenAI has boosted the demand for chips, particularly graphics processing units, benefiting semiconductor companies.
Per the Semiconductor Industry Association data, semiconductor sales in May were $41.2 billion, up 4.1% year over year. In April, sales were $46.4 billion, up 15.8% year over year.
Moreover, the PC segment witnessed growth in the second quarter of 2024. Per IDC’s latest report, 64.9 million PCs were shipped, up 3% from the year-ago period. Lenovo and HP witnessed growth of 3.7% and 1.8%, respectively, while Dell Technologies lost 2.4%.
Upcoming Earnings to Watch
A chunk of technology companies are set to report their earnings results over the next couple of weeks. Hence, finding technology stocks with the potential to beat earnings estimates can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down the list of choices by looking at stocks that have the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise with their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination of ingredients, the odds of a positive earnings surprise are as high as 70%.
Top Bets
The five technology stocks mentioned below have the right combination of elements to beat on earnings this reporting cycle:
Santa Clara, CA-based Arista Networks ANET has an Earnings ESP of +0.95% and currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is scheduled to report its second-quarter 2024 results on Jul 30. The Zacks Consensus Estimate for earnings has increased by a penny to $1.94 per share over the past 30 days.
Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote
New York-based Corning GLW is scheduled to report its second-quarter 2024 results on Jul 30.
The company has an Earnings ESP of +1.59% and a Zacks Rank #1.
The Zacks Consensus Estimate for earnings has increased by a penny to 46 cents per share over the past month.
Corning Incorporated Price and EPS Surprise
Corning Incorporated price-eps-surprise | Corning Incorporated Quote
San Jose, CA-based PayPal PYPL is set to report first-quarter 2024 results on Apr 24. The company has an Earnings ESP of +1.68% and a Zacks Rank of 1.
The consensus estimate for its earnings has been unchanged at 95 cents per share over the past 30 days.
PayPal Holdings, Inc. Price and EPS Surprise
PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote
Oklahoma City, OK-based Paycom Software PAYC has an Earnings ESP of +9.11% and a Zacks Rank of 1. The company is scheduled to report its second-quarter 2024 results on Jul 31.
The Zacks Consensus Estimate for earnings has been steady at $1.59 per share over the past 30 days.
Paycom Software, Inc. Price and EPS Surprise
Paycom Software, Inc. price-eps-surprise | Paycom Software, Inc. Quote
San Francisco, CA-based Twilio TWLO currently has an Earnings ESP of +2.34% and a Zacks Rank #1.
Twilio Inc. Price and EPS Surprise
Twilio Inc. price-eps-surprise | Twilio Inc. Quote
The company is set to report second-quarter 2024 results on Aug 1. The consensus mark for earnings has been steady at 71 cents per share over the past 30 days.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
See Stocks Now >>Corning Incorporated (GLW) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Paycom Software, Inc. (PAYC) : Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
Twilio Inc. (TWLO) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
