Earnings Season and Big Tech Stocks
As earnings season approaches, all eyes will be on big tech stocks. Among the “Magnificent Seven” stocks, Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) have shown relative resilience, with drops of 13% and 14.5% respectively as of April 22, 2025.
Both companies are set to report their Q1 2025 earnings on April 30. Despite market turbulence, there are compelling reasons to consider investing in these stocks.
Challenges Ahead for Microsoft and Meta
One significant challenge for both Microsoft and Meta is the recent tariff policies, which could increase their AI infrastructure costs. These costs include Nvidia chips, custom silicon engineering, and data center buildouts. The impact of tariffs on their business operations is still unclear, potentially leading to reduced spending in areas like cloud computing, cybersecurity, and advertising.
Why Microsoft Remains Attractive
Microsoft’s forward P/E ratio of 28 is slightly below its three-year average. Despite potential IT budget constraints, businesses are likely to maintain spending on mission-critical infrastructure like cloud computing and cybersecurity software. Microsoft’s diversified portfolio, including personal computing, LinkedIn, gaming, and more, provides resilience against potential economic slowdowns.
Why Meta Platforms Holds Potential
Meta’s growth is primarily driven by advertising and metaverse ambitions. While the digital advertising space is competitive, Meta’s ecosystem, including Facebook, WhatsApp, and Instagram, positions it well for continued monetization. The company’s advancements in AI also present new opportunities in the consumer market.
Long-Term Perspective
Investors should consider the long-term potential of Microsoft and Meta. Tariff policies can change, and while economic slowdowns are possible, they are typically temporary. The current market sell-off presents an opportunity to invest in quality stocks at reasonable valuations.
As of this writing, both Microsoft and Meta are trading at reasonable valuations compared to their three-year averages. Investors looking to “buy the dip” may find these stocks appealing for long-term holdings.
