META & MSFT: What’s Brewing Before Earnings?

Earnings season is heating up, and two of the biggest names on the street, Meta and Microsoft, are about to show their cards. Both have cooled off from earlier highs, but make no mistake: they are still at the centre of the biggest tech trends right now. Many traders are still looking to Meta and Microsoft, both as an indication of the company’s health and as a barometer for the tech sector as a whole.

Beyond just earnings which are backward-looking data points by nature, traders are looking closely at META and MSFT management outlooks on capital expenditures (i.e., capex) and corporate advertising spending in the coming years. With uncertainty on the horizon given the volatile U.S. presidential administration, advertising and capex are key spending drivers that can be paused when the company’s growth outlook becomes foggy.

Meta: Betting Big on AI, But Will It Pay Off?

Meta, the powerhouse behind Facebook, Instagram, and WhatsApp, dominates the global social media landscape and is going all-in on AI and virtual reality. Its bread and butter is ad revenue, but it is betting that AI will supercharge future user engagement and monetization.

Meta’s stock has had a rough ride lately, sliding about 25% from February highs, now hovering near $550. However, expectations for Q1’25 are still strong, with revenue expected to rise 13% YoY and EPS similarly seeing an 11% rise based on analyst expectations. Nevertheless, there are headwinds for the company as U.S.-China tensions could dent ad revenue from Chinese companies – all whilst Meta continues pouring money into AI and infrastructure investment this year.

Ticker: META, Timeframe: Daily

META is seeing bearish momentum still taking hold of price action, as the price holds below the 50-EMA and Ichimoku cloud. As the price approaches the $585 resistance level in line with 50-EMA, 38.2% Fibonacci Retracement and 100% Fibonacci Extension, we could see a reversal and a push lower towards the $480 and $450 swing low supports, in line with 78.6% and 100% Fibonacci Extensions respectively.

On the flip side, a break and close above the $585 resistance could prompt a further rise toward the $635 resistance zone, in line with 100% and 161.8% Fibonacci Extensions instead.

Microsoft: The Steady Giant Powering the AI and Cloud Boom

Microsoft is the ultimate tech giant, straddling everything from cloud computing (Azure) to productivity tools (Office, Teams) to gaming (Xbox, Activision). Lately, it’s made massive moves in AI as well, using tools like Copilot to weave smart tech into business workflows.

In comparison to META, MSFT seems to be faring slightly better. Trading around $394, it’s only down roughly 12% YTD. Based on analyst expectations, revenue should see an 11% YoY increase and EPS is forecasted at $3.22. Given its diversified business lines, solid cloud business and strong balance sheet, Microsoft boasts strong potential to ride out the volatility in today’s macroeconomic environment with fewer hits to its bottom line. Nevertheless, in line with Meta and much of other Big Tech firms, Microsoft is also investing heavily into expanding its own AI and cloud computing capabilities, and the result of such investments will be heavily scrutinised.

Ticker: MSFT, Timeframe: Daily

MSFT is retesting the 50-EMA and $395 resistance level, in line with the 50% Fibonacci Retracement and 78.6% Fibonacci Extension. A breakout of this resistance level and above the 50-EMA would see stronger bullish momentum taking hold, and the price could rise further to test the $415 resistance zone, in line with 61.8% Fibonacci Retracement and 127.2% Fibonacci Extension. Further gains beyond the $415 resistance level could prompt a rally toward the $448 swing high resistance.

However, if a strong reversal is seen below the $395 resistance level, we could see the price retrace lower to the $350 swing low support in line with the 100% Fibonacci Extension. A steeper decline towards the $325 support, in line with the 161.8% Fibonacci Extension may occur upon breaking $350.

Both Meta and Microsoft are navigating a tricky but opportunity-rich environment. Traders are hoping for strong earnings to validate their AI investments and to offset macro risks like regulatory scrutiny and slower global growth. A positive earnings season could reignite momentum for both stocks, while any disappointments may cause short-term turbulence. However, keep an eye out for management outlooks and comments, as any unexpected announcements could provoke a strong market reaction.