Tech stocks start to report earnings next week. We’ve been saying tech’s new driver is the “enterprise” which should support the coming earnings season (here here here). Gartner just confirmed that upgrade cycle is on.
Remember the days decades ago when we needed a new Microsoft Windows (NASDAQ:MSFT) version to drive the entire tech food chain? As we know companies like Micron (NASDAQ:MU) and Applied Materials (NASDAQ:AMAT) have said this latest tech cycle is bigger than the past because we’re not solely dependent on a new Windows upgrade to drive tech. AI, data, cloud have all been drivers. But one segment was left out, enterprise.
Traditional companies known as “enterprise” had not been spending aggressively on tech for about a decade.
Overall there is a much larger wallet size at enterprise than the cloud/hyperscalers like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG)(NASDAQ:GOOGL) and Facebook (NASDAQ:FB). And those cloud players are the ones that have been driving that tech spend so far. So adding this new leg of spending can be huge.
Gartner Confirms Our Thinking
Gartner just confirmed what we had been saying. They just reported PC sales grew by a not-so-big 1.2% in Q2. But that was the first time PC growth had been positive since 2012. What was the driver?
Here’s what they said,
“PC shipment growth in the second quarter of 2018 was driven by demand in the business market, which was offset by declining shipments in the consumer segment.”
The more confirmational data you have the more you can have conviction on your top ideas going into earnings season, especially those tech stocks that benefit from the enterprise and PC food chain.
The offset risk to earnings season as we’ve been saying is the Q3 guide. Do trade war concerns spook business leaders into slowing purchases. So far our work says no. We still expect strong Q3 guides but we are still doing the work.
We still expect a strong earnings season. AI, data, cloud and now enterprise should help the tech stock food chain.
Hitting Tech Stock Earnings Home Runs
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We’re about to hit our prime time, earnings season.
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