Stocktake: US earnings season kicks into gear

US earnings season has begun and really kicks into gear in the coming week.

According to Bespoke Investment, seven of the eight biggest technology stocks report earnings before the end of October, starting with Netflix after the market close today, Tesla on Wednesday and Amazon on Thursday.

Amazon is expected to report a monster quarter, with analysts expecting sales of $91.6 billion – $23 billion more than what it reported a year ago.

Microsoft, Apple, Facebook and Google parent Alphabet all report next week, with Bespoke's data indicating Facebook is especially likely to beat estimates – historically, the stock has surpassed earnings expectations 91 per cent of the time.

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While tech stocks have thrived during the global pandemic, overall earnings are expected to be substantially lower. Analyst estimates project earnings will be 21 per cent lower than last year – the second-largest annual decline since mid-2009, according to FactSet.

Nevertheless, analysts have become more optimistic of late. Estimates have risen 5 per cent since earnings pessimism peaked in June. That marks a significant change from the usual pattern where estimates start out too high and are revised downwards as earnings season approaches.

For the overall market, investors will likely be happy with another quarter that could be summarised as “bad, but not as bad as feared”. Expectations are much higher for soaring mega-cap tech stocks however, where a lot of good news is already baked into market prices.