Time for more record earnings reports from Big Tech, led by Amazon’s first $100 billion quarter

It’s typical for companies to beat earnings estimates in aggregate, but the high proportion of beats so far this season is notable because it could break the S&P 500 out of its latest earnings recession. The index is now predicted to record a slight profit decline of 2.3% for the latest period, down from a projected 9.3% at the end of the fourth quarter.

FactSet senior earnings analyst John Butters wrote that “if earnings continue to surpass estimates at current levels, it is possible the index will report year-over-year earnings growth for the quarter for the first time since Q4 2019.”

Since the S&P 500 is weighted by market value, bigger companies have a disproportionate impact on the index’s profit trajectory. Among the most notable names set to report this week are Amazon.com Inc. AMZN, +3.74%, Alphabet Inc. GOOG, +3.86% GOOGL, +3.99%, PayPal Holdings Inc. PYPL, +3.50%, and Pfizer Inc. PFE, -0.17%

In all, 110 S&P 500 components are set to report, along with two Dow Jones Industrial Average DJIA components, Amgen Inc. AMGN, +0.64% and Merck & Co. MRK, +1.10%.

Big holiday season for Big Tech

Amazon topped expectations in its prior two reports and “the catalysts are there for another round of strong results,” according to Bernstein analyst Mark Shmulik. Amazon’s upcoming earnings will reflect the double whammy of its delayed Prime Day as well as a holiday shopping season that increasingly moved online due to the pandemic.

See also: Amazon Prime member total reaches 142 million in U.S. with more shoppers opting in for a full year, data shows

Fellow tech giant Apple Inc. AAPL, +1.72% posted its first-ever $100 billion quarter of revenue last week, and Amazon is poised to do the same, with analysts calling for $119.7 billion in revenue on average. As always, a big question for Amazon concerns the impact of surging growth on profits as the company invests heavily in fulfillment and other areas.

Alphabet is also due for a record quarter, and its first with revenue above $50 billion, buoyed by strong digital ad spending around the holidays.

Full earnings preview: Google should benefit big from bump in ads in 2021

Both Amazon and Alphabet report results Tuesday afternoon.

Payday

PayPal has been another big winner during the pandemic, benefitting from a rush of digital payments as more people migrated to online shopping. The company has hit a number of records in recent quarters and it’s expected to rack up at least one more with its Wednesday afternoon report. Analysts expect that PayPal notched $6.1 billion in revenue for the December quarter, which would be its highest total ever and its first quarterly sum above $6 billion.

Of note in PayPal’s report will be the impact of a recent cryptocurrency effort on engagement and revenue. PayPal began letting all U.S. users buy, sell, and hold cryptocurrencies like bitcoin in November and the company plans to enhance the feature in 2021.

Game plan

The COVID-19 crisis has been a boon for gaming and analysts expect that to continue when video game publishers Electronic Arts Inc. EA, +2.10% and Activision Blizzard Inc. ATVI, +0.27% report results this week.

Activision is the only major video game company with a December-ending fiscal year, so its Thursday report will be notable for “the first crack at guidance for the upcoming year,” wrote KeyBanc Capital Markets analyst Tyler Parker. “Whether we hear more information on ‘Overwatch 2’ or not, consensus expectations appear achievable at only ~2% growth.”

Read: Videogames are a bigger industry than movies and North American sports combined, thanks to the pandemic

EA looks set up to post a strong December quarter Tuesday afternoon according to BMO Capital Markets analyst Gerrick Johnson, but the company’s earnings call could be dominated by talk of fiscal fourth-quarter guidance and the recently announced Codemasters acquisition.

Pharma ‘peak’

This week marks the “peak” of pharmaceutical earnings season, according to J.P. Morgan analyst Chris Schott, with Pfizer due up Tuesday morning, AbbVie Inc. ABBV, +0.41% Wednesday morning, and both Bristol Myers Squibb Co. BMY, +2.08% and Merck on Thursday morning.

Pfizer’s report could be dominated by talk of the company’s COVID-19 vaccine that was co-developed with BioNTech SE, which said recently that it planned to increased its capacity to 2 billion doses this year. Schott now expects higher sales from the vaccine, and he also increased his research and development assumptions as he anticipates that the company will reinvest some of its vaccine money into its broader pipeline.

Speaking of pipelines…

Exxon Mobil Corp.’s XOM, +0.54% earnings are expected to have plunged in the December quarter, but J.P. Morgan’s Phil Gresh sees better things ahead for the company. He recently upgraded Exxon shares, writing that “historical execution challenges might finally be turning.” Exxon faces a low bar for 2021, according to Gresh, meaning earnings could come to see upward revisions.

Investors will learn more about 2021 expectations when Exxon posts results Tuesday morning.