Mag 7 Earnings Preview: What Can Investors Expect?

We get into the heart of the Q1 earnings season this week, with more than 800 companies reporting results, including four Magnificent 7 members and 173 other S&P 500 members. We have Microsoft MSFT and Meta Platform META on deck to report results on Wednesday, April 30^th, and Apple AAPL and Amazon AMZN on Thursday, May 1^st.

The Mag 7 stocks have been active participants in the market’s rebound recently, but the group has struggled this year, and the underperformance has been exacerbated during the market sell-off since the February 2025 market peak.

Of the four Mag 7 members reporting this week, Microsoft has held up a lot better during the market sell-off, doing better than the S&P 500 index, while Apple, Amazon, and Meta have been laggards. You can see this in the chart below that shows the performance of Microsoft (down -6.4%), Apple (down -14.8%), Amazon (down -17.1%) and Meta (down -22.6%) relative to the S&P 500 index (down -10.9%) since February 19, 2025.

This performance picture is reversed when we change the starting point from February 19^th to April 26, 2024. Looking at the performance of these Mag 7 members over the past year, Meta and Apple appear as the standout performers, while Amazon and Microsoft become the laggards.

These four Mag 7 members, along with Alphabet GOOGL that reported strong results already and Nvidia NVDA whose results will not be out for another month, are all leaders in the artificial intelligence space and actively investing in setting up datacenters and related infrastructure that will enable them to run the large-language models.

Even before the DeepSeek announcement in January, but particularly after that development, many in the market are skeptical of the economic value of these huge investments. These companies aren’t budging from their capex plans, as we saw again with Alphabet as it discussed its plans after the earnings release, and will most likely see from Microsoft, Meta, and Amazon this week. We should keep in mind, however, that market sentiment didn’t sour solely on these Mag 7 leaders, but all the companies in the ‘broader AI basket’ that had earlier been market darlings have had to deal with an increasingly skeptical marketplace.

On top of the ‘AI overhang’ for these mega-cap companies is exposure to the trade uncertainty, which is a direct headwind for the likes of Apple, Tesla, Nvidia, and even Amazon, and an indirect issue through the macroeconomic channel for all of them. After all, if recession risks for the economy increase as a result of the tariff uncertainty, then all of the Mag 7 players are exposed in varying degrees.

Given their reliance on digital advertising spending, the Mag 7 members’ economic sensitivity is the greatest for the likes of Alphabet and Meta. Still, Apple and Tesla provide discretionary products and services that will get deferred, if not altogether cut, during times of economic stress.

Looking at earnings expectations for the group as a whole, the expectation is that Mag 7 earnings will increase +19.6% in 2025 Q1 from the same period last year on +10.9% higher revenues. These expectations are a blend of actual results from Alphabet and Tesla and estimates for the remaining five, of which four are on deck to report this week.

The chart below shows the group’s 2025 Q1 earnings and revenue growth expectations in the context of what was achieved in the preceding period and what is expected in the coming three quarters.

The chart below shows the Mag 7 group’s earnings and revenue growth picture on an annual basis.

Please note that estimates for the Mag 7 group have started coming under pressure lately, after remaining very strong over the last two years. The +9.9% earnings growth expected this year today is down from +15.7% that was expected three months ago.

The chart below of aggregate full-year 2025 dollar earnings shows how this aggregate total has evolved over the past six to seven months.

Of the Mag 7 members reporting this week, Q1 estimates for Microsoft have remained unchanged, and the same for Apple and Amazon have only modestly come down; they have been significantly reduced for Meta.

Key Earnings Reports This Week

In addition to the aforementioned four members of the Mag 7 group, we have more than 800 companies representing a cross-section of all sectors reporting Q1 results this week, including 177 S&P 500 members.

The bellwethers reporting this week range from McDonald's and Starbucks to UPS, Pfizer, Visa, Caterpillar, International Paper, Airbnb, Exxon, Chevron, and many others. By the end of this week, we will have seen Q1 results from 356 S&P 500 members or 71.2% of the index’s total membership.

The Q1 Earnings Scorecard

Through Friday, April 25^th, we have seen Q1 results from 179 S&P 500 members or 35.8% of the index’s total membership. Total earnings for these 179 index members are up +18% from the same period last year on +4.2% revenue gains, with 69.8% of the companies beating EPS estimates and 63.7% beating revenue estimates.

The comparison charts below put the Q1 earnings and revenue growth rates for these index members in a historical context.

The comparison charts below put the Q1 EPS and revenue beats percentages in a historical context.

As you can see here, the EPS and revenue beats percentages are tracking below historical averages, with the Q1 EPS beats percentage of 69.8% for the companies that have reported already comparing to the average for the same group of 79.1% over the preceding 20-quarter period (5 years). The revenue beats percentage is also tracking below the 20-quarter average, but by a smaller amount.

Estimates Under Pressure

Looking at Q1 as a whole, combining the actuals from the 179 S&P 500 members with estimates for the still-to-come companies, the expectation is that earnings will be up +9.4% from the same period last year on +4% higher revenues, which would follow the +14.1% earnings growth on +5.7% revenue gains in the preceding period.

The chart below shows current earnings and revenue growth expectations for 2025 Q1 in the context of where growth has been over the preceding four quarters and what is currently expected for the following three quarters.

We noted in recent weeks that estimates for the current period (2025 Q2) have been coming down, with the negative revisions trend expected to accelerate further as companies report results and talk up the extent of uncertainty around their near-term business outlook.

Depending on where the emerging tariff regime settles, earnings estimates will need to come down in response. The ongoing market weakness is essentially a reflection of these diminished earnings expectations. The chart below shows how expectations for the current period have evolved since the start of the year.

The chart below shows the overall earnings picture on a calendar-year basis.

Estimates for full-year 2025 have come under increasing pressure in recent weeks, with the negative revisions trend becoming very meaningful and widespread since mid-February 2025.

Estimates have been cut for 14 of the 16 Zacks sectors, with Aerospace and Construction as the only sectors enjoying modest positive revisions since mid-February. Sectors suffering the biggest cuts to estimates since mid-February include Transportation, Energy, Autos, Basic Materials, Tech, Finance, and others.

The chart below shows how full-year 2025 aggregate earnings estimates for the Zacks Tech sector have evolved over the past year.

For more details about the evolving earnings picture, please check out our weekly Earnings Trends report here >>>>Tech Estimates Come Under Pressure: What to Expect?

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This article originally published on Zacks Investment Research (zacks.com).

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