The stakes are high as Alphabet (GOOG, GOOGL) and Microsoft (MSFT) gear up to report earnings today, but the recent performance of Netflix (NFLX) may have alleviated some pressure on what is known as the ‘Magnificent Seven’—a group of technology giants that also includes Alphabet, Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft, and Nvidia (NVDA).
Data from FactSet, highlighted by Yahoo Finance’s Josh Schafer, reveals the substantial contribution these seven companies, excluding Tesla (TSLA), are expected to make to the S&P 500 during this earnings season. The Magnificent Seven are anticipated to report earnings growth exceeding 50% in the fourth quarter, significantly outpacing the rest of the index, which is expected to collectively see a 10.4% decline in earnings compared to the same period last year.
The impressive performance of Netflix’s earnings report last week has possibly lessened the pressure on the remaining members of the Magnificent Seven. Investors have demonstrated a willingness to reward companies for successful execution, as evidenced by the positive response to Netflix’s results.
With a quarter of the S&P 500 already having reported earnings, John Butters’s team at FactSet observed a trend where companies beating earnings expectations are being more generously rewarded, while those falling short are facing less severe penalties. How this pattern holds up as the remaining 75% of the index reports in the coming weeks could be crucial in determining the broader direction of the market, especially as these seven companies play a pivotal role in actual earnings growth.
