AMZN - Q1 Software Earnings Preview: AI And Vendor Consolidation Will Be Key Themes To Watch

2024-04-18 10:52:25 ET

Summary

• AI and vendor consolidation are key drivers for outperforming software companies in the technology industry, and that will continue to be the case in Q1 2024.
• Software companies are projected to grow their revenues and earnings by 13.5% and 15% YoY respectively in Q1, much stronger than the S&P 500.
• Although macroeconomic uncertainties and valuation concerns remain, I believe that the long-term growth story in select software companies remains intact.
• The outperformers in the software sector will be the ones that demonstrate robust AI product roadmaps to deepen adoption and spend, leading to improving margins.

Introduction & Investment Thesis

2023 was one of the most climactic years in the history of technology as generative AI unveiled itself to the world, building upon decades of innovation in technology. The previous earnings season that closed its curtains on full-year 2023 earnings demonstrated two key themes that distinguished outperformers in the technology and software industry from the laggards, per my observation....

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