The recent tech market rally, powered by Nvidia’s dominance, might soon find new champions in Netflix and Meta as investors eagerly await their upcoming earnings reports. After Nvidia’s staggering 170% gain this year propelled much of the market’s growth, Wall Street appears ready for fresh catalysts to maintain momentum in the second half of 2024.
Netflix reports earnings on July 18 while Meta follows on July 24, setting the stage for what could be pivotal moments in this year’s tech rally. Their performance will likely indicate whether the market’s gains can broaden beyond the artificial intelligence narrative that has largely benefited semiconductor stocks.
“We’re entering a critical stretch where investors need validation that this rally can extend beyond AI hardware plays,” says Marcus Dawson, chief investment strategist at Meridian Capital. “Netflix and Meta represent different facets of tech growth that could demonstrate sustainability in this market.”
Netflix has already shown remarkable resilience, climbing 30% this year as its advertising tier and password-sharing crackdown have started paying dividends. Analysts from Goldman Sachs estimate these initiatives could add $5 billion in annual revenue by 2025. The streaming giant’s ability to monetize its massive user base while maintaining subscriber growth has impressed even skeptical investors.
The stakes appear particularly high for Meta, which has surged nearly 40% year-to-date despite recent volatility. The company’s aggressive cost-cutting measures and substantial AI investments represent a calculated gamble by CEO Mark Zuckerberg. Meta’s Reality Labs division continues to burn through billions while the company doubles down on AI infrastructure spending, betting these investments will yield substantial returns in coming years.
According to data from FactSet, analysts expect Netflix to report earnings of $4.68 per share on revenue of $9.53 billion, representing year-over-year growth of 35% and 15% respectively. Meta faces expectations of $4.72 per share on revenue of $36.2 billion, translating to 58% earnings growth and 18% revenue increase from the same period last year.
These projections reflect Wall Street’s high expectations, but they also create significant downside risk if either company misses forecasts. The Federal Reserve’s latest meeting minutes revealed continued concerns about persistent inflation, potentially delaying rate cuts that many investors had anticipated for 2024. This macroeconomic uncertainty adds another layer of complexity to an already tense earnings season.
“Tech investors are walking a tightrope,” explains Janet Rivera, portfolio manager at Atlantic Financial Group. “On one hand, they need these companies to show strong growth to justify current valuations. On the other, they’re watching the Fed closely for any policy shift that could impact borrowing costs and market liquidity.”
The broader context matters significantly. The S&P 500 has climbed approximately 15% this year, with the tech-heavy Nasdaq up nearly 20%. However, market breadth has remained relatively narrow, with a handful of mega-cap tech stocks accounting for a disproportionate share of these gains. According to Bank of America research, just seven stocks have contributed roughly 70% of the S&P 500’s return in 2024.
This concentration has made many market participants uneasy, with some drawing parallels to the dot-com bubble of the late 1990s. However, unlike that era, today’s tech giants generate substantial profits and cash flow. Netflix is expected to produce over $6 billion in free cash flow this year, while Meta could generate more than $30 billion despite its heavy investments in AI and the metaverse.
The sustainability of their growth models will face intense scrutiny during upcoming earnings calls. For Netflix, investors will focus on subscriber additions, especially in international markets, and the progress of its advertising business. Meta will need to demonstrate that its core advertising platform remains robust while providing a clear roadmap for how its massive AI investments will translate into future revenue.
Recent data from Antenna shows Netflix added approximately 2.3 million subscribers in the U.S. and Canada during the second quarter, exceeding analyst expectations. Meanwhile, Meta’s advertising platform appears to be benefiting from improved targeting capabilities despite privacy changes implemented by Apple in recent years.
“What makes these particular reports so interesting is that they’ll show whether AI is actually driving real business results yet,” notes Rivera. “We’ve heard a lot about potential, but now investors want to see tangible benefits to the bottom line.”
The technology sector’s valuations have stretched considerably during this rally. Netflix currently trades at roughly 30 times forward earnings, while Meta sits at about 24 times – both above their historical averages. These multiples reflect investor optimism but also create vulnerability should growth projections falter.
Beyond their individual performances, these reports could signal broader market direction. Positive results might encourage investors to look beyond the semiconductor sector for growth opportunities, potentially broadening market participation. Disappointments, however, could prompt a reassessment of the tech rally’s sustainability.
“We’ve reached an inflection point,” says Dawson. “The market needs new leadership to maintain momentum, and these earnings reports could determine whether we see that emerging or whether investors become more defensive heading into the fall.”
As these tech giants prepare to report, the broader economy continues to send mixed signals. Consumer spending has remained resilient despite elevated inflation, but manufacturing indicators suggest some weakening. This complex backdrop makes company-specific execution all the more critical for sustaining investor confidence.
For long-term investors, these upcoming reports represent not just quarterly performance checks but indicators of how effectively these companies are positioning themselves in a rapidly evolving technological landscape. Their ability to navigate current challenges while investing in future growth will likely determine their trajectories for years to come.
