5 Technology Stocks Set To Trump Estimates In Q2 Earnings

The second-quarter 2018 reporting cycle has commenced, with 22 S&P 500 members reporting quarterly results as of Jul 11, according to the latest Earnings Outlook. Total earnings of these companies are up 29% on a year-over-year basis on 12.5% higher revenues.

Per the report, Technology is one of the 11 sectors anticipated to report double-digit earnings growth this quarter. Apart from Technology, growth in the second quarter is expected to majorly come from Energy, Basic Materials, Industrial Products, Finance and Retail sectors.

Let’s Take a Closer Look at the Tech Sector

The technology sector, in spite of a turbulent ride in the first quarter, was one of the top performers and is expected to remain so in the second quarter. Per the report, the sector’s total earnings are expected to grow 23.8% from the same period last year on 10.7% higher revenues.

Strong demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and the Internet of Things (IOT) related software and hardware continue to drive the sector.

Increasing number of Internet users coupled with improvement in Internet penetration and rapid adoption of 4G Volte technology have also been key catalysts for tech providers.

A robust increase in overall IT spending is giving further impetus to the tech sector. Per the latest report by Gartner, worldwide IT spending is projected to witness record growth to reach $3.7 trillion this year.

However, increasing regulations for social media companies like the implementation of EU’s General Data Protection Regulation is an overhang. Further, the uncertain environment created due to the ongoing trade war between the United States and China is also a concern.

All said the optimism surrounding the technology sector is well reflected in its year-to-date performance. Notably, the Technology Select Sector SPDR ETF (XLK) returned 12.6% in the year-to-date period compared with the S&P 500’s gain of 4%.

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