Tech sector projected to see fewer positive earnings surprises in Q3 - Citi

Investing.com -- Fewer positive earnings surprises are expected in the third quarter for technology stocks, according to analysts at Citi.

In a note to clients on late Thursday, the analysts said their model forecasts indicate that the amount of quarterly earnings beats in the sector are expected to decline by 5% versus the prior three-month period. However, when compared to other sectors, tech names are still forecast to deliver the largest number of better-than-anticipated results, Citi said.

Technology, along with healthcare, were the sectors that reported the highest percentage of positive surprises in the second quarter, Citi's research showed.

Yet the market capitalization in many global mega tech groups still fell sharply in July following the unveiling of their last quarterly earnings reports, as investors fretted over elevated valuations and raised concerns that massive recent artificial intelligence investments would lead to only modest gains.

Software giant Microsoft (NASDAQ:MSFT ) and Google-owner Alphabet (NASDAQ:GOOG ), in particular, shed around 6% of their market caps at the end of July to $3.1 trillion and $2.1 trillion, respectively, Reuters reported, citing LSEG data. Both still hover around those levels.

Meanwhile, AI chip designer Nvidia (NASDAQ:NVDA ) also saw its market valuation slide 5.2% to $2.8 trillion, although it has since edged up from that mark to around $3.01 trillion.

The third-quarter returns are tipped to show that positive surprises were "more concentrated" among such larger cap stocks, Citi noted, although they added that beats have "increased significantly for the smaller cap stocks."

In terms of earnings growth, consensus forecasts for Russell 1000 companies -- or the top 1000 groups by market cap in the US -- estimate an uptick of 5.2% year-on-year. Excluding the so-called Magnificent 7 group of megacap firms, earnings are seen expanding by 2.6%.

(Reuters contributed reporting.)

Source: Investing.com