Wednesday preview: Four of the 'Mag 7' to report, Fed policy announcement due

(Sharecast News) - Four of the five 'Magnificent Seven' are slated to report across the pond on Wednesday, with Alphabet, Microsoft, Amazon and Meta Platforms all set to release results. As far as Meta's Q1 numbers are concerned, Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "AI is adding fresh momentum to Meta's core advertising engine, with better targeting helping support both pricing and volumes. That mix pushed revenue growth higher last quarter, and next week's update should show whether that strength is carrying into 2026.

"That said, this story isn't just about top-line delivery. Costs remain front and centre as management pushes to stay at the front of the AI race, even if that means a heavier spend profile in the near term. Media reports have also pointed to further headcount reductions as the group tries to balance discipline with rising infrastructure needs.

"The key issue is whether the pace of AI investment is keeping in step with what's being delivered in the ad business, particularly on margins and cash generation. Guidance on operating expenses and capital plans may therefore matter just as much as any headline on advertising demand."

Ahead of Microsoft's Q3 results, Britzman said the company has been out of favour of late, but the earnings should give another read on how well AI and cloud spending are translating into growth.

"The group is still deep in an investment phase, with data centre and chip spend ramping quickly," he said. "The trade-off is that margins can look a little messier in the near term as capacity is built out.

"That keeps Azure firmly in focus. Demand has looked resilient, but capacity constraints and internal AI consumption have made the reported numbers harder to interpret. As more capacity comes online, Azure growth and the outlook commentary should help show whether today's infrastructure spend is being put to work efficiently.

"Beyond the cloud, the market will want to see evidence of AI paying its way in areas like Office 365. Copilot adoption is a useful signpost for whether AI can shift from a cost headwind to a revenue driver over time. Updates on usage, retention and incremental pricing power would help round out the picture of how quickly that transition is happening."

On the UK corporate front, investors will eye first-quarter results from AstraZeneca, GSK and Aston Martin, Q1 updates from Haleon, Melrose and Prudential, preliminary results from Lloyds and a Q1 new business announcement from St James's Place.

Market participants will also be watching out for the latest policy announcement from the Federal Reserve amid expectations the policy rate will be maintained at 3.50-3.75%.

Rabobank said that Jerome Powell - whose term as chair ends on 15 May - could shed light on the FOMC's take on the economic data that have been released this month, how they reflect the impact of the war with Iran, and what this means for monetary policy.

"We still expect two rate cuts this year, one in September and one in December," it said. "Once Warsh becomes the new Chair, he will try to convince the Committee to make more than the single cut in their most recent projections."

Rabobank said that whether Warsh succeeds depends on the incoming economic data, which will be heavily affected by the war.

"On balance, we think that in the coming months we are more likely to drop a rate cut from our forecasts than add one. It is still unclear whether the April meeting is going to be Powell's last as Fed Chair. If the confirmation of Warsh stalls, Powell may still serve as Chair pro tempore in June."

The Bank of Canada is expected to hold rates at 2.25% when it makes its latest policy announcement on Wednesday.

TD Securities, which expects the policy statement to strike another cautious tone, said: "Higher energy prices will drive a sharp upgrade to the Bank's inflation forecast in the April MPR, with more modest revisions to core inflation and GDP.

"Crucially, we look for the Bank to note 'two-sided' risks to growth from higher oil prices, and maintain its pledge to look through near-term inflation impacts."