TECHnalysis Research Pres. & Chief Analyst Bob O’Donnell joins Yahoo Finance Live to discuss earnings expectations for Big Tech companies like Apple amid supply chain concerns.

Video Transcript

JULIE HYMAN: Well, we're focusing on earnings this week and our continuing earnings coverage. We've got Microsoft, Google, Meta, Amazon, Apple. Those are just some of the major names among the trends to watch with them. Whether the industry's big bet on subscription-- well, everything-- is working or not, for more, let's bring in Bob O'Donnell, TECHnalysis Research president and chief analyst. Good to see you, Bob. So we're--

BOB O'DONNELL: You, too.

JULIE HYMAN: --watching all of these companies.

BOB O'DONNELL: Hey, Julie.

JULIE HYMAN: I think it's safe to say that for many of them, expectations are not terribly high. Do you think, by and large, particularly for a company like Meta, but by and large, do you think that we are going to see a Netflix-like trend for these companies or not?

BOB O'DONNELL: It's a great question. I think it's going to be a mixed bag. I don't think we're going to be able to put a consistent theme across these companies because I think you're going to find that some are going to do better than others. I certainly think Apple will be able to continue its amazing trend of just continuing to grow. I think we will see some iPhone strength.

Even though he has strong compares versus last year, you're going to see-- I think you're going to continue to see their services because, remember, services for them is not just the subscriptions that we're used to, but it's things like the App Store, which is a huge percentage, which is not really a subscription, obviously. It's things like Apple Care and other sort of non-traditional subscriptions. I think Amazon could have some issues because of people's uncertainty about buying certain things. That's on the-- you know, obviously, on the commerce side.

On the other hand, I expect cloud computing, both from Amazon and from Microsoft, and, frankly, from Google, all to see continued growth because that move to the cloud, obviously, accelerated during the pandemic and continues to grow. And companies are making the move to put more of their stuff there.

In the case of Meta, I think it's going to be an interesting story. Obviously, there's been a lot of challenges there. We'll see how the advertising space plays out. That's going to impact, obviously, Google to a great degree. And Amazon increasingly, of course, is building out their advertising business. So, bottom line is, I think we're going to see a mixed bag. You know, the FAANG story, obviously, has changed quite a bit. But I think you're going to continue to see a couple of the bigger players continue to do very well.

BRIAN SOZZI: Bob, three months ago, Meta came out here, and I would say, really shocked the world of Wall Street. Terrible outlook, terrible quarter. Stock, I believe, finished down more than 20% on the day. Do you think they have another quarter like that coming this week?

BOB O'DONNELL: I certainly think it's possible. I don't see anything that's necessarily magically corrected itself, Brian. So I certainly think that there is a possibility that we will continue to see those kinds of trends for Meta.

JULIE HYMAN: What kind of sentiment-- when you talk to people out on the West Coast in the tech industry, what kind of sentiment are they feeling right now? And are you seeing trouble on the part of some of these firms and holding on to people as a result?

BOB O'DONNELL: Well, I mean, there's all kinds of interesting things going on that front, Julie. I mean, look, in general, the continued growth and influence of tech across every single industry, just, it continues ad infinitum, it seems. And so the way with which those bigger players, the Googles, the Microsofts, the Amazons, are impacting companies, digitizing all their processes, changing their logistics practices, all these kinds of things that started during the pandemic, are being powered by the technology that these other companies offer. I think that's going to continue to be a strong story.

On the consumer side, it is going to be more challenging. To your comment right before I came on, the subscriptions to everything is a tough model to maintain. And people are going to have to make some hard choices. But there are certain consumer goods people are going to continue to want. I think for Apple, I think we'll see strong Mac sales. That, and PC market, despite last quarter being down slightly on the consumer side, was still strong in commercial because people are buying more PCs as they're going back to the office. And Apple's starting to make a presence in the business world to some degree. IPhone, of course, as well.

But, you know, it's also, there's-- to your comment about people moving, there's also a lot of movement going on, lots of people moving around. The decision of whether they have to work at home or not continues to be a huge factor, particularly in tech. So all of those things are at play. At the same time, hey, traffic is back to close to pre-pandemic normalcy here in the Bay Area. So that says something about what's going on in terms of how people are thinking about it. So it's a lot to kind of try and decipher all of it, but I think in general, there's still a lot of positive thoughts about business related technology and the developments happening there.

BRIAN SOZZI: Bob, I can't think of another time when sentiment has been so down, and rightfully so in some of these big cap tech names, and Netflix just not a good quarter. Meta, like, to your point, may put up another disappointing quarter. Is there a surprising name in tech outside of these FAANG names that we need to be watching that could be the next big great investment?

BOB O'DONNELL: Ooh, that's a great question, Brian. Look, I continue to think that the semiconductor market, it's obviously seeing some tremendous growth. You've just mentioned AMD being very strong. I think there's still a lot of opportunity for them. The demand for semiconductors, obviously, the equipment makers have been having an extraordinarily hard time, people like ASML and others, to try and continue building the equipment that's necessary.

As governments around the world are being-- essentially throwing money in terms of subsidies for the semiconductor manufacturers around the world to build plants there, I think that presents some potential upside. Even though I know there's a lot of concerns about, oh, we've caught up and the chip cycle is going to kick in, and we're going to start to see demand drop, everything I'm hearing is that there are still supply chain disruptions. They still can't get the parts they need.

So, to me, that represents a significant upside, as if we've entered a new era of how we think about the semiconductor market. So I would say, look for little places within semis and the semi supply chain. And that could be some interesting opportunities moving forward. AI specific chips, a bunch of companies are working on those types of things. And those are going to be definitely interesting to watch.

JULIE HYMAN: Bob, you touched on supply chain, and I want to circle back to Apple on that question, right, because here we are, talking about the shutdown in Shanghai. We're talking about a potential shutdown in Beijing. We know there are shutdowns in other areas of China. And of course, Apple has diversified its production network a little bit. But is that going to be-- and it's been a problem for them in the past, right? The demand is there, but people can't get the phones they want. What's the status of that?

BOB O'DONNELL: You're absolutely right, Julie.

JULIE HYMAN: Yeah.

BOB O'DONNELL: Yeah, no, it's a fair point. And my guess is, if we're going to see an impact, it's probably going to be next quarter, not necessarily this previous quarter. Because I think a lot of the mechanisms were in place to kind of get things going, and a lot of the lockdowns kind of kicked in more toward the middle or end of this last quarter, to be honest, really, much more toward the end. So I don't know that we would see a lot this quarter.

Next quarter is a big question. Of course, one of the big things to look for is what Apple says, if anything, about their forward-looking forecasts and the market. They've generally been pretty vague, but they've been giving a few hints. And so it's going to be very interesting, I think, to see what they have to say about what's going to happen in the next quarter or two because I agree. I think, given all these lockdowns, it's going to catch up to people. And it's going to make a bad situation because of other supply chain issues even worse.

BRIAN SOZZI: Bob O'Donnell, TECHnalysis Research president and chief analyst, good to see you this morning.