Q1 Tech Earnings Preview: A Tale of Two Cities

It's been a tale of two cities for the tech sector in 2026. While the Magnificent Seven companies have faltered and software has continued its decline amid fears of AI disruption, semiconductors have staged a historic rally, emerging as the preferred "picks and shovels" play for investors betting on a sustained AI infrastructure boom. Heading into the second part of first-quarter earnings season, the key question is whether that divide will hold or begin to narrow.

Investors remain focused on AI infrastructure demand and its ability to support chipmakers moving forward. But software companies' earnings and forward guidance are also in the spotlight, with some hoping they can help ease AI disruption fears and help spark a rebound in the lagging sector.

So far, tech earnings have impressed. More than 90% of S&P 500^® Index tech companies surpassed Wall Street's earnings estimates this quarter as of April 24, according to FactSet. Although only 28% of companies had reported at the time, the blended earnings growth rate for the info tech sector was also very high at 46.3%. Semiconductor earnings have been particularly strong, driven by aggressive AI spending.

"Investors appear to be viewing this industry as the safest way to participate in the AI trade and avoid AI disruption in software or overspending in hyperscalers," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR).

After surging in April, semiconductor stocks are essentially "priced for perfection," which will make earnings from chip giants like Nvidia (NVDA) and Advanced Micro Devices (AMD) high-stakes events. Still, Peterson noted that while semis may appear overbought in the near-term, "bullish momentum can take time to slow."

The next few weeks should offer a clearer look at whether the divergence in tech stocks' performance will continue, and where opportunities may lie moving forward.

First-quarter tech earnings have certainly exceeded expectations so far, with the semiconductor industry delivering early indications that the AI infrastructure build-out continues to accelerate.  

Taiwan Semiconductor Manufacturing Company (TSM), for example, topped analysts' lofty estimates, posting a 35% year-over-year revenue jump and a 58% year-over-year profit spike in the first quarter. "AI-related demand continues to be extremely robust," said TSM's President and CEO C.C. Wei on the company's earnings call.  

It was a similar story at Intel (INTC), which delivered blowout earnings in late April, leading its shares to surge. The company beat Wall Street's earnings and revenue estimates and delivered upbeat guidance, citing strong chip demand. 

Lam Research Corp. (LRCX) also fueled investor optimism about AI infrastructure demand. The semiconductor equipment company reported record first-quarter revenue and earnings per share (EPS) and noted that its customers' spending projections rose across all its device segments.  

The AI-driven memory boom has shown no signs of slowing so far this year. Massive AI infrastructure and data center spending drove High Bandwidth Memory (HBM) and conventional DRAM prices to fresh record highs in early 2026, and memory makers cashed in. The South Korean memory-chip giant SK Hynix saw its revenue nearly triple in the first quarter, while its profits rose more than 400% year over year. 

"As memory becomes increasingly critical in AI computing, demand for high-performance memory is surging while supply remains constrained," the company said in its earnings release, noting that it expects the "favorable pricing environment to continue for the time being." 

While early semiconductor industry results have painted a bullish picture for tech investors, the software industry continues to lag amid fears of disruption due to AI tools. 

International Business Machines (IBM) stock plummeted after the company reported slowing revenue growth in the first quarter as its software segment underperformed expectations. 

Shares of IBM were already under pressure before the earnings report. In February, privately held AI developer Anthropic unveiled a tool designed to automate the modernization of legacy code, leading some investors to fear IBM's lucrative consulting and mainframe services business could be disrupted. IBM pushed back against the AI disruption narrative in its earnings release, however. "AI continues to be a tailwind for our global business," said CEO Arvind Krishna.  

Despite topping analysts' revenue and EPS estimates, ServiceNow (NOW) shares also plunged after reporting its first-quarter earnings. The software company's subscription revenue growth fell short of targets, spooking investors. ServiceNow said the conflict in the Middle East was the main culprit behind the miss.

Investors will be closely watching a slew of semiconductor earnings in the coming weeks. Advanced Micro Devices, Nvidia, and Broadcom (AVGO) will garner the most attention, but AI infrastructure plays like ARM Holdings (ARM), Analog Devices (ADI), and Arista Networks (ANET) will also be in the spotlight amid signs of robust demand.  

Enterprise software giants like Salesforce (CRM), Cisco Systems (CSCO), and Oracle (ORCL), meanwhile, will be heavily scrutinized amid ongoing concerns about potential AI disruption. 

Tech investors have a full calendar to look forward to beyond software and chip stocks, including multiple e-commerce leaders and cybersecurity names. The table below features some of the closely watched earnings coming in the second half of this earnings season.

There's been a lot of discussion lately about how long the AI infrastructure build-out can continue at its current pace. Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META), and Alphabet (GOOGL) alone are expected to dish out a combined $700 billion in 2026 as they expand their AI offerings. There seems to be an insatiable thirst for chips and data centers, and in the first quarter, semiconductor companies repeatedly highlighted one reason that thirst could continue: agentic AI.

The AI market is evolving from a focus on generative AI chatbots to agentic AI tools that can execute tasks. TSM's CEO Wei said on the company's first-quarter earnings call that this shift is driving a need for more computation and supporting robust demand for advanced chips. "Our conviction in the multi-year AI megatrend remains high," Wei told analysts.

For investors hoping to gauge how long the current AI infrastructure build-out will last, it may be wise to pay attention to chipmakers' guidance and earnings calls. Further discussion of AI agents driving demand for chips and data centers may be a bullish near-term signal for the industry. Semis have largely been carried by the spending of only a few hyperscalers in recent years, but signs of AI spending broadening to other businesses or governments amid the rollout of AI agents could provide another—potentially more sustainable—driver of the AI infrastructure boom.

That being said, hyperscalers' AI spending remains critical for semis, and every investment cycle eventually slows.

"At some point, the AI infrastructure investment cycle is going to show signs of exhaustion, or demand saturation. Nobody knows when this will occur. It could be this year or a couple years down the line," said Peterson. "The risk is that investors are not keeping this risk on their radar, since AI infrastructure stocks will likely correct quickly once signs of spending exhaustion manifest."

What to watch in semiconductor sector earnings:

• Pricing power and supply updates. Keep an eye out for commentary on chip pricing and supply trends. Chipmakers' gross margins, inventory levels, and lead times for advanced graphics processing units (GPUs) and central processing units (CPUs) will be critical.
• Developments outside of AI. Track demand for chipmakers' products coming from the automotive industry, robotics manufacturers, and other markets that aren't AI-related. To sustain its revenue growth over the long term, the semiconductor industry will likely need a wide range of buyers.
• Memory and packaging issues. With high-bandwidth memory prices soaring, and advanced packing capacity (mainly at TSM) strained, chipmakers could face a bottleneck as they attempt to meet record demand. Monitor earnings calls for commentary on how these developments could impact sales and margins moving forward.

The S&P North American Technology Software Index plunged more than 20% year to date through late April amid fears AI could weigh on software demand.

However, while AI is raising questions about disruption to existing business models, it's also creating new revenue opportunities. Investors should consider focusing on these clashing trends during the second half of this earnings season. "Markets still don't know how software should be valued," Peterson said.

Earnings from software giants like Salesforce (CRM), Adobe (ADBE), and Oracle (ORCL) will be heavily scrutinized. Commentary on earnings calls and forward guidance will be particularly important, as markets continue to gauge enterprise software spending and scrutinize whether new AI features are drawing in customers and increasing revenue or simply weighing on margins. Software pricing and usage trends will also be in the spotlight as investors try to parse how AI could impact the sector over the longer term.

Last quarter, many software CEOs argued AI would be a growth driver, pushing back on the notion that it could break their business models in what's now been dubbed the "SaaSpocalypse."

"You've heard about the SaaSpocalypse? And it isn't our first," Salesforce CEO Marc Benioff said on a late-February earnings call. "If there is a SaaSpocalypse, it may be eaten by the Sasquatch because there are a lot of companies using a lot of SaaS because it just got better with agents."

Ultimately, this earnings season may begin to clarify whether AI is an opportunity for the software industry or if it's a genuine disruptive force.

What to watch for in software industry earnings:

• Seat counts amid AI push. In many enterprise software businesses, revenues are tied to the number of users, or "seats," a customer pays for. Watch whether software companies' seat counts are growing or if AI tools are reducing the need for additional licenses.
• Remaining performance obligations (RPO). RPO represents revenue that is under contract but has not yet been delivered or recognized. Monitor RPO figures to gauge software demand. If RPO is slowing, it could signal a weakening pipeline of new customers.
• AI tool usage metrics. Some software companies have begun reporting metrics that track the usage of their new AI tools. Salesforce, for example, now reports agentic work units (AWU), which measures whether an AI agent has completed a task. Tracking metrics like this can help investors gauge how useful new AI products are to customers and whether they will translate into increased revenues.

The tech sector faces multiple headwinds that investors should take into account heading into the second half of earnings season. Economic uncertainty is the most obvious potential risk for tech. Some fear sticky inflation will slow global economic growth. If it does, that could weigh on enterprise AI and software spending.

At the same time, lofty valuations and crowding in semiconductor stocks have heightened risks for investors in that industry. "Given the recent tech rally, particularly in chips, investor expectations are high, and therefore, the potential for a 'sell on the news' reaction to results is elevated," said Peterson.

Geopolitics could also spoil the party this year. Investors have largely focused on surging oil prices amid the closure of the Strait of Hormuz, but there's a hidden threat to semiconductor companies as well.

"It's not just a choke point for oil, but natural gas, fertilizer, and helium—which goes into chip production," Collin Martin, head of fixed income research and strategy at SCFR, said in a recent episode of the OnInvesting podcast. "This is more than just a crude oil story."

While chipmakers currently report adequate supplies of helium, if the Strait of Hormuz remains closed, it could trigger shortages. Investors should consider monitoring memory chipmakers' earnings calls for insights into potential helium shortages that could hinder the broader tech sector moving forward. Samsung Electronics (SSNLF) and Micron Technology (MU), for example, both rely on helium to create advanced memory chips.

Tracking tech companies' ability to top Wall Street's expectations will be critical in the second half of this earnings season with expectations elevated. Here's a breakdown of the consensus earnings and revenues estimates for some major tech stocks set to report:

• Palantir Technologies (PLTR): Reporting May 4, analysts expect EPS of $0.28 (up 114.6% year over year) and revenue of $1.5 billion (up 74% year over year)
• Advanced Micro Devices (AMD): Reporting May 5, analysts expect EPS of $1.29 (up 34.3% year over year) and revenue of $9.9 billion (up 32.8% year over year)
• Applied Materials (AMAT): Reporting May 14, analysts expect EPS of $2.66 (up 11.2% year over year) and revenue of $7.7 billion (up 8% year over year)
• Cisco Systems (CSCO): Reporting May 13, analysts expect EPS of $1.03 (up 7.6% year over year) and revenue of $15.5 billion (up 9.8% year over year)
• Nvidia (NVDA): Reporting May 20, analysts expect EPS of $1.76 (up 116.9% year over year) and revenue of $78.5 billion (up 78.2% year over year)
• Salesforce (CRM): Reporting May 27, analysts expect EPS of $3.11 (up 20.7% year over year) and revenue of $11.1 billion (up 12.5% year over year)
• Broadcom (AVGO): Reporting June 4, analysts expect EPS of $2.42 (up 52.9% year over year) and revenue of $22.4 billion (up 49.4% year over year)
• Oracle (ORCL): Reporting June 10, analysts expect EPS of $1.96 (up 15.2% year over year) and revenue of $19.1 billion (up 20.1% year over year)
• Micron Technology (MU): Reporting June 24, analysts expect EPS of $19.25 (up 907.7% year over year) and revenue of $33.8 billion (up 263.3% year over year)

Not a complete list. Estimates are as of April 28, 2026, and are subject to change.

Historically, the tech sector has often moved as a homogenous group, but in recent quarters, there's been a clear discrepancy between semis, the Magnificent Seven, and software. For investors, that makes parsing individual earnings reports more important this quarter. 

Semiconductor investors will need to closely track AI spending and forward guidance. Even if companies in this industry manage to top Wall Street's lofty earnings expectations, it may not be enough to lift their already inflated share prices.

Meanwhile, software investors will be looking for evidence that AI is a tailwind rather than a headwind. Many software stocks have been beaten down in recent quarters, but without strong signs that software demand remains durable in a shifting landscape, pressure could persist.

Perhaps more than ever, for both software and semis, the focus may be more on what companies signal about the path ahead than this quarter's earnings.