- GRIT
- Posts
- 👉 Big Tech Meets the Fed
In partnership with
Welcome to your new week.
Alphabet, Microsoft, and Amazon report within 24 hours of a Fed decision, third-quarter GDP, and September PCE inflation. After Meta's selloff on its first-ever negative free cash flow, investors want proof that record AI spending is turning into profit, while the Fed weighs a December hike.
Let’s dive in.
Key Earnings Announcements:
Microsoft, Alphabet, and Amazon headline the biggest week of earnings season.
Monday (10/26): Cadence Design Systems, Celestica, Nucor, Verizon, Welltower, Whirlpool.
Tuesday (10/27): Boeing, Coca-Cola, Corning, Freeport-McMoRan, PayPal, Robinhood, S&P Global, Seagate, SoFi, UPS, Visa, Waste Management.
Wednesday (10/28): ADP, Alphabet, Boston Scientific, Chipotle, FedEx, GE Vernova, KLA, Microsoft, ServiceNow, T-Mobile, Vertiv.
Thursday (10/29): Amazon, Caterpillar, Coinbase, Eli Lilly, Intel, Mastercard, Merck, Reddit, Roblox, Sandisk, Starbucks.
Friday (10/30): AbbVie, Chevron, ExxonMobil, General Dynamics, Regeneron.
A Single Typo Shouldn’t Cost You a Sale
A shopper types “running shos” and gets nothing back. Another types “red waterprof trail runners under $150” and hits the same wall. Both knew what they wanted.
Traditional site search relies on exact keyword matching, leaving shoppers stranded at “0 results found” screens.
Gladly understands what shoppers mean, typos and all. Instead of a dead end, they get products that fit what they asked for and a conversation that keeps them shopping.
What We’re Watching:
Alphabet (GOOGL)
Alphabet (-5.5% YTD) reports Wednesday after the close, just hours after the Fed decision. Shares fell 6% last week to $320.21 as the broader AI trade came under pressure and investors continued questioning the cost of the infrastructure buildout. Consensus calls for roughly $127.9 billion of revenue, up 25% year over year. The question Wednesday is no longer whether AI demand exists — it is whether Alphabet can build capacity fast enough to capture it without overwhelming margins and cash flow.
Last quarter, revenue rose 24% to $119.8 billion, led by an 82% surge in Google Cloud to $24.8 billion. Cloud operating margin reached 35.6%, while backlog jumped by more than $50 billion in a single quarter to $514 billion. Search still grew 17% and YouTube ads rose 13%. The catch was spending: capital expenditures reached $44.9 billion and pushed free cash flow to negative $5.9 billion, Alphabet’s first negative quarter on record.
This quarter, Cloud is the number to watch. Alphabet raised its 2026 capital spending outlook to roughly $200 billion and is still using third-party capacity because its own infrastructure cannot keep up with demand, creating additional margin pressure. If Cloud can sustain anything close to its current growth while margins hold and backlog keeps building, the spending becomes much easier to justify. Also watch for the first real framework around 2027 capex and an update on the public rollout of Gemini 4.
"We continue to be supply constrained, a sign of momentum and rapid adoption."
Alphabet (GOOGL) Stock Performance, 5-Year Chart, Seeking Alpha
Amazon (AMZN)
Amazon (+7.4% YTD) reports Thursday after the close, with shares ending Friday at $248.00. Consensus calls for roughly $202.2 billion of revenue, just above the top of Amazon’s own guidance. The setup is increasingly about AWS: demand is so strong that Amazon says capacity is largely sold out through 2027, but supplying it now requires one of the largest capital spending programs in corporate history. Thursday will show whether cloud growth is accelerating fast enough to keep justifying the buildout.
Last quarter, revenue rose 20% to $200.6 billion and operating income jumped 43% to $27.5 billion. AWS was the standout, growing 37% to $42.2 billion — its fastest pace in 18 quarters — while backlog reached $496 billion and advertising revenue climbed 26% to $19.8 billion. The headline EPS of $5.75 was heavily boosted by a $53.4 billion pre-tax gain on Amazon’s Anthropic investment.
This quarter, AWS growth is the number to watch. Amazon raised its 2026 cash capex plan to roughly $220 billion, partly because of higher memory costs, and management has warned that free cash flow will remain pressured while data centers are built ahead of revenue. Prime Day timing also creates nearly a 4-point drag on Q3 growth, making the retail headline noisier than usual. If AWS can stay near its recent growth rate while backlog keeps climbing, the spending looks increasingly supported by demand. If growth slows while capex rises again, the return on that AI buildout becomes a much harder question.
"Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too."
Amazon (AMZN) Stock Performance, 5-Year Chart, Seeking Alpha
Investor Events / Global Affairs:
Apple's brings touch to the Mac, the ECB's oil problem, and Oracle's AI financing pitch.
Apple Brings Touch to the Mac
Source: Apple via 9to5Mac
Apple holds its "Pro and tell" event in Los Angeles on Wednesday at 10 a.m. PT, or 1 p.m. ET. Bloomberg reports Apple will debut its first touchscreen MacBook Pro, along with an M6 MacBook Pro, a new iMac, and a sharper iPad mini. It is the first major Mac launch since John Ternus became CEO on September 1.
The Mac comes in strong. Mac revenue rose 29% to a June-quarter record of $10.4 billion, helped by the low-cost MacBook Neo, despite supply constraints. The broader PC market is shrinking: IDC says global shipments fell 20.1% in the third quarter as AI data centers soak up memory supply. Mac shipments fell 11.3%, but Apple still gained share.
Pricing is the question. Apple already raised prices in June on memory costs, and the OLED models are expected to cost more than today's $1,999 starting price. Shares are up 27.9% this year ahead of the November 2 earnings report, so watch prices, ship dates, and memory supply into the holidays.
Apple (APPL) Stock Performance, 5-Year Chart, Seeking Alpha
"We're going to make the best iPad we can possibly make, we're going to make the best Mac we can possibly make."
ECB's Oil Problem
Source: Bloomberg
The European Central Bank announces its rate decision Thursday at 9:15 a.m. ET, with Christine Lagarde's press conference at 9:45 a.m. ET, the day after the Fed. A Reuters poll found 70 of 73 economists expect the deposit rate to stay at 2.50% after hikes in June and September.
Oil is the problem. Euro-area inflation hit 3.8% in September, the highest since 2023, with energy prices up 18.8% from a year earlier as the Iran war keeps fuel costs elevated. Core inflation is a calmer 2.5%, and rising long-term yields, especially in France, are already tightening financial conditions.
Markets are looking past October to December, when 64 of the 73 economists expect a quarter-point hike. Watch whether Lagarde confirms that path, what she says about French bond spreads, and any sign that energy costs are spreading into wages. A hawkish ECB alongside a hawkish Fed would keep pressure on global bond yields.
"The problem with secondary effects is by the time you see them it's too late."
Oracle's AI Financing Pitch
Source: Oracle
Oracle AI World runs through Wednesday in Las Vegas, with co-CEOs Mike Sicilia and Clay Magouyrk delivering Monday's opening keynote at 9:30 a.m. local time. Magouyrk returns Tuesday with a keynote titled "Now that AI works, what are we going to do with it?" The stock needs the help: Oracle closed Friday at $126.16, down 35.3% this year and 49.2% below its June high.
The business is growing fast. Fiscal first-quarter revenue rose 30% to $19.3 billion, and cloud infrastructure revenue jumped 121% to $7.4 billion. Remaining performance obligations, Oracle's contracted backlog, reached $664 billion. But capital spending of $28 billion left free cash flow at negative $5 billion, and Oracle sold $20 billion of stock during the quarter to help fund the buildout.
Financing is the pitch Oracle has to win. Management says most new contracts use customer prepayments or bring-your-own-hardware deals that don't require new cash from Oracle, and it expects full-year capex of up to $95 billion. Watch for new customers beyond OpenAI, details on how those deals are funded, and any update on its outlook for at least $90 billion of fiscal 2027 revenue.
"While there clearly are capital expenditures, it does not require Oracle to go out and find additional cash to do it."
Major Economic Events:
The Fed, third-quarter GDP, and PCE inflation all land within 24 hours.
Monday (10/26): Chicago Fed National Activity Index; Dallas Fed manufacturing survey; 2-year Treasury note auction.
Tuesday (10/27): FOMC meeting begins; September durable goods orders; FHFA house price index; S&P Case-Shiller home prices; September new home sales; October Conference Board consumer confidence; Richmond Fed manufacturing survey; 5-year Treasury note auction.
Wednesday (10/28): MBA mortgage applications; September advance goods trade balance; retail and wholesale inventories; FOMC rate decision; Fed Chair Warsh press conference.
Thursday (10/29): Initial and continuing jobless claims; third-quarter GDP (first estimate); September personal income, spending, and PCE prices; 7-year Treasury note auction.
Friday (10/30): Third-quarter Employment Cost Index; October Chicago PMI.
What We’re Watching:
FOMC Rate Decision
The Fed announces its decision Wednesday at 2 p.m. ET, followed by Chair Kevin Warsh's press conference at 2:30 p.m. It is the first meeting since the Fed raised rates a quarter point to 3.75%–4.00% on September 16, its first hike since July 2023, in a 12–0 vote. A Reuters poll found 94 of 100 economists expect a hold this week, and all of them expect a hike in December.
A weak September jobs report and patient comments from Vice Chair Philip Jefferson and New York Fed President John Williams cooled talk of back-to-back hikes. Inflation keeps moving the wrong way, though, with surging gas and diesel prices adding pressure. Fed funds futures imply only about a 10% chance of a move this week.
With no new projections due, Warsh's press conference carries the signal. He has avoided forward guidance, so watch whether he lays out conditions for a December hike and whether Beth Hammack, Neel Kashkari, and Lorie Logan, who dissented in favor of a hike in July, dissent again. A clear December signal would push Treasury yields higher just as Microsoft and Alphabet report after the close.
Economists expect the following:
Fed funds target: Hold at 3.75%–4.00%
"We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed."
September PCE Inflation
Thursday's PCE report, the Fed's preferred inflation gauge, lands the morning after the decision. The Wall Street Journal's survey expects core PCE to rise 0.3% in September, lifting the annual rate to 3.1%, while headline PCE is expected to jump to 3.7% as higher gasoline prices feed through.
Inflation has climbed all year. Headline PCE ended 2025 at 2.9% before the Iran war pushed energy costs higher, peaking at 3.8% in May. Core PCE has held at or above 3.0% since February. Hot September consumer and producer price reports point to another firm reading.
Spending matters too. Consumer spending is expected to rise 0.6%, a sign that demand is holding up despite higher prices. RBC expects core prices to rise 0.4%; a print that hot would lock in a December hike, while a 0.2% reading would give Warsh room to wait.
Economists expect the following:
Core PCE (y/y): 3.1% vs. 3.0% prior
"The picture is not benign with inflation elevated and intensifying."
Grit is a publisher of financial information, not an investment advisor. Grit does not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient. Grit does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
Cover Image Source: Todd Owyoung; Getty Images
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. INVESTORS SHOULD OBTAIN INDIVIDUAL INVESTMENT ADVICE BASED ON THEIR OWN CIRCUMSTANCES BEFORE MAKING AN INVESTMENT DECISION
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
The author, publisher or insiders of the publisher may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and Grit undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
Grit does not accept any liability whatsoever for any direct or consequential loss, however arising, directly or indirectly, from any use of the information contained herein.
By using the Site or any related social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.
Please read: Terms of Use, Privacy Policy, Disclosure Policy and Disclaimer Policy
If you have any questions please contact us at [email protected]