As the second-quarter earnings season approaches, HSBC analyst Nicole Inui has identified ten stocks recommended for purchase, poised to outperform in various sectors. These selections include major players from technology, finance, consumer goods, and industrial sectors, reflecting strong expectations headed into the earnings reports.
Leading the lineup is Microsoft, showcasing an impressive 40% year-over-year revenue growth in its Azure AI segment. HSBC emphasizes that Microsoft’s cross-selling capabilities deepen customer loyalty while supporting margin enhancement, even amidst substantial capital investments. The company has secured a 20-year power agreement with Chevron that will supply energy to a new data center located in West Texas.
Alphabet is anticipated to maintain its position in core search services, with Google Cloud set for rapid expansion thanks to the rollout of its latest eighth-generation TPU chips. In addition, Google plans over €1 billion in investments to upgrade its data center operations in Austria.
Amazon continues to bolster its AWS division, which retains the largest cloud revenue in the industry, aided by in-house silicon that has now generated $20 billion in recurring revenue. The company recently introduced Loom for AWS, a platform designed for the secure utilization of AI agents.
In the social media realm, Meta experienced a robust 33% growth in advertising revenue in the first quarter, partially fueled by artificial intelligence tools that improved ad recommendations. The corporation has also commenced construction on a $13 billion AI-optimized data center in Canada.
Other notable mentions include Caterpillar, which is expected to benefit significantly from demand for AI data centers, targeting a capacity increase to 65GW by 2030. The company recently enhanced its quarterly dividend by 8% and complemented its offerings with the acquisition of spatial data provider Skycatch.
Vertiv stands out for its approximately 80% revenue share tied to data centers, following its acquisition of thermal technology firm ThermoKey and the launch of a new manufacturing site in Malaysia. NextPower holds a strong backlog exceeding $5.25 billion in solar trackers and is expanding internationally through a new joint venture in the Middle East.
Marriott adopts an asset-light model and serves a loyalty base of 283 million Bonvoy members. The company has implemented a beta version of Ask Bonvoy, an AI-driven tool designed to assist with hotel bookings. Lastly, AbbVie is described as a strong performer, with anticipated growth from its medications Skyrizi and Rinvoq, complemented by a pipeline expansion through the recent Apogee acquisition.
Wells Fargo rounds out the list, trading at a multiple of 10.8 times its estimated earnings for 2027, buoyed by improving net interest income and solid share buybacks. Overall, HSBC's selections underline a mix of growth and stability as Q2 earnings results draw near.
This material is informative and not intended as financial advice.
