Investment banking advisory firm Evercore ISI has warned clients of potentially softer second-quarter earnings from Big Tech firms, citing regulatory pressures and macroeconomic headwinds. However, analysts highlighted two stocks they believe are oversold and poised for recovery, according to research notes seen by financial outlets.
The report suggests companies like Alphabet, Meta, and Amazon may face earnings declines between 5-12% year-over-year due to slowing ad revenue growth and increased antitrust compliance costs. Evercore’s tech sector team specifically noted regulatory scrutiny in Europe and potential US legislative changes as contributing factors.
“We’re seeing the perfect storm of cyclical demand weakness meeting structural regulatory changes,” said one analyst familiar with the report who requested anonymity because they weren’t authorized to speak publicly. “But this creates selective opportunities where valuations don’t reflect long-term fundamentals.”
While the firm didn’t name the recommended stocks in public materials, sources indicate they likely include a semiconductor manufacturer and a cloud infrastructure provider that have underperformed sector benchmarks this year. Market data shows short interest in both companies has risen sharply since January.
Tech investors appear divided on the outlook. Some portfolio managers contacted for this story expressed skepticism about catching falling knives, while others pointed to historically attractive price-to-earnings ratios. The sector’s forward P/E multiple has compressed 18% from 2023 peaks according to Bloomberg data.
Looking ahead, much depends on June quarter earnings calls and whether companies maintain full-year guidance. Several Big Tech firms have quietly reduced hiring targets and paused non-essential projects, suggesting management teams are bracing for tougher conditions.