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Special Report Mega-Cap Earnings Could Decide the Tech Sector's Next Big MoveAuthored by Ryan Hasson. First Published: 1/28/2026. 
What You Need to Know - Despite strength in pockets like memory chips, heavy weighting in underperforming Magnificent Seven names has kept XLK and QQQ stuck in consolidation.
- Microsoft, Tesla, and Meta's Jan. 28 earnings reports carry outsized influence as both ETFs sit just below key breakout levels.
- Guidance on AI spending, monetization, and profitability from these three leaders may determine whether tech breaks higher or stays range-bound.
The technology sector has had a sluggish start to the year by its own standards. The tech-heavy Technology Select Sector SPDR ETF (NYSEARCA: XLK) is up just 2.8% year-to-date (YTD), while the Invesco QQQ Trust (NASDAQ: QQQ) has also struggled to gain traction. That's notable given the sharp rally in memory chip stocks, to which both ETFs have exposure. So what's holding tech back? Largely, it's weighting. Both XLK and QQQ are heavily concentrated in mega-cap technology names — the Magnificent Seven — which have underperformed so far this year. As a result, despite pockets of strength elsewhere in the sector, the broader tech complex has remained stuck in a consolidation phase. On September 14th, 2023, something big happened that didn't make the news. The price gap between London gold and Shanghai gold blew out to $120 an ounce. For years, that gap was a few dollars, maybe $5 or $10. A 20x jump in seconds isn't a glitch, it's the system breaking. Traders tried to buy gold in London to sell in Shanghai, but hit a wall. The London vaults were empty. Since that day, gold has hit 53 all-time highs. One stock is positioned to capture the bulk of this wealth transfer. See the full story on this opportunity now. That could be about to change. Earnings season is now underway, and Wednesday, Jan. 28, 2026, could be pivotal. Three Magnificent Seven members — Microsoft (NASDAQ: MSFT), Tesla (NASDAQ: TSLA), and Meta Platforms (NASDAQ: META) — report after the bell. Their combined influence on major tech ETFs is substantial: Microsoft alone accounts for more than 11% of XLK, and in QQQ, Microsoft, Tesla and Meta collectively represent nearly 14% of the ETF. Both ETFs also sit just below key breakout levels. XLK is roughly 3.2% below its 52-week high, with the $150 area acting as resistance. QQQ is even closer, less than 1% from its all-time high as of Tuesday's close. With technical pressure building, these earnings could determine whether tech finally breaks higher or slips back into consolidation. Unsurprisingly, AI-related capital spending will be a central theme, particularly for Microsoft and Meta, as investors seek reassurance that investment remains disciplined and growth-oriented. Microsoft: AI Infrastructure Under the Microscope Microsoft has lagged both the broader market and the tech sector, down modestly YTD and more than 6% over the past six months. That underperformance makes its earnings report especially important given its heavy ETF weighting. The company reports fiscal Q2 2026 results after the bell on Jan. 28, with capital expenditures front and center. In Q1, Microsoft reported capex of $34.9 billion, above prior guidance due to surging demand for AI and cloud. In the Q2 report, investors will be watching updates on Azure growth, AI monetization and forward guidance. Analysts expect revenue between $79.5 billion and $80.6 billion, implying about 14%–16% year-over-year growth, with EPS estimates ranging from $3.88 to $3.91. Tesla: A More Challenging Setup Tesla has also underperformed so far in 2026, with shares down more than 4% YTD. Analysts are bracing for a tougher quarter, and prediction markets assign a relatively low probability of an EPS beat. For Q4 2025, consensus expectations call for EPS around $0.44–$0.45 and revenue near $24.8 billion, reflecting weaker deliveries and higher spending. That said, investors may look past near-term auto margins and focus on longer-term narratives such as energy storage, robotaxis, Optimus and forward-looking capex commentary. Meta: Strength Heading Into Earnings Meta enters earnings on firmer footing. The stock has surged nearly 10% over the past week, and prediction markets imply a high probability of a beat. Analysts expect EPS between $8.16 and $8.32, driven by continued strength in advertising. As with Microsoft, capex will be closely watched. Meta's last report showed strong revenue but softer EPS due to elevated AI spending and a tax-related hit. Guidance on AI investment levels and profitability will likely shape the stock's next move. Taken together, this earnings slate could be the catalyst tech bulls have been waiting for. With major ETFs sitting near breakout thresholds, the tone set by these mega-cap leaders may determine whether the sector pushes to new highs or remains stuck in neutral for a while longer. The Real Test After Earnings: Guidance and AI Spending Across all three reports — Microsoft, Tesla and Meta — the initial market reaction will be less important than what managements reveal about the next few quarters. Investors will parse AI infrastructure spending plans, any clearer signals on monetization, and whether managements sound confident or cautious about demand into 2026. The bigger takeaway won't simply be whether estimates were beaten, but whether guidance and commentary support sustained leadership from mega-cap tech and a durable breakout attempt for XLK and QQQ in the sessions ahead.
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