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Further Reading from MarketBeat Media Mega-Cap Earnings Could Decide the Tech Sector's Next Big MoveBy Ryan Hasson. Article Published: 1/28/2026. 
At a Glance - 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 gotten off to 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? The answer mostly comes down to 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 across the sector, the broader tech complex has remained in a consolidation phase. JC Parets has spent more than 20 years tracking the market's most important technical signals, and he's now warning that a key date on the calendar could mark the next major turning point for stocks. After calling the 2008 crash, the 2020 collapse, and the exact bottom in 2022, he's sounding the alarm again — and he's sharing the specific day he believes investors need to prepare for. See JC's latest market forecast here That could be about to change. Earnings season is now underway, and Wednesday, Jan. 28, 2026, may prove pivotal. Three Magnificent Seven members — Microsoft (NASDAQ: MSFT), Tesla (NASDAQ: TSLA), and Meta Platforms (NASDAQ: META) — report after the bell. Their combined influence on the major tech ETFs is substantial: Microsoft alone accounts for more than 11% of XLK, and Microsoft, Tesla, and Meta together make up nearly 14% of QQQ. Both ETFs are also trading just below major breakout levels. XLK sits roughly 3.2% below its 52-week high, with the $150 area acting as a key resistance zone. QQQ is even closer — less than 1% from its all-time high as of Tuesday's close. With technical pressure building, the outcome of these earnings reports could determine whether tech finally breaks higher or slips back into consolidation. Not surprisingly, AI-related capital expenditures will be a central theme, particularly for Microsoft and Meta, as investors seek reassurance that spending 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 amid surging demand for AI and cloud infrastructure. Investors will closely watch updates on Azure growth, AI monetization, and forward guidance. Analysts expect revenue between $79.5 billion and $80.6 billion, implying 14% to 16% year-over-year growth, with earnings per share (EPS) estimates in the $3.88 to $3.91 range. 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 signal a relatively low probability of an EPS beat. For Q4 2025, EPS is expected to be roughly $0.44 to $0.45, with revenue near $24.8 billion, reflecting weaker deliveries and higher spending. Still, many investors may look beyond near-term auto margins and focus on longer-term narratives: energy storage, robotaxis, the Optimus program, and any forward-looking capex commentary. Meta: Strength Heading Into Earnings Meta arrives at earnings on a much stronger 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, capital expenditures will be closely watched. Meta's last report featured robust 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 perched just below breakout levels, the tone set by these three mega-cap leaders may determine whether the sector pushes to new highs or remains stuck in neutral. The Real Test After Earnings: Guidance and AI Spending For Microsoft, Tesla, and Meta, the initial market reaction will matter less than what their results reveal about the next few quarters. Investors will parse capital-expenditure plans for AI infrastructure, any clearer signals on monetization, and whether management speaks more confidently or cautiously about demand heading into 2026. Ultimately, the bigger question isn't simply whether companies beat estimates, but whether guidance and management commentary support sustained leadership from mega-cap tech — and a more durable breakout attempt for XLK and QQQ in the sessions ahead.
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