Image Source: UnsplashTech giants Meta Platforms (META – Free Report) and Microsoft (MSFT – Free Report) will highlight this week’s earnings lineup which also includes results from EV leader Tesla (TSLA  – Free Report).Scheduled to release their quarterly results on Wednesday, January 29, here’s a look at which software giant may be the better investment as earnings approach.

Meta Q4 Expectations
 Considered an internet software company due to its involvement in creating and managing internet-based platforms and services, Meta’s Q4 sales are expected to be up 17% to $46.97 billion. On the bottom line, Q4 EPS is thought to have spiked 29% to $6.90 versus $5.33 a share in the comparative quarter.Notably, Meta’s Zacks Internet-Software Industry is currently in the top 19% out of 250 Zacks industries. It’s also noteworthy that Meta has surpassed the Zacks EPS Consensus for eight consecutive quarters with an average earnings surprise of 11.34% in its last four quarterly reports.Image Source: Zacks Investment ResearchMore intriguing, The Zacks ESP (Expected Surprise Prediction) indicates the streak may continue with the Most Accurate Estimate having Q4 EPS pegged at $7.37 and nearly 7% above the Zacks Consensus.
Image Source: Zacks Investment Research

Microsoft Q2 Expectations
 Pivoting to Microsoft, the leader in PC software will be reporting results for its fiscal second quarter (FY25). Microsoft’s Q2 sales are expected to increase 11% to $68.7 billion. Although Q2 EPS is expected to rise 7% to $3.13, the Zacks ESP does indicate Microsoft could miss earnings expectations with the Most Accurate Estimate at $3.05 and 2% below the Zacks Consensus.Image Source: Zacks Investment ResearchMicrosoft has exceeded earnings expectations for nine consecutive quarters with an average EPS surprise of 4.91% over the last four quarters. That said, Microsoft’s Zacks Computer-Software Industry is in the bottom 34% of all Zacks industries at the moment.  
Image Source: Zacks Investment Research

Performance & Valuation Comparison
 Over the last year, Meta’s stock has risen +64% to largely outperform Microsoft’s +6%, while topping the benchmark S&P 500 and the Nasdaq’s gains of +24% respectively.  
Image Source: Zacks Investment ResearchAt their current levels, Meta trades at 25X forward earnings which is a pleasant discount to Microsoft’s 34.4X, and is closer to the benchmark. Meta trades at 10.2X sales and beneath Microsoft’s 12.9X, although both are at noticeable premiums to the S&P 500’s 5.6X. 
Image Source: Zacks Investment Research
Bottom LineAhead of their quarterly reports, Meta Platforms stock lands a Zacks Rank #3 (Hold) with Microsoft shares landing a Zacks Rank #4 (Sell).As alluded to in the Zacks ESP, earnings estimate revisions have remained favorable for Meta and suggest investors could still be rewarded. In contrast, earnings estimates have declined for Microsoft which is an indicator of more downside risk ahead.More By This Author:Tesla Earnings Preview: The Best Of The Mag 7?
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