Morgan Stanley laid out its preferred positioning for the first-quarter earnings season, placing Meta at the top of its list, followed by Amazon and then Google.
In a client note, analyst Brian Nowak wrote that the bank’s "pecking order is META, AMZN, GOOGL," and flagged four overarching macro themes that it expects will influence earnings revisions and market performance through 2026.
The first theme centers on revenue momentum and the evidence companies provide that GenAI investments are generating attractive returns on invested capital (ROIC). Morgan Stanley said it will be watching for sustained advertising upside and continued strength at hyperscalers, both of which it believes would support investors paying higher multiples.
Second, the bank highlighted rising capex expectations for 2027. Morgan Stanley noted it is "~15% ahead of consensus" on hyperscaler spending, and cautioned that ambiguity about where peak investment intensity will settle could act as a constraint on valuations.
On the consumer front, the bank warned that any softening is not currently reflected in prices. It noted early indications of weaker branded advertising markets and singled out shifting user behavior as a material variable this quarter, stating that "GOOGL [is] not pricing in any disruption risk and META not pricing in any MetaAI success."
Morgan Stanley reiterated Meta as its top pick, saying the company’s capacity to guide toward stronger top-line growth will be important to "showcasing the ROIC of its GPU/GenAI investments." The firm will also track the broader rollout of MetaAI across Meta’s apps and is seeking "clarity around Meta's reported headcount cuts."
For Amazon, the emphasis is squarely on AWS. Morgan Stanley is modeling AWS growth of "29%/31%" for 1Q/2026 and expects AWS margins to stay in the low-to-mid 30s. The bank also laid out a forecasted path to "$10–$11 of GAAP EPS in '27."
Google is projected by Morgan Stanley to deliver high-teens paid search growth alongside 60% year-over-year Google Cloud growth. The note adds that incremental margins for Google reached "56% last quarter."
Context and implications
Morgan Stanley’s framework ties valuation sensitivity to two measurable variables - revenue acceleration tied to GenAI ROIC and the direction of hyperscaler capex - while also flagging nearer-term consumer ad risk and potential user behavior shifts as catalysts for revision. The bank’s ranking gives Meta the highest conviction among the three, with Amazon and Google following behind in that order.