What is arguably the most unpredictable earnings season for technology companies in modern history kicks off this week as investors try to navigate the unknowable to figure out which companies will crash, hold the line and even prosper amid the COVID-19 pandemic.

IBM leads off today with earnings expected to be announced after the close of the markets. Analysts are expecting Big Blue to report earnings of $1.80 per share, down 20% year-over-year and down 14% from estimates of $2.08 per share 90 days ago. Revenue is expected to decline 3% to $17.6 billion. For the full year, analysts are now expecting IBM to earn $11.73 per share, well below the $13.35 that IBM forecast in January.

How close IBM comes to matching those estimates will say a lot about what to expect over the next two weeks. Market watchers are expecting cloud infrastructure vendors to hold their own, although Google LLC holding company Alphabet Inc. (which reports April 28) and Amazon.com Inc. (April 30) could be hit by weaknesses in their advertising and retail businesses, respectively. IBM Corp. ushers in the tech earnings season Monday, April 20, with few surprises expected from the venerable company.

Consensus earnings estimates for Microsoft Corp. (April 29) have come down in recent weeks, but they’re still ahead of forecasts from the beginning of the year. Late last month Microsoft said it has seen a significant increase in demand for cloud services tied to efforts to stop the spread of the pandemic.

Analysts note that the impact of the coronavirus in this quarter will be leavened by the fact that more than two months of the quarter had passed before shutdowns in the U.S. began.

Losers and (yes) winners

The surprise winners could be personal computer makers such as Dell Technologies Inc. and HP Inc., though they don’t report results until May, as well as chip king Intel Corp. (April 23), who may benefit from a surge of demand from newly isolated home workers and data center operators that support them. Those hopes were buoyed by Micron Technology Inc.’s statement late last month that it was seeing stronger-than-expected revenue because of a spike in demand from corporate and cloud customers bulking up servers.

Analysts surveyed by Zacks Investment Research Inc. are expecting Intel’s first-quarter sales to climb 16.8%, to $18.75 billion, and profit to surge nearly 44%, to $1.28 per share, up from estimates of $1.05 per share at the beginning of the year. They’re also projecting stronger-than-expected profit growth for Intel in the second quarter.

“While spending on data center solutions appears to be down significantly, cloud computing usage seems to be on the rise,” said Charles King, principal analyst at Pund-IT. “The massive growth in working from home also appears to be driving significant sales of commercial PCs and laptops.”

Losers are likely to be companies in the services business, which are seeing clients put contracts on hold because of budget cuts and social distancing, among other reasons. “These projects involve moving bodies around, so buyers may be holding off projects involving face-to-face encounters,” said Ralph Finos of Ralph Finos Consulting. He expects a 10% sales drop in those markets.

A question mark is companies that deliver software as a service. While SaaS vendors in vertical markets like collaboration and videoconferencing have reported strong growth since the pandemic hit, it’s unclear what the impact of layoffs will be on those firms that sell more mainstream business applications like enterprise resource planning and customer relationship management.

“Vendors with subscription models will continue to see revenue, but those revenue numbers will decline, especially for vendors that charge on a per-user basis,” said Ian Campbell, chief executive of Nucleus Research Inc.

In a conference call with Cowen and Company LLC last week, Chief Information Officer Peter Wokwicz of executive consulting firm Tatum LLC said many companies have been overbuying software as a service for the past several years and may now put their spending on new licenses on hold to adjust for lower headcount and inactive users.

But the big may also get bigger. In upgrading its outlook for SAP SE (April 21) earlier this month, UBS Group AG analysts said the ERP giant’s high recurring revenue base, manageable debt load blue-chip customer base make it “relatively well-placed to handle the challenges that the pandemic will create.”

Investors shrug

Investors have so far shrugged off their worries as stock markets have come back from their lows late last month. Cloud infrastructure companies have bounced back especially well.

The Dow Jones Industrial Average has risen 30% since its March 23 low and the Nasdaq is up 25% since its nadir the following day. By comparison, Amazon is up 41% from its March low, Zoom Communications Inc. up 35%, Microsoft 31% and Intel 35%.

An even more bullish picture is apparent when prices are compared to the beginning of the year. While the Dow has slid 16% since January 2, Microsoft is up 11%, Amazon is up 25% and Zoom has soared 45%.

“Cloud and subscription software companies will not experience much of a hit, if any,” Finos said. “AWS and Microsoft Azure should be relatively untouched.”

The same probably can’t be said for Facebook (April 29) and Google, which rely heavily on advertising revenue. Many businesses have slashed marketing budgets as sales have sagged and e-commerce advertising revenue is expected to make up the difference.

“We exist in an ecosystem of partnerships and interconnected businesses, many of whom are feeling significant pain,” Alphabet CEO Sundar Pichai wrote in a memo to employees last week that outlined plans to significantly cut back hiring for the year.

If visibility is weak for the first quarter, it’s almost nonexistent beyond that. Earnings reports that arrive in June, which include those of Apple Inc., Salesforce.com Inc., Adobe Systems Inc. and Oracle Corp., will be the first to reflect a full quarter under a global lockdown economy.

“I expect technology vendors will experience a difficult Q2,” Campbell said. “Even if there is a clear path going forward, companies will be slow to restart buying activities.”

Tech companies and investors can take heart in the fact that they are in pretty good shape compared with industrials, transportation energy and financial firms. FactSet Research Systems Inc. estimates first-quarter earnings for all public companies will decline 10%, which would make it the biggest year-over-year drop in nearly 11 years.

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