🔍 The focus this week: An AI reality check

✌️ Two Big Tech earnings reports this week – Oracle and Adobe – could double as a gut check for the AI trade. Oracle will give us a read on the infrastructure layer – the pipes and power behind AI – while Adobe will offer a glimpse into whether consumers and businesses are actually willing to pay for the things AI can do. Both are expected to show strong year-over-year growth – but, as always, the devil will be in the details.

👀 Oracle’s cloud infrastructure business has been on fire, growing nearly 50% last quarter on demand from OpenAI, Nvidia, and others. But with its multibillion-dollar Stargate data center expansion underway, the spotlight is now on margins. Some analysts are warning that the project could chew through all of Oracle’s cash flow next year. So it’s worth keeping an eye on bookings and future obligations – if those key measures keep rising, that'll tell you that demand is still hot. If not, the market will start to wonder whether Oracle’s gone too far, too fast with its spending.

🥧 Adobe’s challenge is simpler: it’s aiming to turn AI excitement into sales. It’s embedding its Firefly tools across the creative suite, and looking to double its annual recurring revenue (ARR) from AI by the end of the year. And so far, not so good: the ARR recently sat at a modest $125 million – a sliver of Adobe’s overall pie. So this quarter, it’s hoping to show that users aren’t just playing with AI features – they’re paying for them, too.

🤠 Together, these results will tell the market something bigger: whether AI is moving from hype to usefulness. If Oracle shows strong, sustainable demand and Adobe proves it can charge for features, it could add fuel to the broader tech rally. But if not, AI’s big frontier may start to look like it’s all hat and no cattle.

📅 On the calendar

• Monday: China inflation (May)
• Tuesday: UK unemployment (April). Earnings: GameStop
• Wednesday: US inflation (May). Earnings: Oracle
• Thursday: US PPI (May), UK economic growth (April). Earnings: Adobe
• Friday: US consumer sentiment (June)

👀 What you might’ve missed last week

🗺️ Global

• The OECD trimmed its 2025 global economic growth forecast to 2.9%, down from its previous estimate of 3.1% – not because of one big crisis, but a mix of trade spats, debt spirals, and political uncertainty. It lowered its growth predictions for both the US and China, warning that both countries are slowing faster than foreseen. That matters because investors have been riding a wave of soft-landing optimism – but if the world’s two biggest economies downshift at the same time, the market narrative may need to adjust.

🇺🇸 The US

• The US president followed through on a widely expected move this week, doubling America’s import taxes on steel and aluminum to 50%. The move came ahead of a July 9th deadline for trade negotiations with key partners, and just days after a US federal court struck down some of the US’s recent tariff moves.

• Dollar General beat earnings estimates and raised its full-year outlook, with the discount retailer seeing its biggest influx of wealthier shoppers since 2021. The results suggest that higher-income consumers are feeling more financially squeezed than expected, a trend we highlighted in a recent Research piece.

🇪🇺 Europe

• The European Central Bank (ECB) lowered its key interest rate to 2% from 2.25%, marking its eighth cut in a year. The move puts the rate in a spot the market considers “neutral” – neither encouraging nor discouraging spending and borrowing, and comes as inflation has returned to the Bank’s target. The head of the ECB said policymakers now have the flexibility to move interest rates in either direction. And by keeping markets unsure of what’s next, they preserve their most valuable tool: optionality.