Four of the ‘magnificent seven’ heavyweights announced their Q1 earnings this week. Tesla shares rose despite sales falling year-over-year and an earnings miss, while Meta stock tumbled after it beat expectations. Alphabet's strong earnings report, including dividends and share buybacks, echoes the positive sentiment seen in Microsoft's strong results, underlining the growing market confidence in the AI strategies of tech giants.
- Tesla missed analyst expectations, but shares jumped on low-cost vehicle update.
- Investors sold Meta shares after earnings beat and AI comments from Zuckerberg.
- Alphabet tops $2trn market cap during after-hours trading following its earnings beat.
Tesla
The Tesla [TSLA] share price rose after-hours on Tuesday despite the company having announced a year-over-year fall in quarterly revenue for the first time since Q2 2020.
Total revenues of $21.3bn marked a 9% decline from the year-ago period, but investors appear to have been encouraged by CEO Elon Musk’s comments regarding low-priced electric vehicles (EVs) and self-driving cars.
In a press release, Tesla noted it will leverage its existing production infrastructure to “introduce new and more affordable products”. This may refer to the $25,000 Model 2, which had previously been shelved. At least, that is what Reuters reported earlier in April; in a post on X, Musk accused the news agency of lying, though he did not specify any inaccuracies.
On the earnings call, Musk told analysts that the launch date for these new, affordable models had been brought forward to “early 2025, if not late this year”. Musk also promised to provide more information about low-cost vehicles and the company’s in-development robotaxi, ‘Cybercab’, in August.
“If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company,” Musk said on the call.
Tesla’s share price closed up 12.1% the day after the earnings.
Non-GAAP earnings per share (EPS) fell 47% to $0.45, missing the $0.51 consensus among analysts polled by LSEG.
Tesla stock closed on 25 April, up 5.92% over the past 12 months and 31.50% down in the year to date.
Meta
While Tesla’s share price gained on an earnings miss, Meta’s [META] fell on a beat.
EPS more than doubled year-over-year to $4.71, 9.28% higher than the $4.32 consensus expectation among analysts polled by LSEG. Revenue increased 27% to $36.5bn, 0.8% above analyst expectations.
Despite this, Meta stock fell 15.1% in after-hours trading on Wednesday.
The Financial Times attributed Meta’s share price slump to investor fears that CEO Mark Zuckerberg is failing to control costs. The high end of Meta’s full-year capital expenditure guidance rose from $37bn to $40bn, as Zuckerberg pledged to turn Meta into “the leading AI company in the world”.
Zuckerberg addressed the shareholder reaction to his increased AI infrastructure investments during the earnings call.
“We’ve historically seen a lot of volatility in our stock during this phase of our product playbook, where we’re investing in scaling a new product but aren’t yet monetising it,” he said, highlighting similar responses to reels and stories in the past.
“Historically, investing to build these new scaled experiences in our apps has been a very good long-term investment for us and for investors who have stuck with us,” added Zuckerberg, though a similar and long-standing ambition towards the metaverse has not been mirrored by actual results. Notably, the metaverse was cited as a target of further capex on the call.
Meta’s shares closed on 25 April 10.56% down on the previous day. However, Meta’s share price is up 112.66% over the past 12 months and 27.46% in the year to date.
Alphabet
Alphabet’s [GOOGL] earnings prompted an exuberant response from investors. Google’s parent company announced its first ever dividend, of $0.20 per share to be paid on 17 June, as well as a $70bn share repurchase.
Revenue increased 15% year-over-year to $80.54bn, 2.48% ahead of the $78.59bn that analysts had forecast. EPS increased 61.54% to $1.89, beating analyst expectations (of $1.51) by 25.17%.
Alphabet stock traded as high as $181.86 in after-hours trading, 16.58% up from the market close price of $156. As of 8pm ET, Alphabet’s share price had pulled back to $174.08 — 11.59% up since markets closed. The gains pushed Alphabet’s market cap past the $2trn threshold.
The positive response from investors appears to vindicate Alphabet’s execution of its AI strategy, which had previously experienced setbacks.
“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” Sundar Pichai, Alphabet’s CEO, told investors.
As of market close on 25 April, Alphabet’s share price had gained 50.22% over the past 12 months and 12.90% in the year to date.
Microsoft
Like Alphabet, Microsoft [MSFT] also posted positive results that seemed to validate its investments into AI.
Revenue increased 17% year-over-year to $61.86bn, and EPS rose 20% to $2.94, beating analyst expectations by 1.74% and 4.26%, respectively.
Cloud revenues increased 23% year-over-year to drive the results. Satya Nadella, Chairman and CEO, said in a statement accompanying the results that “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry.”
However, hardware revenues, specifically from Xbox and Surface, both fell during the quarter.
Microsoft’s share price gained 4.41% in after-hours trading. Before markets closed, Microsoft stock had gained 44.88% over the past 12 months and 7.60% in the year to date.
Amazon / Apple
Two of the remaining magnificent seven will announce earnings next week. Amazon’s [AMZN] earnings are scheduled for 30 April, while Apple’s [AAPL] are to follow on 2 May.
Analysts polled by LSEG expect Amazon to post EPS of $0.83 and revenue of $142.5bn. If correct, these figures would imply a 167.7% year-over-year increase in EPS, and an 11.9% increase in revenue.
Analysts are expecting Apple’s EPS to fall 1.3% year-over-year to $1.50, and its revenue to fall 5.1% to $90bn.
Nvidia [NVDA] will round off the magnificent seven earnings schedule when it announces results on 22 May.
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