This is a busy week for 5 companies from the “Magnificent 7” group. Alphabet, Meta, Microsoft, Apple and Amazon are reporting their Q3 results and investors are wondering if there are enough elements to warrant a continuation in price increase for these companies.
And so far the Q3 results did not disappoint but investors seem to have valued more specific negative elements, like increased spending or weaker outlooks and as a result the shares price dropped, writes eToro analyst for Romania, Bogdan Maioreanu.
Alphabet, Google’s parent company, kicked off this big week of earnings for US tech stocks with a bang, delivering solid growth on the top and bottom line, while its cloud business saw 35% growth for the quarter. Its cloud division was the standout, seeing revenue rise to USD$11.4 billion, higher than the USD$10.8 billion Wall Street expected. Microsoft and Amazon are the leaders in the cloud business, but Google is gaining ground and attracting more cloud customers as the rise of AI across enterprises continues. After initial growth stock prices corrected a bit in the post market yesterday.
Microsoft continued the festival of good reporting, seeing growth across the business and beating expectations this quarter. Overall revenues rose to USD$65.59 billion while operating income came in at USD$30.55 billion. The company started early with its AI investments and has spent big, but it continues to pay off.
When you increase your capital expenditure by over 33% in a year, investors expect growth. Microsoft’s Azure cloud business saw 34% growth, driven by the company’s investment in AI, showing that the company is effectively monetizing its AI strategy. But
Microsoft shares fell nearly 4% after revenue estimates for the fiscal second quarter disappointed investors. And here we need to look at the reasons. It is not lack of demand but of offer.
In a conference call with analysts, CFO Amy Hood said that some data center capabilities that Microsoft was counting on for artificial intelligence development didn’t materialize. That will limit revenue growth from the Azure business during the current quarter, which ends in December.
Meta also showed good figures. Revenues of $40.59 billion marked 19% year-over-year growth and came in slightly higher than consensus for $40.31billion. But investors are worried, seeing that capital expenditures also rose year-over-year to $9.2 billion as the company continues to invest billions in artificial intelligence and its Reality Labs hardware unit. Reality Labs is responsible for products such as the recently launched Meta Quest virtual reality headset and Orion augmented reality glasses. But for now, this division posted an operating loss of $4.4 billion, a trend that CFO Susan Li said the company expects to maintain through the end of the year. Shares fell 3% in the post market.
And in all this complicated AI development landscape, after AMD’s poor results and news that Super Micro’s auditor has resigned investors are looking more cautiously at the entire tech sector. And as we’ve seen that the big increases have actually been in this very area of data centers that are chip-dependent it’s possible that this has also influenced investor sentiment.
Another two giants are ending this “Magnificent 7” busy reporting week: Amazon and Apple. At Amazon, investors will be keeping an eye on consumer spending trends at a time when the e-commerce giant’s retail business is experiencing slowing growth. Wall Street expects that the revenue to grow 9.9% to $157.28 billion during the quarter. And investors’ eyes are focused on the growth of the data center sector. In the previous financial report we saw that although data center revenues are half of the online commerce revenues, when you get to operating profits the data center ones are twice as much as those generated by all the other divisions combined.
At Apple all eyes are on the new iPhone 16 and its sales, but also on the estimates for the last quarter of the year and the impact that the introduction of Apple intelligence (the AI integration in iPhone) in the U.S. and its expansion in other regions of the globe – not the European Union – will have on the company’s revenues.
According to the latest eToro Retail Investor Beat survey, retail investors are very interested in the “Magnificent 7” stocks, with only less than 26% declaring that they are not invested and do not plan to invest in these stocks (35% for Alphabet). Also, all these stocks are in the top 10 most held stocks by global and Romanian investors on the eToro platform at the end of last quarter.
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