Tech Stock Roundup: Amazon Leads Gainers While Weak Guidance Hits Microsoft; AI Dominates Earnings
Key Takeaways
- Meta and Amazon delivered strong quarterly results from digital advertising and cloud computing growth.
- Microsoft and Apple faced challenges due to profitability and future guidance.
- Qualcomm and ARM will release their earnings reports, potentially overshadowing their ongoing legal battle.
The past week was a rollercoaster ride for tech giants, with mixed earnings reports and stock price fluctuations. While artificial intelligence emerged as a key driver of growth, capacity constraints and economic uncertainties cast a shadow over the sector.
As investors eagerly await Nvidia‘s earnings report, the focus shifts to Qualcomm and ARM, whose recent split has added another layer of complexity to the tech landscape.
Best and Worst
Meta lost 2.6% last week to $567.16 despite the tech giant behind Facebook and Instagram reported a record-breaking third quarter . Revenue climbed by 19% year-over-year to $40.58 billion, while net income surged 35% to $15.69 billion.
This translates to earnings per share of $6.03, significantly exceeding Wall Street’s projected revenue of $40.29 billion and earnings per share of $5.25.
Microsoft dropped by 4.2% to $410.37 after posting mixed results in the quarter ending on Sept. 30. While revenue surged by 16% year-over-year, and net income climbed by 11% to $24.67 billion, the stock price took a hit due to weaker-than-expected guidance.
The company forecasts $68.1 billion to $69.1 billion for the current quarter, below analyst expectations of $69.83 billion.
Apple decreased by 4.5% to $222.91. Apple’s fiscal fourth-quarter earnings report revealed a mixed bag of results . While revenue increased 5.4% year-over-year to $94.93 billion, net income plummeted 36% to $14.74 billion.
Earnings per share also declined to $0.97. Although revenue exceeded analyst expectations, the significant drop in profitability weighed on investor sentiment, causing the stock to fall over 1% in after-hours trading.
Amazon Leads the Gainers
Alphabet gained 1.3% to $172.65. Google’s parent company posted a strong third-quarter report , with revenue surging by 15% year-over-year to $88.2 billion. Digital advertising accounted for a significant portion of this growth.
Google Cloud continued its impressive trajectory, surpassing $10 billion in quarterly revenue for the first time and achieving $1 billion in operating profit.
On a more positive note, Amazon rose by 4.4% to $197.93. Amazon’s earnings report was a resounding success. The company delivered strong results, with earnings per share of $1.43 and revenue of $158.88 billion.
AWS, the company’s cloud computing division, continued its impressive growth trajectory, albeit slightly slower than in previous quarters. Despite this, AWS remains a key driver of Amazon’s overall growth and profitability. The stock price surged over 7% in response to the positive news.
A mention apart goes to Super Micro Computer (SMCI) shares plummeted by 11% on Friday only, the steepest decline among S&P 500 stocks.
This extended a recent downward trend sparked by EY’s resignation as the company’s auditor. The move followed allegations of accounting irregularities raised by Hindenburg Research over the summer.
AI Spending Dominates Earnings
The “Magnificent Seven” tech giants, collectively valued at over $10 trillion, have made artificial intelligence a central focus in their quarterly earnings reports.
Apple, Microsoft, Alphabet, Amazon, and Meta executives highlighted significant advancements in AI integration and the rollout of new AI-powered features. They also emphasized the robust demand for AI solutions and their challenges in meeting this surge.
These tech titans have significantly ramped up their infrastructure investments to accommodate the burgeoning AI environment.
Cloud providers, in particular, have accelerated the development of their AI operations to keep pace with the soaring demand for cloud computing.
In the third quarter alone, Microsoft, Alphabet, Amazon, and Meta collectively spent over $60 billion on property and equipment, a 60% increase year-over-year .
While these investments have raised concerns about their impact on profitability, recent earnings reports have alleviated some of these fears.
Despite the significant investments, tech giants continue to grapple with capacity constraints. Microsoft and Amazon have acknowledged difficulties in meeting the overwhelming demand for cloud computing, citing a shortage of advanced semiconductors as a major bottleneck.
Nevertheless, AI is driving substantial growth for these companies. Microsoft’s AI business is on track to achieve a $10 billion annual revenue run rate, making it the fastest-growing business in the company’s history.
Amazon’s AI business is also experiencing triple-digit growth, outpacing the early growth of cloud computing. Alphabet is leveraging AI to enhance its core advertising business and cloud unit, while Meta is utilizing AI-driven recommendations to boost user engagement and advertising revenue.
Apple, too, is continuing to focus on AI. The strong adoption of iOS 18.1, which incorporates Apple Intelligence, signals robust demand for the company’s AI-powered features.
What’s Next?
While the market still has to wait for Nvidia’s report—expected to be published on Nov. 20— investors’ eyes turn now to Qualcomm and ARM’s results. The two companies announced their split, recording contrasting performances on Wall Street after the news.
The tension stems from ARM’s decision to revoke Qualcomm’s chip design license, escalating an ongoing legal battle. Qualcomm criticized ARM’s move as a “strong-arm” tactic that could result in billions in lost revenue.
The chipmaker is expected to report a significant year-over-year increase in earnings per share (EPS) for the third quarter. Analysts forecast EPS of $2.56, representing a 26.7% growth rate.
Revenue is projected to reach $9.9 billion, up 14.7% from last year’s period. Over the past 30 days, analysts have revised their EPS estimates upward by 0.28%, signaling growing confidence in the company’s prospects.
ARM will instead report the results for its second quarter—it has a non-ordinary financial year—on Nov. 6. Analysts expect earnings per share to be at $0.26, down from $0.36 recorded in the same period last year.
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