Four Magnificent Seven companies report earnings this week!! Microsoft reported on Tuesday. Revenue was $64.7B vs. $64.5B expected. EPS was $2.95 vs. $2.94 expected. Microsoft earnings are pretty solid but MSFT 0.00%↑ fell 2.5% afterwards. The only thing investors can nitpick on is that Intelligent Cloud revenue was $28.5B vs. $28.7B expected, a very slight miss. I suppose investors start to worry about the ROI of the huge AI investments.
Meta reported on Wednesday. Revenue was $39.07B vs. $38.3B expected. EPS was $5.16 vs. $4.74 expected, a very solid beat. META 0.00%↑ stock was only up 3% afterwards. The company did warn investors that:
While we do not intend to provide any quantitative guidance for 2025 until the fourth quarter call, we expect infrastructure costs will be a significant driver of expense growth next year as we recognize depreciation and operating costs associated with our expanded infrastructure footprint
Basically, the depreciation cost will be a lot higher due to the insane GPU infrastructure buildout.
Amazon reported on Thursday. Revenue was $147.98B vs. $148.56 expected. EPS was $1.26 vs. $1.03 expected. AWS revenue was $26.3B vs. $26B expected. Advertising was $12.8B vs. $13B expected. Amazon said the revenue miss was due to North America customers buying cheaper stuff, which indicates softening consumer spend and competition from discount Chinese sellers like Temu and Shein. AMZN 0.00%↑ stock tanked 8.8% afterwards. I do personally find Amazon’s product quality pretty lackluster these days. If I am not in a hurry, I mostly bought clothing and household items from Temu, which is cheaper with comparable or better quality. Amazon needs to do better or they will get surpassed by Temu.
Apple also reported on Thursday. Revenue was $85.78B vs. $84.53 expected. EPS was $1.4 vs. $1.35 expected. iPhone revenue was $39.3B vs. $38.8 expected. Service revenue was $24.21B vs. $24.01 expected. Overall, it was a pretty solid beat. AAPL 0.00%↑ stock was up 0.7% after the report.
The Magnificent Seven earnings so far have been pretty good. But their stocks were only up a little if it’s a solid beat and can tank if they miss some key metrics. Tesla, Google and Amazon’s stocks have been retreating quite a bit. We won’t know Nvidia’s earnings until the end of this month. But I think because the Magnificent Seven’s stocks have risen so much this year, investors have lofty expectations. Apple, Microsoft and Meta met those expectations while Google, Amazon and Tesla did not. It does appear that ad revenue is slowing at some of the companies and consumers are pulling back their spending. Is this the soft landing the Fed is looking for or is this a recession? We will know in the next few quarters.
