Tech Week

Big Tech Delivers on Earnings, Doubles Down on AI

Five of the “Magnificent Seven” reported this week, revealing strong cloud demand, rising capital expenditures on AI, and diverging investor reactions.

All five beat revenue expectations, and only Meta missed on profits due to a one-off tax expense.

Companies highlighted soaring costs as they race to invest in artificial intelligence and data centers. Goldman Sachs estimates AI infrastructure spending could hit $4 trillion by 2030.

Holiday Momentum Buys Time on AI

Apple reassured investors with a bullish holiday forecast and strong demand for its iPhone lineup, despite supply constraints and a delayed China launch.

CEO Tim Cook signaled confidence in returning to growth in China and flagged progress on AI upgrades, including a major Siri overhaul expected next year.

Apple’s AI rollout lags rivals, and it’s been cautious in its spending plans. So far, that restraint hasn’t hurt performance.

Capex Raises Eyebrows

Microsoft’s taking the opposite approach, leaning fully into AI.

Microsoft beat all expectations, but its $35 billion quarterly capex, nearly 80% of operating cash, and a $3.1 billion hit from its OpenAI stake raised investor concerns.

Growth in cloud business Azure jumped 40%, and Microsoft’s partnership with OpenAI — the creator of ChatGPT — continues to deepen.

Investors are watching whether Microsoft’s AI spending translates into durable returns.

Soaring on AI and Cloud Momentum

Amazon posted its strongest growth in AWS cloud business since 2022, sending shares up as much as 12% on the earnings day.

CEO Andy Jassy said demand for AI and infrastructure is “stronger than ever”.

Amazon is also spending huge amounts on AI and its capex hit nearly 90% of operating cash last quarter. But the earnings suggested its investments are starting to pay off.

Retail and ad businesses also outperformed.

Investors Cheer Cash Discipline

Alphabet’s cloud revenue jumped 34% to $15 billion, making it the company’s fastest-growing unit. It’s now rivaling YouTube as the second biggest cash generator, after ads.

Alphabet’s capital expenditures were modest compared to Microsoft and Amazon, only 49% of operating cash, easing investor concerns.

Stock jumped on balanced growth and discipline.

Tax Hit and Rising Costs Overshadow Results

Meta’s overall strong quarter was overshadowed by a one-off $16 billion tax charge and rising expenses. The share price plummeted 9% on back of the earnings.

CEO Mark Zuckerberg raised 2025 capex guidance to $72 billion, citing surging AI compute needs.

Ad sales remain strong, but investors are wary of mounting costs and losses at Reality Labs, Meta’s virtual and augmented reality unit.

Earnings Show AI Inflows, But Costs Mount

Five of the “Magnificent Seven” reported their earnings this week, beating revenue expectations. Consistent themes were: strong results but massive investments in cloud and AI.