Tesla, Facebook, SpaceX post positive earnings

TECH GIANTS POST Q3 EARNINGS RESULTS

 

 

The earnings season gives investors a clearer picture of how the world’s biggest companies are doing. With technology firms playing such an important role in the stock market, those results can influence not only their own shares but the direction of the market. Markets are looking closely at this earnings season to see how AI technology is progressing and how much companies are spending on AI.

 

Why earnings matters and what results show so far

So far, the results have been encouraging. According to FactSet, 83% of the S&P 500 companies that have reported so far beat analysts’ earnings-per-share (EPS) forecasts. That is above the five-year average of 78%. Analysts expect S&P 500 earnings to grow by around 29.5% year on year, which would mark another strong quarter. The coming days are very important, with Microsoft, Alphabet, Intel, Amazon, SpaceX and other techs due to report. Their results will show whether strong demand for cloud computing and AI means higher revenue. Better-than-expected results and positive guidance could boost stock prices, although investors are also looking at companies’ AI spending.

 

Tesla, Meta: positive results but cautious reaction

 

Tesla’s third-quarter results had some positives. EPS beat expectations, and money left after paying its operating costs and bills (free cash flow) was much higher than forecast. However, revenue was below expectations. Tesla’s stock price dropped after the results as investors focused on expansion costs and weaker profits. Tesla announced it would reduce its planned spending. Meta (Facebook), also beat revenue expectations and forecast stronger sales for this quarter. Its advertising business continues to benefit from AI improvements that help target ads. However, the company expects to spend $135 billion to $145 billion this year. Much of this is will go on AI. Its shares fell after the results as investors were concerned about the large outlay.

On October 27, NVIDIA announced that it would invest $3 billion in Meta as the two companies expand their AI partnership. Meta plans to make greater use of NVIDIA’s chips and tech, including its next-generation Vera Rubin platform. The deal strengthens ties between two major players in AI, but it appears that both companies understand investors’ concerns about how much money tech companies are investing in AI. SpaceX also beat earnings and revenue expectations on October 20 and its stock price jumped after markets closed and Elon Musk confirmed that SpaceX and Tesla are taking steps to merge.

 

Next up: Microsoft, Google and Apple

Microsoft and Alphabet report on October 28, with investors looking for continued growth in Azure and Google Cloud, and evidence that AI investments are paying off. Amazon follows on October 29, when lucrative cloud business, AWS, will be a major focus. Apple is due to report on November 2. Analysts expect revenue of around $113 billion and earnings of around $1.99. Investors will look for evidence that demand for its latest iPhones is holding up, alongside updates on services revenue and the company’s plans for AI. Apple shares are up 28% this year, making the results important for a stock that has outperformed many rival tech giants. NVIDIA is expected to report its results on November 18, with analysts looking for another large increase in revenue as demand for AI chips remains strong.

 

AI spending vs growth

The S&P 500 and Nasdaq traded at record levels in early October, but both fell last Thursday as investors reacted to Meta’s spending plans and worried about the returns from AI investment. The Nasdaq dropped 2.6%, with semiconductor stocks hit hardest. The market recovered within days as fresh earnings and positive announcements helped shares rebound. Despite recent volatility, the broader picture remains positive. The S&P 500 is up around 12% this year, while the Nasdaq has gained roughly 13%. NVIDIA is up about 17%, Microsoft around 11%, while Amazon is up around 10%. For some investors, the recent pullback appears more like a pause in a bull market of broadly rising prices.

 

Conclusion

Upcoming results should help determine whether the tech sector can maintain its strong earnings growth. Investors will want to see that AI investment is supporting sales and profits, rather than simply increasing costs. If Microsoft, Alphabet and Amazon deliver solid results and positive guidance, they could help propel stocks back to recent record highs.