Topline
A high-profile mix of earnings including four of the “magnificent seven” stocks this week sent ripple effects throughout the market and moved billions of dollars in the fortunes of the world’s richest people, highlighted by somewhat surprising reactions to the whirlwind earnings week for the most-tracked public companies on the planet.
It was a whirlwind week for tech investors.
Key Facts
This week’s biggest first-quarter earnings reports were Tesla’s on Tuesday, Meta’s on Wednesday and Alphabet and Microsoft on Thursday, with those four American technology companies’ $6.8 trillion collective market capitalizations accounting for roughly 7% of the world’s total equity market.
Let’s start with the basics: Tesla missed on both the top and bottom lines, with its $21.3 billion in revenue and $1.5 billion net income coming in far below analyst forecasts, while its three big tech peers delivered double beats, headlined by Alphabet’s record $23.7 billion quarterly net income, which was 25% above Wall Street estimates (see below for full results).
The market reaction to both Google parent Alphabet and Microsoft was largely in line with what one may expect from their respective results—Alphabet shares rallied 10% to an all-time high Friday and Microsoft shares tacked on a respectable 2%—but the post-earnings moves for Meta’s and Tesla’s stocks are less logical, inspiring memes about throwing fundamental-based valuations in the trash.
Tesla shares are up 16% after its double miss, including a 21% year-over-year decline in earnings, and Meta shares are down 10% after it reported a nearly 50% annual bottom-line increase in earnings, which is a stark reminder that, especially in today’s market, companies are valued for future earnings potential rather than past results.
Meta and Tesla faced wildly different backdrops heading into earnings, with the social media kingpin’s stock hot off of a six-month return of 58% and the electric vehicle maker’s stock riding a 32% six-month loss.
Investors latched onto different narratives spun by Meta and Tesla, as Meta CEO Mark Zuckerberg most notably warned the company will sink billions into its artificial intelligence projects “before it is making money," and Tesla CEO Elon Musk most significantly said the cheaper car model which had reportedly been scrapped will begin production next year.
Zuckerberg’s warning of sinking capital with no clear returns is just about the worst thing a bottom-line obsessed investor could hear, while Tesla’s production update provided a rare glimmer of hope for Tesla investors attracted to the company’s core electric vehicle business.
What Billionaires Gained And Lost The Most To Their Net Worths In The Busy Week?
Musk and Zuckerberg were the most directly impacted, as the world’s third-richest man Musk added a cool $13 billion from Tuesday to Friday while the fourth-wealthiest man Zuckerberg lost about $19 billion from Wednesday to Friday, according to Forbes’ calculations. Billionaires whose fortunes come from their stakes in Google and Microsoft got a pretty penny after the firms’ bumper earnings, including Google cofounders Sergei Brin ($12 billion richer Friday) and Larry Page ($12 billion), Google’s former CEO Eric Schmidt ($2 billion), Microsoft cofounder Bill Gates ($800 million) and former CEO Steve Ballmer ($2 billion). Facebook cofounders Eduardo Saverin and Dustin Moskovitz also lost about $2 billion and $1 billion, respectively, amidst the selloff.
What To Watch For
A pair of the remaining magnificent seven companies will report earnings next week, with Amazon slated for Tuesday and Apple slated for Thursday. Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla comprise the magnificent seven, deemed as such for their market-beating gains as the stock market roared back beginning in late 2022 and their relatively similar profiles as high-tech, high-margin companies. Amazon is expected to report a 12% year-over-year jump in quarterly sales to $142.6 billion and a 182% rise in net income to $8.9 billion, while Apple is forecasts to report a 5% annual drop in revenue to $90.3 billion and 4% decline in profits to $23.2 billion, according to analyst estimates compiled by FactSet. Nvidia, which won’t report until May 22, is expected to report a more than 200% surge in revenues and a more than 500% jump in profits.
Crucial Quote
The strong results from Microsoft and Alphabet “helped restore optimism over the outlook for artificial intelligence and the tech sector,” Solita Marcelli, UBS Global Wealth Management’s chief investment officer of the Americas, wrote to clients Friday. The tech-heavy Nasdaq jumped more than 2% Friday, its biggest gain since Feb. 22 and closing the week up more than 4%, erasing last week’s brutal selloff.
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