Magnificent Seven earnings: blockbuster numbers, muted reactions

The latest earnings season for the Magnificent Seven – Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Nvidia and Tesla – has been a showcase of scale, ambition and volatility. These tech titans, which collectively account for more than a quarter of the S&P 500’s market capitalisation, delivered headline-grabbing numbers driven by artificial intelligence (AI) and cloud computing. Yet the market response has been mixed, as investors weighed record revenues against ballooning capital expenditure and margin pressures. Questions are mounting as to whether future returns from these mega-investments justify the expenditure?

The table below shows the share price performance of each of the Magnificent Seven shares since the day before their latest results announcement. Nvidia’s results announcement last night proved a significant relief and have resulted in gains in all the players during after-hours trading. 

Nvidia: the relief at the end of earnings season

Nvidia smashed Wall Street expectations in its third quarter results, posting record revenue of $57bn – up 62% year-on-year – and adjusted earnings per share (EPS) of $1.30, beating forecasts. 

The results are more than a corporate triumph – they’re a barometer for the entire AI economy. The chipmaker’s record-breaking quarter, powered by a 66% surge in data centre revenue and the rollout of its Blackwell architecture, sends a clear message: the AI arms race is accelerating, not easing. For cloud providers, this means the pressure to scale infrastructure is intensifying. 

Hyperscalers like Microsoft, Amazon and Google will need to keep pouring billions into graphics processing units (GPUs), networking and power capacity to meet demand for generative AI services. That spending spree will ripple through the supply chain, from semiconductor fabs to cooling systems, creating winners among component makers and energy providers. 

For rival chipmakers, Nvidia’s ability to hold margins above 73% while shipping at unprecedented volumes sets a daunting benchmark. AMD and custom silicon players face a choice: innovate fast or risk irrelevance. The takeaway is stark – AI is no longer a side bet; it’s the defining growth engine of tech, and Nvidia’s numbers show the sector may only be at the foothills of this investment cycle.

Alphabet: first $100bn quarter, the largest gainer

Alphabet stole the spotlight with a historic milestone: quarterly revenue topping $100bn for the first time. Advertising rebounded strongly, while Google Cloud posted double-digit growth, underpinned by AI services. The company’s spending on AI infrastructure is set to exceed $90bn this year, signalling its determination to dominate the generative AI race.

Alphabet shares have held up better than peers since its third-quarter results because the update delivered a clean beat without the same margin or spending shocks that hit rivals. The company posted record revenue of more than $102bn, up 16% year-on-year, and earnings per share far ahead of forecasts, driven by strength in both advertising and Google Cloud. AI demand was a clear tailwind, with cloud revenue jumping 33% and operating income in that segment up 85%, signalling profitable growth rather than cash burn. 

While Alphabet did raise its capital expenditure outlook to around $91–93bn for the year, investors viewed this as manageable given its strong margins and $155bn cloud backlog. The stock also benefited from a perception of relative value – it entered the year as the cheapest of the Magnificent Seven – and recent catalysts such as the launch of Gemini 3 and a surprise stake from Berkshire Hathaway reinforced confidence. In short, Alphabet combined robust top-line growth with disciplined cost control, avoiding the heavy capex shock that sank Meta and the margin worries dogging Microsoft. 

The shares have risen since the results and Alphabet remains one of the group’s best performers year-to-date.

Microsoft: Azure powers growth, but capex worries weigh

Microsoft reported on the first quarter of its financial year and its results beat market expectations, with revenue up 18% to $77.7bn, with Azure cloud growth of 39%.

Microsoft shares have slipped since its third-quarter earnings despite a headline beat because the update raised concerns about future profitability and spending. The company posted EPS of $3.46, ahead of forecasts, with Azure cloud growth still strong at 34%–35%. But management signalled that capital expenditure will remain elevated, hitting $16.8bn in the quarter – up more than 50% year-on-year – as it doubles down on AI infrastructure. 

That spending surge, combined with a slight dip in cloud margins and guidance that fell short of some bullish expectations, spooked investors worried about margin compression and the long payback period for AI investments. The result: a muted market reaction and a steady drift lower in the stock as traders weigh whether Microsoft’s aggressive AI bet can deliver near-term returns. 

Apple: record revenue, but iPhone sales disappoint

Apple posted record September-quarter revenue of $102.5bn, helped by services growth and the launch of its latest iPhone. However, iPhone unit sales fell short of analyst expectations, as a result of supply constraints on the new model.  

Apple’s muted share performance since its third-quarter results is because investors were underwhelmed because Apple’s AI strategy remains in the integration phase rather than generating meaningful revenue. Unlike Microsoft and Meta, which have monetised AI aggressively, Apple’s features such as upgraded Siri and visual intelligence are seen as long-term bets. 

The stock’s premium valuation – trading at about 28 times forward earnings – amplifies pressure for tangible AI returns. Tariff costs and a trimmed buyback programme also dampened sentiment, leaving shares largely flat despite the headline beat. Apple’s valuation remains lofty, and with growth largely reliant on services, the market is demanding more innovation to justify its premium pricing. 

Amazon: cloud strength lifts results, stock hits record

Amazon shares have put in a subdued performance since its third-quarter results because, despite beating expectations on revenue and earnings, the update raised concerns about spending and profitability. 

Amazon delivered an earnings beat, with Its AWS cloud business the star performer, posting 20% growth as enterprise demand for AI-driven cloud services surged. Net profit jumped 39%, helping the stock hit a record high in the immediate aftermath. Yet the rally proved short-lived. The company posted a 12% jump in sales to $180.2bn. However, operating income was hit by $4.3bn in special charges, including a $2.5bn Federal Trade Commission (FTC) settlement and $1.8bn in severance costs. 

More importantly, Amazon lifted its capital expenditure forecast to $125bn for 2025 and signalled further increases in 2026 as it ramps up AI and cloud infrastructure. That aggressive investment strategy, combined with tariff pressures and thin retail margins, overshadowed the upbeat cloud narrative. 

Investors are worried about free cash flow, which fell sharply due to heavy spending, and whether Amazon can monetise its AI bets quickly enough to justify the outlay. The result: an initial post-earnings pop faded into weakness, leaving the stock trailing other Magnificent Seven peers. 

Meta Platforms: strong revenue, brutal sell-off

Meta reported revenue of $51.2bn, up 26% year-on-year, and beat earnings expectations. But a one-off tax charge and guidance for massive capital expenditure – projected to soar to $71bn in 2025 and even higher in 2026 – spooked investors. The shares plunged 11% on results day, their worst post-earnings drop in three years – and have continued falling since.

Meta’s shares have fallen sharply since its third-quarter results because, despite posting strong revenue growth and beating adjusted earnings expectations, the update raised several red flags for investors. The company reported a $15.9bn one-off tax charge, which slashed reported net income by 83%, creating poor optics even though the hit was non-cash. 

More importantly, Meta lifted its capital expenditure guidance to $70–72bn for 2025 and warned that spending will be “notably larger” in 2026, driven by AI infrastructure and data centre expansion. This aggressive investment strategy, combined with rising operating costs and another heavy loss at Reality Labs, stoked fears about margin pressure and cash burn. The cautious tone on future expenses overshadowed the 26% revenue surge and upbeat user metrics, triggering the stock’s biggest post-earnings drop in three years.

Tesla: revenue up, profits squeezed

Tesla shares have fallen since its latest earnings release because, while the company returned to revenue growth after two weak quarters, profitability collapsed and guidance disappointed. 

Third-quarter revenue rose 12% to $28.1bn, beating forecasts, but net income plunged 37% year-on-year to $1.37bn as aggressive price cuts, higher tariffs and soaring operating expenses – up 50% due to AI and other R&D projects – squeezed margins. Earnings per share missed estimates, and automotive regulatory credit income fell sharply. 

Investors were also unsettled by the lack of concrete guidance on future profitability and the slow progress of Tesla’s Full Self-Driving technology, while Musk’s focus on long-term robotaxi ambitions offered little near-term clarity. With margins at their lowest in five years and valuation still stretched, the shares have continued to drift lower as markets reassess Tesla’s growth story. 

Market verdict: enthusiasm tempered by valuation fears

The underlying tension is clear: investors love the AI growth story but are increasingly wary of its cost. Hyperscalers are locked in a capex arms race, with combined AI and datacentre spending projected to be in excess of $350bn this year and climb further in 2026. Markets are asking whether “capex at any cost” is sustainable, especially as valuations hover near historic highs. This quarterly earnings season underscores a new reality: AI is no longer just a growth catalyst – it is a capital challenge.