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Big Tech’s latest earnings season has come to a close just as quickly as it started. Alphabet (GOOG, GOOGL), Amazon (AMZN), AMD (AMD), Apple (AAPL), Intel (INTC), Meta (META), and Microsoft (MSFT) all reported their latest financials within the same week. The remaining holdout, Nvidia (NVDA), will give us the lowdown on its own performance later this month.
They all, with the exception of Intel, either met or exceeded Wall Street’s expectations on the top and bottom lines. But investor response to the announcements was far from uniform. And you can, mostly, thank AI for that. The technology powered revenue growth for some firms while spooking investors over fears of an AI slowdown at others.
Here's a rundown.
Meta and Microsoft reported better-than-anticipated numbers, with both companies saying that AI is contributing to their broader revenue. But the firms also said they’re set to pour billions more dollars into their AI buildout, with Meta CFO Susan Li saying the social media giant will “continue to expect significant capital expenditures growth in 2025.”
AI in focus: Amazon CEO Andy Jassy speaks during the New York Times DealBook Summit in New York in late 2022. (Michael M. Santiago/Getty Images) ·Michael M. Santiago via Getty Images
Microsoft meanwhile said it’s going to keep spending as it continues to construct data centers to power its AI services. According to CFO Amy Hood, Microsoft’s capital expenditures in Q1 totaled $20 billion, with much of that going toward AI. What’s more, she expects spending to increase in the current quarter.
Alphabet, meanwhile, spent $13 billion in Q3, primarily on servers, data centers, and networking equipment, and expects to spend roughly the same amount in Q4. Amazon CEO Andy Jassy said his company plans on a total of $75 billion in capital expenditures for 2024 — and even more next year to support its generative AI plans for its Amazon Web Services segment.
Wall Street didn’t take too kindly to Meta or Microsoft’s spending announcements, sending shares sliding, but looked past Alphabet and Amazon’s own pricey plans, giving their stocks a lift.
AMD and Intel went in opposite directions as well. Shares of AMD fell following the company's earnings release where it shared expectations to bring in between $7.2 billion and $7.8 billion in the current quarter. The midpoint of that would be $7.5 billion, and analysts were looking for $7.55 billion. AMD’s stock dropped 9% on the news as investors questioned whether the company’s AI revenue growth was beginning to slow.
Intel’s stock, on the other hand, jumped after the company announced it expects Q4 revenue between $13.3 billion and $14.3 billion, with a midpoint of $13.8 billion. Wall Street was anticipating $13.6 billion. The stock move came despite Intel reporting worse-than-expected earnings per share for the prior quarter and noting that it expects its data center and AI segment revenue to be flat quarter over quarter.
Complicated earnings: Apple CEO Tim Cook. (Evan Agostini/Invision/AP) ·Evan Agostini/Invision/AP
The company also said it signed up two new customers for its next-generation 18A chip, though it didn’t name them. Intel previously announced it’s building chips using its 18A technology for Amazon and Microsoft. After months of disappointing news, investors seemed to jump at the prospect of positive developments from the chipmaker.
Then there’s Apple, which had a more complicated earnings announcement than its peers. On its face, the company fell short on earnings per share by a wide margin: $0.97 versus expectations of $1.59. But the shortfall was actually the result of $13 billion in back taxes Apple paid to Ireland following a European General Court ruling.
Analysts wanted more details about whether the company's Apple Intelligence platform is driving iPhone sales. But Apple CEO Tim Cook largely steered clear of providing any specifics on the platform's impact on fourth quarter iPhone sales. Instead, he said that upgrades to iOS 18.1, the version of the iPhone’s operating system that includes Apple Intelligence, have been twice as fast as upgrades to last year’s iOS 17.1. But that was about it.
Unlike prior iPhone cycles, where the phone’s must-have features are available on day one, Apple Intelligence will roll out slowly throughout the rest of 2024 and 2025. That means consumers may hold off on buying the iPhone 16 until there are enough Apple Intelligence capabilities to make the purchase worthwhile.
Finally, there’s Nvidia, which will report its earnings results after the bell on Nov. 20. The biggest beneficiary of the AI trade, Nvidia’s announcement will impact fellow chip stocks, as well as shares of software companies like Microsoft.
Nvidia’s stock is up 178% year to date and 206% over the last 12 months, thanks to the company’s leadership in AI chips. And while rivals AMD and Intel are working to catch up, they still have a long way to go before they can begin to vie for Nvidia’s crown.
If Nvidia outperforms analysts’ expectations for the quarter, it could send shares of AI companies higher. But underperforming could spell trouble for the broader AI trade.
Until then, Wall Street will be on tenterhooks as it awaits Nvidia’s results. After all, the AI obsession isn’t going away anytime soon.
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