It was a big week for tech companies – with Amazon, Apple, Meta, Alphabet and Microsoft all reporting. That’s close to 20% of the S&P 500. We’re not single stock analysts and we don’t usually comment too specifically on corporate earnings, but given the focus of attention on tech and AI, we thought it was worth trying to find some key themes.
We’re looking at these results through three different lenses. First, how are these businesses performing? Second, how did they perform relative to the expectations of stock analysts – as reported by different news agencies. Third, what outlook did management teams provide?
Then there’s a fourth consideration, which is how did the equity market react to these announcements. We should be wary of reading too much into a short-term reaction, but it might tell us something about investors sentiment at the moment.
On the first point, the results were generally quite strong in our view. Most of these businesses saw double-digit revenue growth year-on-year (Apple was the exception). These are really big businesses – Apple, Alphabet and Amazon all saw total quarterly revenues exceed US$ 100 billion – so to show strong revenue growth is pretty impressive.
On the second point, most of these businesses reported better earnings than analysts had expected. Meta was the only exception, even if the miss was due to the impact of a one-time tax charge. There was a lot of focus on the cloud businesses – which we think of as a proxy for AI spending by their customers. Here, growth was strong – with Alphabet reporting 30%+ growth in its cloud business. Microsoft also showed strong growth in its cloud business Azure of close to 40% year on year, but apparently that was slightly lower than some analysts had expected. An outage on their cloud service on the day the company reported perhaps didn’t help investor sentiment.
It’s a bit tougher to draw clear conclusions from management commentary. Different people hear different things. But some themes stood out. Apple, for instance, was pretty optimistic about the holiday season – which is always an important period for a consumer-facing business. Others, notably Alphabet, Microsoft and Meta, highlighted their plans to increase investment spending in 2026. Alphabet and Meta said they’d be spending more on capital investments next year than analysts had previously expected.
The market reaction
Finally let’s turn to the market reaction. Overall, the initial responses were mixed (as measured by the reaction of the share prices immediately after the results were released). Traders were, initially at least, less pleased by results from Microsoft and Meta than by Amazon, Alphabet and Apple. There might be a few reasons for that. Revenue and profit growth might not have been quite as strong as optimists had hoped. The increased investment spending might have worried some investors who think that it’ll be tough to earn a return on those investments. Or maybe it was just traders taking profits after a strong result. It’s always tough to know.
Overall, we think that these results were pretty healthy. Revenue growth was strong and earnings generally came in better than analysts had expected. We continue to think that investors will stay focused on the combination of profit growth and capital spending – as a measure of whether the massive investment spending will actually lead to stronger profit growth. We think that’s the key question as we head into 2026. Recent operating performance has been strong, but with high expectations, we’ll need to continue to see more of that going forward.
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