Alphabet stock falls on AI capex increase

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It’s a big fortnight for tech stocks, as the first round of Magnificent Seven results of 2026 kicks off.

Alphabet’s shares fell overnight following its results. Despite beating on revenue and earnings, a huge increase in capital expenditure (capex) forecasts spooked markets.

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Amazon releases its results on Thursday 5 February.

Since the launch of ChatGPT just over three years ago, the ‘Magnificent Seven’ stocks – (NASDAQ:GOOGL) , Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) – have led the stock market.

These seven big tech stocks are among the biggest potential winners from advancing artificial intelligence (AI) technology and have been investor favourites for much of the ensuing period.

At the start of 2023, the seven tech companies collectively comprised approximately 20% of the S&P 500 between them. Now, they make up more than a third (33.5%) of the index.

Given their weighting in arguably the world’s most important stock market index, the Magnificent Seven’s fortunes have a knock-on effect on global stock market sentiment. As such, their quarterly earnings numbers are box office events that are watched carefully by investors the world over.

While there is considerable hype around these stocks, their earnings growth has tended to back it up.

“A number of the companies in the Magnificent Seven have been top contributors to year-over-year earnings growth for the S&P 500 in recent quarters,” said John Butters, senior earnings analyst at market research platform FactSet.

Magnificent Seven results and expectations

Below are the expectations in terms of revenue and earnings per share (EPS) for each of the Magnificent Seven companies yet to release their results for the last quarter of the 2025 calendar year, as well as the results for those companies that have already reported earnings.

In some cases, share price movements following the results are more linked to the broader narrative and management’s response to analysts’ questions than the fundamentals in the earnings release – which, after all, reflect the past rather than the future.

Alphabet

Shares in Alphabet opened 6.2% lower on the morning of Thursday 5 February despite reporting above-expected Q4 2025 earnings and revenue the previous evening.

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GOOGL	Expected	Reported	Year-over-year change
EPS	$2.64	$2.82	31.2%
Revenue	$111.3 billion	$113.8 billion	18%

^{Expected figures based on analysts polled by FactSet.}

This was largely due to Alphabet raising its capex estimates for the year to $175 billion - $185 billion, up from $91.4 billion in the previous financial year.

“Alphabet has stunned the world with a capex spending plan of as much as $185 billion this year, 55% more than expected,” said Jim Reid, global head of macro research at Deutsche Bank. “With tech in a current state of flux it's not clear whether that's a good or a bad thing. Alphabet has been the brightest star in the tech space in the last six months so this is a big story for markets.”

Alphabet was the top performer among the Magnificent Seven stocks during 2025, gaining 66% throughout the year. One of the major factors that boosted investor sentiment was a favourable outcome in a US antitrust case which many worried would lead to a forced sale of Google Chrome.

Amazon

Amazon announces its Q4 2025 results on 5 February after US markets close.

LSEG analysts expect Amazon to announce double-digit revenue growth, but a relatively subdued uptick in profits.

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AMZN	Expected	Expected year-over-year change
EPS	$1.96	5.4%
Revenue	$211.3 billion	12.5%

Apple

Apple announced its results for the first quarter of its 2026 financial year (covering the three months to December 2025) on Thursday 29 January after US markets closed.

Apple beat expectations on earnings and revenue; iPhone sales registered their best-ever quarter, rising 23% year-over-year to $85.3 billion, driven by strong iPhone 17 demand particularly in China.

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AAPL	Expected	Reported	Year-over-year change
EPS	$2.67	$2.84	18.3%
Revenue	$138.4 billion	$143.8 billion	15.7%

^{Expected figures based on analysts polled by FactSet.}

“Apple has been behind the curve on its AI spending spree, yet the features installed in the iPhones so far were still enough of a draw to help bring in record revenues for handset sales around the world,” said Susannah Streeter, chief investment strategist at Wealth Club.

Apple shares gained in after-hours trading on Thursday, finishing extended trading around 0.6% up on their close price having gained as much as 3.9% immediately after markets closed.

But the stock opened pre-market trading on 30 January slightly below the previous day’s close, and slipped further from there, having fallen 0.8% overnight as of 11am GMT. Reports that Donald Trump favours monetary hawk Kevin Warsh as the next Federal Reserve chair dampened US stocks.

Microsoft

Microsoft also announced results for the second quarter of its 2026 financial year (the three months to December 2025) after US markets closed on Wednesday 28 January.

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MSFT	Expected	Reported	Year-over-year change
EPS	$3.91	$4.14	24%
Revenue	$80.3 billion	$81.3 billion	17%

^{Expected figures based on analysts polled by FactSet}^.

“Microsoft’s mismatch between soaring AI spend and slower cloud growth unnerved investors, with shares falling sharply after-hours and in early trading today,” said Susannah Streeter, chief investment strategist at Wealth Club, the morning after the results. Shares in Microsoft were down 6.6% in pre-market trading on 29 January.

Britzman, though, felt the market reaction was “harsh”, though he highlighted that guidance for the next quarter came in slightly below expectations.

There is additionally some concern over the reliability of Microsoft’s upcoming cloud revenues. “With nearly half of the cloud backlog tied to OpenAI, investors are jittery about what looks uncomfortably like a single point of failure,” said Britzman. “Still, the foundation remains strong - Azure cloud revenue is held back only by supply, not demand, and new compute capacity is already attracting long‑term, locked‑in customers.”

Nvidia

Nvidia announces its results for the fourth quarter of its 2026 financial year (the three months to January 2026) after markets close on 25 February – as usual, concluding Magnificent Seven earnings season in the process.

Nvidia has been the big winner of the opening years of the post-ChatGPT era and that is set to continue, with analysts forecasting large increases in both earnings and revenue.

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NVDA	Expected	Expected year-over-year change
EPS	$1.30	46.1%
Revenue	$65.7 billion	66.9%

Its chips are viewed as the only game in town as far as cutting-edge AI hardware are concerned, and that has driven material results.

While it post-dates the period covered by these results, management will likely address recent reports suggesting it may have a route back into the lucrative Chinese market, which has been restricted by both the US and the Chinese governments over recent years.

Tesla

Tesla announced its earnings for Q4 2025 after US markets closed on Wednesday 28 January.

Markets had already priced in a decline in the financials, as vehicle delivery numbers published earlier in January had revealed Tesla had fallen into second place behind BYD as the world’s largest seller of electric vehicles (EVs).

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TSLA	Expected	Reported	Year-over-year change
EPS	$0.45	$0.50	-60%
Revenue	$24.8	$24.9 billion	-3%

^{Expected figures based on analysts polled by FactSet}^.

With the decline in earnings already expected, investors were reasonably impressed with the narrative that CEO Elon Musk conveyed.

“Tesla’s shares gained about +2% in post-market trading after delivering a decent earnings beat and laying out plans to invest $20bn this year to streamline its EV lineup and expand work on robotics and AI,” said Jim Reid, global head of macro research and thematic strategy at Deutsche Bank.

Magnificent Seven earnings in context

Share price movements are often volatile in the wake of Magnificent Seven earnings releases, and that could be especially so for 2026’s first set of results.

Fears that AI valuations indicated a bubble gained traction late last year. Increasing capital expenditure (capex), which had previously been greeted warmly by the markets, led to concerns as it emerged that private credit was increasingly being used to fund data centre buildouts.

Investors will therefore be on the lookout for strong year-over-year profit growth, as well as evidence that these leading AI stocks are backing up their spending with improved financials.

Butters observes that three of the five companies that analysts think will post the highest year-over-year earnings growth for the final quarter of the 2025 calendar year are Magnificent Seven constituents (Nvidia, Alphabet and Microsoft).

“In aggregate, the Magnificent Seven companies are expected to report year-over-year earnings growth of 20.3% for the fourth quarter,” said Butters. “Excluding these seven companies, the blended (i.e. combining actual and estimated results) earnings growth rate for the fourth quarter for the remaining 493 companies in the S&P 500 would be 4.1%.”

What are the Magnificent Seven stocks?

The Magnificent Seven – often abbreviated to ‘Mag7’ – comprises seven big tech stocks that the investing community perceives as being the leading exponents of technology in general and AI in particular.

They are:

Alphabet – the parent company of Google, as well as other companies such as the AI lab DeepMind;
Amazon – originally an online bookstore, now a giant of e-commerce and cloud computing via AWS;
Apple – the tech hardware company that brought the world the MacBook and the iPhone;
Meta – formerly Facebook, the company is now heavily focused on ‘Metaverse’ technology as well as AI products, like the Llama model;
Microsoft – the computing giant behind the Windows operating system and the Azure cloud platform;
Nvidia – the hardware developer that pioneered GPUs, the chips that power AI data centres;
Tesla – the electric vehicle manufacturer that launched its long-awaited self-driving car service in Austin, Texas in 2025..

The term ‘Magnificent Seven’ was coined by Bank of America analyst Michael Hartnett in 2023. By then, the group was already starting to dominate the stock market in the wake of the AI and tech stock mania that followed the public launch of ChatGPT in late November 2022.

While most of the group are highly diversified (Amazon is an e-commerce company as well as the world’s largest cloud services provider; Alphabet makes phones, self-driving cars and owns YouTube in addition to its cloud computing division and its core internet search business), AI is their unifying feature as a group.

Some (like Nvidia) sell the hardware that underpins AI, or the cloud services on which models are trained and distributed (Amazon, Microsoft and Alphabet hold a 60% share of the global cloud market between them). Others develop AI platforms, such as Meta’s Llama or Microsoft’s Copilot, or integrate ‘physical AI’ into robotics and self-driving cars (especially Tesla).

They are stock market behemoths; all have a market capitalisation (market cap) over $1 trillion as of 5 February.

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Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.

META	Expected	Reported	Year-over-year change
EPS	$8.21	$8.88	11%
Revenue	$58.4 billion	$59.9 billion	20.6%