Big tech earnings: Amazon beats expectations but share price falls

Amazon's shares tumbled in after-hours trading after the company revealed a worse-than-expected outlook for Q1

Summary

  • Big tech earnings season is now well underway. Six of the Magnificent Seven companies have announced results so far.
  • Microsoft and Meta beat earnings expectations on 29 January, while Tesla missed. Shares were volatile in after-hours trading.
  • Apple’s results followed on 30 January, also beating consensus estimates.
  • Alphabet shares slumped after a Google Cloud revenue miss on 4 February.
  • Amazon beat earnings expectations on 6 February, but its shares fell after the Q1 outlook disappointed.
  • In separate news, Chinese AI start-up DeepSeek has disrupted US equity markets this month by launching a chatbot that appears to rival ChatGPT's performance – but with lower costs and less advanced chips.
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Good afternoon, and welcome to our live blog covering a big week for big tech.

Four of the Magnificent Seven – Tesla, Microsoft, Meta and Apple – are announcing their latest results this week, along with the likes of ASML, IBM and SAP.

We’ll let you know exactly what to expect ahead of the major earnings announcements, as well as all the reaction and analysis once they’ve dropped.

Stay tuned!

Which of the Magnificent Seven are reporting earnings this week?

Meta, Microsoft, Tesla and Apple all report earnings this week. Meta, Microsoft and Tesla are reporting after US markets close (i.e. 9pm UK) on Wednesday, while Apple’s earnings are released the same time the following day.

This is followed by Google’s parent company Alphabet and Amazon next week, on 4 February and 6 February respectively.

Nvidia will complete this round of Magnificent Seven earnings, but not until 26 February.

Tech earnings: what's happened so far

The latest round of big tech and artificial intelligence earnings opened a couple of weeks back, as Nvidia supplier Taiwan Semiconductor (NYSE:TSM) announced an earnings and revenue beat. Shares gained 3.9% in the session following the announcement.

Netflix – which once shared big-tech acronym status, back in the ‘FAANG’ days – then continued the momentum when it posted a revenue beat and a surprise acceleration in subscriber growth. Netflix (NASDAQ:NFLX) shares opened the next session 14.8% above their previous close.

See Katie Williams’ Netflix earnings write-up for the detail.

Earlier today, SAP (NYSE:SAP) announced its results for the latest quarter. Shares opened 2% down as the company missed analyst earnings per share (EPS) estimates.

DeepSeek rocks the stock market

Despite positive results from Netflix and TSM, a cloud has settled over the US big tech stocks ahead of earnings this week.

The reason: Chinese AI start-up DeepSeek appears to be capable of building sophisticated AI platforms without relying on the kind of high-performance GPUs whose export to China has been banned by successive US governments.

The S&P 500 fell 1.5% yesterday in response to the news, while the Nasdaq 100 – which is more heavily-skewed towards big tech stocks – fell 3.0%. Nvidia (NASDAQ:NVDA) stock fell 17.0%, as investors processed the notion that AI capability could potentially grow independently from demand for its chips.

Katie Williams has all the details covered in her deep dive into DeepSeek’s challenge of US big tech.

The $600 billion fall in Nvidia’s market cap is the largest single-day loss in US stock market history. In total, $1 trillion in market cap was reportedly erased yesterday by the news about DeepSeek. It should be said that much of this value has since been restored: Nvidia shares have today opened 2.9% up on last night's close.

Nvidia has made a habit of brushing off dips in its share price by posting financial results that blow expectations out of the water. If that’s to be the case this time around, investors have some time to wait before the bounce; Nvidia isn’t announcing earnings until late next month.

Is the bubble bursting?

Renowned investor Ray Dalio, founder of hedge fund Bridgewater Associates, has stated that in his view the current AI boom is reminiscent of the dot-com bubble that ballooned then burst in the late 1990s.

“Pricing has got to levels which are high at the same time as there’s an interest rate risk, and that combination could prick the bubble,” Dalio told the FT.

Dalio compared the current phase of the AI boom to the run-up to the dot-com bubble’s burst. “There’s a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful,” he said.

While the rise of DeepSeek calls into question the potential profitability of Silicon Valley’s capital-intensive approach to developing AI, Dalio observed that “the tech war between China and the US is far more important than profitability, not only for economic superiority, but for military superiority”, adding that “those who are going to pay attention to profitability with sharp pencils are not going to win that race”.

Where that leaves investors who have put money into US big tech on the assumption that AI would drive outsize future profits is unclear.

Has Tesla been hit by DeepSeek?

Tesla’s shares fell 2.3% on Monday as part of the broader DeepSeek sell-off. The EV company invests heavily in AI and hopes to launch a fleet of driverless cars – known as robotaxis – doing paid rides later this year.

DeepSeek’s apparent success in creating a low-cost AI model has thrown Silicon Valley into a frenzy. It suggests the billions of dollars thrown at AI research and development in the US could have been used more efficiently.

Despite this, experts have pointed out that there is little overlap between what Tesla does and how DeepSeek operates.

“Tesla does not compete in large language models,” says Morningstar analyst Seth Goldstein. “We think the firm’s advantage in autonomous driving software comes from the billions of miles of full self-driving software testing and its ability to process that data to improve the software, not the AI cost,” he adds.

AllianzGI: DeepSeek doesn’t change the long-term story, but watch earnings calls closely

Jeremy Gleeson, chief investment officer, global tech equity at Allianz Global Investors, doesn’t think the news about DeepSeek changes the fundamental narrative around AI stocks.

“At the early stages of new technology development, it is normal to see standards changing or performance improving persistently,” he says.

While DeepSeek’s apparent upending of assumptions about the capital intensiveness of AI “have led to volatility seen in some share prices”, Gleeson reiterates that he views AI as “a long-term structural megatrend.

“It is also worth noting that this news flow has come at a time when many Asian markets are already closed or about to close for their Lunar New Year celebrations, and many Western companies are in their quiet period ahead of Q4 [earnings] reports,” he says. As such, they haven’t yet had a chance to respond directly to the stock market stir that DeepSeek has caused – but Gleeson told MoneyWeek that he expects the big tech companies announcing earnings this week, particularly those most directly linked with AI, will “spend some time commenting” on DeepSeek in their earnings calls.

“I think we'll be in a much more informed place come Wednesday evening or Thursday morning,” he said.

Meta and the open-source model

Another notable aspect of DeepSeek’s impressive AI results over the weekend was the fact that it is largely based on Llama, Meta’s (NASDAQ:META) generative AI large language model (LLM).

As such, Jeremy Gleeson, chief investment officer, global tech equity at Allianz Global Investors, questions the $5.6 million figure that has been reported as the cost of the model’s final training run.

“If [Meta’s] investment hadn't taken place in the first place, and [DeepSeek] had to do all that themselves, where would they be right now?” he asks.

This, however, leads into the discussion of the open-source model. DeepSeek is able to access Llama, because Llama is open-source – i.e. it is available freely to the wider tech community. Meta, and CEO Mark Zuckerberg, are committed to the model, but could opinions shift if open-sourcing LLMs gives competitors a competitive advantage?

“Something else we just don't know is, in commercial terms, is there a monetization opportunity for any provider of an LLM, even if it's open source?” asks Gleeson.

Thanks for joining us today. That concludes the live blog for this evening, but we'll be back tomorrow with more reaction to DeepSeek's impact on big tech shares, plus detailed previews of Meta, Microsoft and Tesla's earnings reports.

Good morning, and welcome back to our big tech earnings live blog. A big day coming up as Meta, Microsoft and Tesla announce earnings this evening.

Overnight, US tech stocks have begun to recover from the selloff following news that Chinese generative AI start-up DeepSeek could rival OpenAI’s performance at a fraction of the cost, without relying on cutting-edge chips.

Nvidia's shares, having fallen 17% on Monday, gained 8.9% yesterday. The Nasdaq 100 gained 1.6%, having fallen 3% on Monday.

Keep following the blog today for more reaction, as well as previews of the big tech earnings releases.

DeepSeek highlights why diversification is key

Various experts are pointing out that the recent pullback in tech stocks underscores the need for a diversified portfolio.

“One of the persistent concerns for investors in recent years has been the growing concentration in the US stock market’s major indices,” says Tom Bailey, head of research at HANetf. “Many investors are now reevaluating concentration risks and exploring diversification strategies.”

“In situations like these, investors should be reminded of the importance of diversification, both across their portfolios and below the headlines,” says Matt Tickle, chief investment officer at independent consultancy Barnett Waddingham. “While the Mag7 are often considered tech stocks, their reach is much more diverse and spans several sectors of the market.

“It’s expected that the AI megatrend will continue, but sizing of exposure to any particular trend is key to managing risk,” adds Waddingham.

Similarly, Bailey reminds investors that “historically, industry leaders have struggled to retain their dominance over the long term”, citing former stock market giants like IBM, GE and Exxon as examples.

“AI is the most significant potential disruptor to today’s tech giants,” he adds – something of an irony, as their current levels of concentration in the stock market have come about largely thanks to the rise of AI.

Tesla earnings expectations

Let’s look at what each of the Mag Seven companies announcing earnings today are expected to reveal, starting with Tesla.

Tesla (NASDAQ:TSLA) is expected to post earnings per share of $0.77 on revenue of $27.2 billion for the fourth quarter of 2024, according to analysts polled by FactSet. Analysts polled by London Stock Exchange Group (LSEG – formerly Refinitiv) yield a consensus EPS estimate of $0.75, with the same revenue figure expected.

It’s notable that these estimates imply a second successive year-on-year decline in annual EPS, though LSEG’s poll predicts a rebound in 2025.

A tesla vehicle is displayed in a Manhattan dealership on January 30, 2020 in New York City

A surprise fall in vehicle deliveries caused Tesla shares to fall earlier in January.

(Image credit: Spencer Platt/Getty Images)

The positivity surrounding Tesla following CEO Elon Musk’s close association with new president Donald Trump was dimmed somewhat when the company posted a fall in annual car deliveries for the first time since 2011.

Matt Britzman, senior equity analyst, Hargreaves Lansdown, thinks that “strong performance in the energy segment should offset the shortfall” in deliveries, but cautions that “margin concerns loom as Tesla relied on aggressive incentives to boost sales late in the quarter”. As well sizeable profit margins, Britzman believes that markets will be on the lookout for updates on a long-awaited affordable model, as well as “tangible progress in full self-driving technology”.

Microsoft earnings expectations

Another stalwart of the big tech scene and a key player in the AI rally, Microsoft (NASDAQ:MSFT) also announces earnings this evening.

FactSet analysts expect Microsoft’s earnings to reach $3.11 per share for the most recent quarter, with a consensus revenue estimate of $68.9 billion. Analysts polled by LSEG expect revenue to come in a shade lower, but yield the same consensus earnings estimate.

LSEG’s estimates imply a 13.5% year-on-year increase in revenue, with annual EPS expected to increase by 10.1%.

Paddy Flood, portfolio manager and global sector specialist, and Simon Webber, head of global equities – both at Schroders – think that Microsoft, along with other large hyperscale companies, could in fact benefit from DeepSeek’s disruption of the AI landscape over the long term.

“Concerns have been growing around the potential returns on their substantial AI-related investments,” write Flood and Webber. “If this situation results in reduced spending requirements for these companies, it could lower their capital expenditure needs and drive significant increases in free cashflow generation.”

Meta earnings expectations

Meta (NASDAQ:META) is the third Magnificent Seven stock to announce earnings today. Analysts polled by FactSet forecast quarterly EPS of $6.76 on revenue of $46.99 billion. LSEG’s poll expects revenue to come in a shade over $47 billion, and EPS to come in at $6.77.

These estimates imply a 52.6% year-on-year increase in full-year earnings.

The most interesting aspect of Meta’s release, though, is likely to be management’s response to the DeepSeek news, especially given the extent to which DeepSeek has leveraged Meta’s LLM, Llama, in achieving its surprise results.

Schroders experts Paddy Flood, portfolio manager and global sector specialist, and Simon Webber, head of global equities, feel that Meta, like Microsoft, could be one of the hyperscalers set to benefit in the long term should the capex requirements of scaling AI products fall in future.

Kate Leaman, chief market analyst at AvaTrade, highlights the fact that providing Llama via the open-source model “is a double-edged sword for Meta.

“While it’s pushing AI technology forward, it’s also giving competitors like DeepSeek the tools to rise up and challenge Meta itself,” Leaman adds. She believes that open-sourcing Llama is at the heart of a long-term strategy for Meta which seeks to make the company “the foundation of the AI ecosystem”, even if that comes at the expense of profits in the short term.

Expect plenty of focus on this in the webcast following the earnings release.

ASML: Strong results offer relief amid DeepSeek sell-off

European semiconductor company ASML (NASDAQ:ASML) published its fourth-quarter results today. The share price bounced at market open on news of stronger-than-expected sales.

Fourth-quarter sales increased by 24%, coming in at €9.3 billion. This beat consensus estimates of €9 billion. Net bookings (which includes orders that have been placed but not yet delivered) looked even more impressive, jumping by 169% to €7.1 billion. Consensus estimates had pointed to €4 billion.

The stock has taken a knock in recent days as part of the wider DeepSeek sell-off, meaning the latest results will come as a welcome development. However, investors will still be keeping an eye on the risks associated with China’s apparent ability to develop AI models using fewer (and less sophisticated) chips.

Derren Nathan, head of equity research at Hargreaves Lansdown, says: “Given the emergence of DeepSeek, minds will be on the longer-term outlook for advanced semiconductor manufacturing equipment.

“The demand for ASML’s machines should benefit from the growing appetite for computing power. But how much of that is derived from the cutting edge ‘High NA’ machines remains to be seen.

“The good thing for ASML is that it has a dominant position in both very advanced and super advanced technologies. Export controls are one thing high on people’s minds, but for now, the impact feels well baked into guidance, with any weakness in China likely to be offset by strength in the US, Taiwan and beyond.”

When do Meta, Microsoft and Tesla announce their results?

As a reminder, Meta, Microsoft and Tesla all announce earnings today, after US markets close.

That happens at 4pm in New York – 9pm in the UK.

In some instances, some of the most informative updates could come about in the post-earnings calls that the companies host with analysts. These don’t start until 10pm UK in Meta’s case, and 10.30pm for both Tesla and Microsoft.

While US markets will be closed by the time earnings are released, the companies’ share prices could still change in after-hours trading.

However, as always in investing – and especially when investing in growth industries like tech and AI – it’s best to take a long term approach, and not to get too caught up in the volatility that often occurs immediately before and after earnings releases.

What to watch out for in big tech earnings

Kate Leaman, chief market analyst at AvaTrade, says that the key things to watch out for in today’s earnings releases will be the companies’ signals as to their long term strategy, particularly as it pertains to AI.

As far as Tesla is concerned, “we’re watching for Tesla's outlook on new electric vehicle models planned for 2025, projected auto sales growth, and any updates on their robotaxi ambitions,” she tells MoneyWeek. “There's also interest in how the company's heavy AI investments may be impacted by recent developments like DeepSeek.

“For Microsoft, Meta, and Apple, key focus areas will be their AI infrastructure investments, particularly spending on Nvidia GPUs, and how they plan to leverage or respond to emerging AI technologies. Also, investors will be keen to hear about each company's strategies for integrating AI into their product ecosystems and any potential impacts on their financial outlooks.”

AI costs in the spotlight for Meta

While Meta is clearly playing a long time when it comes to its AI positioning, investors will undoubtedly be scrutinising its costs in the short run.

“Social media giant Meta is facing steep expectations as it prepares to report its fourth-quarter and full-year results on Wednesday night.,” says Sam North, markets analyst at eToro. Its big spending on AI has boosted sentiment around the company, and helped Meta shares gain 45% over the past six months. That could be about to change, though.

“Meta’s previous guidance pointed to ‘significant acceleration in infrastructure expense growth’ for 2025, but – if reports are to be believed – the new open-source DeepSeek reasoning model costs significantly less to train than leading US-developed AI models, while being, in some ways, more effective,” says North.

That will put Meta’s costs – which ballooned in 2024 following a “belt-tightening phase” the previous year – under the spotlight.

“We saw shockwaves reverberate through the tech industry on Monday. Now, with a few days to digest DeepSeek’s announcement, it will be fascinating to discover how much credence Mark Zuckerberg gives to this potential avenue for lower-cost LLMs,” says North.

Meta, Microsoft and Tesla earnings expectations

A quick recap on the consensus estimates among analysts polled by FactSet for the Magnificent Seven companies announcing their results this evening:

Swipe to scroll horizontally
CompanyForecast EPSForecast revenue
Meta$6.76$46.99 billion
Microsoft$3.11$68.87 billion
Tesla$0.77$27.22 billion

Source: FactSet

These figures represent the median estimate among the pool of analysts polled. They don’t tend to be exactly accurate – and investors shouldn’t rely too heavily on them.

You’d be forgiven for thinking that beating these expectations would prompt an increase in companies’ share price, but this isn’t always the case, particularly where the Magnificent Seven are concerned.

Other factors such as forward guidance and management responses to analysts’ questions during earnings calls can have a much greater impact than the headline numbers, as these give a stronger indication of how the company might perform in the future.

All that said, it’s best for investors to take a long-term approach and not get too bogged down in the short-term price swings that tend to accompany earnings announcements.

What could a tech selloff mean for your money?

In the wake of the DeepSeek news, there is a real chance that disappointing earnings from any of the Magnificent Seven over the coming days could have a big, negative impact on their share price.

That might not sound like a bad thing, particularly if you’ve never bought any of their shares directly. However, given their saturation of the stock market, you may well be more exposed than you realise.

“UK investors might feel a million miles away from Silicon Valley, but their pensions and investment portfolios are probably brimming with US technology stocks,” says Laith Khalaf, head of investment analysis at AJ Bell. While these have served investors and savers well over recent years, and could continue to do so, “the recent wobble in stock prices stemming from DeepSeek’s new large language model highlights the risks to incumbents in the tech sector from the AI arms race that is currently underway”.

These risks prompted the S&P 500 to fall 1.5% on Monday, thanks to its over-concentration in US tech megacaps.

Given its size, most investors worldwide will have significant exposure to the index in their portfolios, but UK investors might be particularly heavily exposed to the Magnificent Seven.

“The Global and North America fund sectors are two of the most popular destinations for UK investors, commanding £331 billion of assets under management, according to Investment Association data,” says Khalaf. A preference for passive rather than active funds will also have left UK investors particularly exposed: “an S&P 500 tracker fund now has a third of its portfolio invested in these seven companies. A typical global tracker fund has around three quarters of its portfolio invested in the US, and consequently just under a quarter of its portfolio invested in the Magnificent Seven,” Khalaf observes.

In terms of ways to protect portfolios against this over-exposure, particularly in the event of a selloff, Khalaf highlights the use of active funds to avoid index over-concentration, choosing funds that offer US exposure without including the Magnificent Seven such as Artemis US Smaller Companies, or choosing an equal-weighted tracker fund such as the iShares S&P 500 Equal Weight ETF (LON:ISPE).

These are potential diversification strategies – it’s certainly not the time to sell up entirely on the Magnificent Seven yet. “But the potential for upheaval as the AI race progresses might mitigate in favour of a more thoughtful, nuanced approach to investing in these companies,” says Khalaf.

Fed meeting to set interest rates

Big tech stocks could be influenced by other factors besides Tesla et al.'s earnings releases today.

The Federal Reserve's (Fed) Open Market Committee (FOMC) is meeting today to set interest rates.

President Donald Trump has called for rates to be cut, but given the inflationary risks that some of his policies carry, that seems unlikely. Fed funds futures prices indicate a 99.5% probability that the Fed will leave rates unchanged.

To follow the FOMC meeting in more detail, see our US sister site Kiplinger's live blog.

Markets so far

We’re about two hours away from the close of US markets today, and the release of the first big tech earnings reports for the latest quarter.

Having rebounded from the DeepSeek shock yesterday, US megacaps are on the back foot again. All of the Magnificent Seven are down; Nvidia shares have fallen over 6%, and the Nasdaq 100 is down approximately 0.8%.

Markets appear to be cautious with the Fed expected to pause its rate cutting cycle. Could strong earnings from big tech brighten the mood?

Fed keeps rates unchanged

The S&P 500 and Nasdaq 100 have fallen further as the Federal Reserve (Fed) keeps its headline rate between 4.25% and 4.50%.

Ahead of earnings, Tesla shares are 2.9% down. Microsoft has fallen 1.1% today, though Meta shares are trading relatively flat.

Nvidia is down 6.1%.

Microsoft Results

And the results are in...

Microsoft announces earnings per share of $3.23, up 10% year-on-year. That's ahead of FactSet analyst estimates of $3.11.

Revenue increased 12% to $69.6 billion, beating analyst estimates of $68.9 billion.

Tesla misses earnings estimates

Tesla's earnings per share come in at $0.73, missing the $0.77 FactSet analysts had forecast.

Revenue of $25.71 billion also missed expectations of $27.22 billion.

Tesla shares fall in after-hours trading following earnings miss

That earnings miss has seen Tesla shares fall over 3% in after-hours trading.

Microsoft shares are also down a similar amount, despite its earnings beat.

Still waiting on Meta's results.

Meta beats earnings expectations

Meta's results are in: a big earnings beat, with quarterly EPS of $8.02 compared to FactSet analysts' expected $6.76.

Revenue of $48.39 billion also beat analysts' expected $46.99 billion.

Tesla shares rebound

Despite slumping in early after-hours trading, Tesla shares have since rebounded and are now up 3.5% after-hours.

Meta's shares are down about 3.8%, while Microsoft's are down slightly over 1%, after both beat estimates.

We did say earnings beats and misses wouldn't necessarily dictate post-earnings moves...

Outlook key for Tesla shares?

Despite the earnings miss, there are some positive signs in Tesla's outlook that could explain its counter-intuitive after-hours bounce.

New models, including more affordable lines, are "on track" to start production in the first half of 2025.

Additionally, Tesla states: "Our purpose-built Robotaxi product – Cybercab – will continue to pursue a revolutionary “unboxed” manufacturing strategy and is scheduled for volume production starting in 2026."

Autonomy and affordability are the watchwords for Tesla if it is to live up to the expectations many have, and if it remains on course to crack them, investors won't mind one quarterly miss in the long run.

Meta shares turn positive during earnings call

Meta's share price has swung upwards, as CEO Mark Zuckerberg has outlined his optimism for 2025 - a year that he says will see a new relationship between the business and the US government, as well as a defining era for Llama and open-source.

Meta shares now 4.7% up after hours, following an initial dip.

Zuckerberg addresses DeepSeek and open-source

In response to a question on the open-source model during Meta’s earnings call, CEO Mark Zuckerberg reiterated his commitment to the open-source model and why he sees being at the centre of the AI ecosystem as strategically important.

“In light of some of the recent news from China, and DeepSeek… one of the things that we’re talking about is, there’s going to be an open-source standard globally," he said.

“I think it’s very important for our advantage that that is an American standard. So we take that seriously, and we want to build the AI system that people are using, and I think that, if anything, the recent news has only strengthened our conviction that this is the right thing for us to be focused on.”

We're going to leave the live blog here for this evening, but there's plenty more detail to come.

Thank you for following the blog today. Join us tomorrow morning as we dissect the details from tonight's earnings announcements and analyst calls in detail, process the market reaction, and of course turn our attention towards Apple's earnings release in the evening.

Good morning, and welcome back to our coverage of big tech earnings season.

We'll spend today digesting yesterday's earnings reports, exploring why Tesla's shares rose in after-hours trading despite its earnings miss, and looking into why Microsoft shares fell despite beating expectations.

Plus, today's main event: Apple's earnings release, due this evening, as Magnificent Seven earnings continue.

Recap: Tesla gains on future hopes, Microsoft could be in deep trouble

We already knew that Tesla's results were likely to be underwhelming, following a fall in deliveries that had been announced earlier in January.

What lifted Tesla shares to a 4.1% gain in after-hours trading was renewed optimism for what Elon Musk’s company has coming up next.

“Tesla investors are fuelled by optimism around Full Self-Driving (FSD) and the upcoming affordable model - two key catalysts that could drive Tesla’s next leg of growth,” says Matt Britzman, senior equity analyst, Hargreaves Lansdown. “Self-driving remains central to justifying Tesla’s lofty valuation, with the long-term bet resting on software-driven profits and autonomy.

“Meanwhile, the low-cost model is crucial for delivering growth in what’s shaping up to be a tough EV market next year, and investors will take comfort in Tesla sticking to a first-half 2025 timeline.’’

Microsoft, however, posted solid earnings, but fell 4.6% after-hours. Investors seem concerned that the company is particularly susceptible to disruption from Chinese AI startup (or upstart?) DeepSeek.

CEO Satya Nadella brushed off questions about what DeepSeek means for Microsoft, especially given its hefty investments in OpenAI, saying that “what's happening with AI is no different than what was happening with the regular compute cycle. It's always about bending the curve and then putting more points up the curve”. He also mentioned that Microsoft is making DeepSeek available to its users via Copilot and on Windows PCs.

Investors clearly aren’t convinced, though, perhaps because these outward attempts to appear relaxed and amiable towards DeepSeek clash with reports that Microsoft and OpenAI are exploring whether or not the Chinese competitor accessed OpenAI’s data without approval.

Why DeepSeek hasn't rattled Apple

Unlike its Magnificent Seven colleagues, Apple's share price has increased in every session so far this week, seeing it regain its crown as the world's largest company by market cap.

While rivals for the title Nvidia and Microsoft saw their stock plummet as DeepSeek's arrival on the scene threatened to displace their places at the forefront of the AI ecosystem, the implications of the Chinese company's advances in cheap, relatively low-compute generative AI could be a tailwind for Apple (NASDAQ:AAPL).

“Innovations like DeepSeek’s smaller, more efficient AI models could potentially improve the AI capabilities of Apple’s flagship products, like the iPhone,” says Kate Leaman, chief market analyst at AvaTrade. “Apple has already shown its commitment to AI by integrating ChatGPT into its latest devices, demonstrating its dedication to staying competitive.”

Leaman adds: “Interestingly, Apple’s relatively low AI expenditures compared to other tech giants may have made it more resilient during recent AI-related selloffs.”

Azure casts a cloud over Microsoft earnings

As well as potential DeepSeek disruption, investors were also underwhelmed by growth in Azure, Microsoft’s cloud computing business.

Microsoft had previously guided for 31-32% year-on-year growth in the division, and the results came in at the very bottom of that range.

“While this may only be a percentage point miss, expectations for a beat are always high for Microsoft so this has been rather poorly received,” says Ben Barringer, technology analyst at Quilter Cheviot.

Barringer himself isn’t phased by these results, though. While acknowledging that they are “a little disappointing”, he maintains that “there is nothing to panic about with Microsoft. It remains a core, diversified way of playing growth in technology and AI given its strong position and recent valuations.”

The world through Zuckerberg’s glasses

“It seems pretty clear to me that open source will be the most cost-effective, customizable, trustworthy, performant, and easiest-to-use option that is available to developers, and I'm proud that Llama is leading the way on this,” said Meta CEO Mark Zuckerberg in his prepared remarks during yesterday’s earnings call.

It was a significant statement, tackling head on the notion that open sourcing Llama has given a leg-up to Meta’s own competition.

Zuckerberg is clearly seeing things through a different lens, though, focused as he is on how his company can use AI to shape its eponymous Metaverse.

To that end, he also elaborated on progress made on Ray-Ban Meta glasses.

“They're great-looking glasses that let you take photos and videos, listen to music and take calls," said Zuckerberg. "But what makes them really special is the Meta AI integration. With our new updates it'll be able to not only answer your questions throughout the day, but also help you remember things, give you suggestions as you're doing things using realtime multimodal AI, and even translate other languages right in your ear for you.

“I continue to think that glasses are the ideal form factor for AI because you can let your AI see what you see, hear what you hear, and talk to you,” he said.

Meta “continues to push ahead with its Metaverse and its collaboration with Ray-Ban”, says Ben Barringer, technology analyst at Quilter Cheviot. “The stock market has been less than pleased by this in the past, but CEO Mark Zuckerberg remains committed.”

“A self-driving wolf” promise boosts Tesla shares

On Tesla’s post-earnings call, CEO Elon Musk promised investors “an epic 2026 and a ridiculous ‘27 and ‘28”. Hitting back at critics that have accused him of under-delivering on full-self-driving (FSD) promises in the past, he stated “I'm telling you there's a damn wolf this time and you can drive it. In fact, it can drive you. It's a self-driving wolf”.

Markets lapped it up; it was as Musk began this speech that Tesla’s shares began to climb in after-hours trading.

Dan Coatsworth, investment analyst at AJ Bell, was less impressed, focusing on Tesla’s stuttering core business and Musk’s political posturing over the assurances the CEO gave for the future.

“Tesla has now missed earnings expectations in five out of the past six quarters. Under normal circumstances, the chair of a company in this situation would be banging their fists on the table and asking why the chief executive seems to be spending all their time doing something else apart from leading the business,” said Coatsworth.

“Having fallen on the results, the shares have subsequently moved higher in pre-market trading. One explanation is that Musk raised hopes on the analyst conference call… Investors have a habit of buying into his every word,” Coatsworth added.

His view is that Musk’s increasingly active political life is a big distraction from the difficult task of running a business as large as Tesla. “Running a multi-billion- or trillion-dollar company is hard work and requires a laser focus. Investors thinking about buying shares in any business, not just Tesla, need to think hard about this point.”

Other analysts, however, do believe that autonomy and the FSD opportunity is the golden egg as far as Tesla is concerned. "We believe the autonomous/AI piece is 90% of the Tesla story today and thus speaks to our $2 trillion valuation thesis for Tesla over the coming 12 to 18 months," wrote Wedbush Securities analyst Dan Ives.

When does Apple announce earnings?

The next Magnificent Seven stock to announce earnings is Apple, which will report today after markets close (9pm UK time). The release will be followed by an earnings call, which will begin at 2pm on the Pacific coast (so, 10pm UK time).

What do analysts expect from Apple’s earnings?

Here's what analysts are forecasting for Apple’s earnings release this evening.

Analysts polled by FactSet expect quarterly earnings per share (EPS) of $2.35 on revenue of $124.3 billion. Those polled by London Stock Exchange Group (LSEG – formerly Refinitiv) yield the same consensus EPS estimate, but forecast fractionally lower revenue, at $124.1 billion.

These numbers imply year-on-year revenue growth of 3.8% and earnings growth of 2.35%.

Besides the headline figures, Matt Britzman, senior equity analyst, Hargreaves Lansdown, suggests that iPhone sales in particular will be watched closely by markets.

“This period not only captures the crucial holiday season but also marks the first full quarter of iPhone 16 sales, bolstered by the rollout of Apple’s new AI features,” he says.

Why Apple needs to show something different to reignite investor enthusiasm

Sam North, markets analyst at eToro, has this to add on Apple’s upcoming earnings release:

“Challenges persist with declining iPhone sales in China, potentially weighing on overall performance. However, innovations in wearables and services could provide offsets.

“Apple has had a negative return over the last 6 months – will that change this earnings season? Maybe, but ultimately it does feel that Apple needs to change something fundamentally to get investors excited again.

“Whether that be a completely revamped new phone, something beyond the incremental updates, a better use of AI or getting back control in China, only time will tell.”

US markets open ahead of Apple earnings

US markets have opened, and after about half an hour, Tesla shares are down 0.5%, Nvidia’s 1.5%, and Microsoft’s nearly 6% as investors continue to digest the implications of yesterday’s earnings releases.

Ahead of earnings, Apple’s shares have opened cautiously, down around 0.2%.

Apple is not immune to Chinese competition

The theme that is developing across all of the Magnificent Seven is one of cheaper competition from China. In fact, big tech earnings reports are a key battleground in the contest for technical and business dominance that is rumbling between the two countries.

Tesla’s profits have been squeezed by competition from cheaper Chinese competitors like BYD. DeepSeek, as we’ve seen, threatens to undercut massive US tech investments in AI.

Apple, meanwhile, has been grappling with falling iPhone sales in China, the world’s largest smartphone market (bigger, in fact, than the next two combined). It has been forced to cut price tags in order to compete with the likes of Huawei, Xiaomi, Honor, and OPPO, which is a red flag for a company that has historically built its business on premium products at premium prices.

For this reason, expect iPhone sales, particularly in China, to be a key focus of attention in Apple’s earnings call.

iPhone shipments: the battle for market share

The International Data Corporation (IDC) publishes a quarterly mobile phone tracker. The latest edition shows that global smartphone shipments increased by 2.4% year on year in the final quarter of 2024.

Despite this, Apple saw a decline with its shipments down 4.1% over the same period. The iPhone giant still holds the top spot on the leaderboard, but Chinese competitors like Xiaomi are fighting hard to take market share.

This is also impacting South Korean giant Samsung, which occupies second place on the leaderboard. Samsung also saw a decline in smartphone shipments in the final quarter of 2024, albeit to a lesser extent at -2.7%.

Apple: keep an eye on services growth

One of the main things Morningstar analyst William Kerwin will be watching during Apple’s earnings call is services growth. This part of the business includes everything from cloud subscription services to Apple TV+.

“We see this segment as Apple’s second-largest driver behind the iPhone, and we expect it to continue a double-digit growth pace in 2025,” he says.

This sentiment is echoed by analysts at investment platform AJ Bell.

“The services business is high margin, with a gross return on sales of 74% in Q1 compared to 36% from hardware products,” they write. As such, “ongoing progress here is important, as it supports sales and profits growth and also cash flow”.

Apple: what analysts are expecting

Once Apple's results are released after market close today, which way will the share price go in after-hours trading?

A lot will depend on whether the results beat analysts’ expectations – so let’s remind ourselves what those look like.

The company’s earnings per share are expected to come in at $2.35, according to Factset consensus estimates, up 8% from last year.

Meanwhile, sales are expected to come in at $124.3 billion, up 4% from last year.

Apple closes 0.74% lower before earnings

There's less than an hour to go until Apple releases its earnings, and the market has now closed. Shares in the company fell 0.74% during trading hours today.

EPS beats expectations, but revenue as expected

Apple announced earnings per share of $2.40, up 10% year on year. This beat consensus estimates of $2.35.

Revenue was broadly as expected coming in at $124.3 billion, up 4% year on year.

“Our record revenue and strong operating margins drove EPS to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders,” said Kevan Parekh, Apple’s CFO.

iPhone sales fall

Although revenues were broadly in line with expectations, iPhone sales fell by around 1% year on year. Overall sales in China also fell by around 11%.

The share price has responded negatively in after-hours trading so far, and is down more than 1% at the time of writing.

Apple's services business: revenues up 14%

Apple's services business continues to see double-digit growth, with revenues hitting a record high of $26.3 billion.

"Services continues to see strong momentum," the company said.

How is Apple Intelligence impacting iPhone demand?

An analyst from Morgan Stanley asked Apple executives to comment on how Apple Intelligence – the company’s foray into the AI space – was impacting performance. Chief executive Tim Cook said that the year-on-year performance of iPhone 16 sales was stronger in markets where Apple Intelligence was available.

Apple on DeepSeek

It was only a matter of time before someone asked about DeepSeek – the Chinese AI chatbot that has been launched this month with significantly lower development costs than US equivalents.

Naturally, an analyst on the call wanted to hear Cook's views.

"Innovation that drives efficiency is a good thing," Cook said, adding that Apple has always taken "a very prudent approach" when it comes to capital expenditure.

Apple share price bounces back during earnings call