Big Tech Earnings: AI Dominates Amidst Mixed Reports

Overview

Big Tech's earnings season winds down, with only Amazon and Nvidia remaining to unveil their quarterly performances. Despite some disappointing reports, artificial intelligence (AI) emerges as a beacon of optimism for Wall Street.

Mixed Results

Microsoft (MSFT) missed cloud revenue expectations, while Meta (META) anticipates slower sales growth. Apple (AAPL) fell short of iPhone revenue estimates, and Google (GOOG, GOOGL) underperformed in cloud growth. Trade tariffs and the rise of low-cost AI models have also impacted results.

AI Remains a Focus

Analysts remain upbeat, highlighting Big Tech's long-term AI investments. UBS's Chief Investment Office notes that "the AI growth story remains intact." Nvidia (NVDA), a key indicator of the AI trade, is set to report earnings on February 26. A disappointing report could derail AI stocks.

Microsoft

Azure cloud revenue fell short of expectations, partially due to capacity constraints. However, AI services surged 157% year-over-year, signaling continued AI dominance. Microsoft plans to increase cloud capacity by fiscal 2025.

Meta

Meta emphasized its AI investment strategy, with plans to allocate $65 billion this year for AI services development. The company dismissed concerns about DeepSeek's low-cost AI, citing its open-source model and low costs.

Google

Google parent Alphabet saw its stock dip after missing cloud revenue targets. It intends to invest $75 billion in AI in 2025 to address demand-supply imbalances. Analysts anticipate this will mitigate the impact of generative AI on Google Search.

Apple

Apple exceeded earnings and revenue expectations but fell short on iPhone sales. The Apple Intelligence AI platform, available only in English, has limitations in reaching a broader user base. However, CEO Tim Cook highlighted better iPhone performance in regions where the platform is available.

Conclusion

Big Tech companies are facing challenges but remain committed to their AI investments. The sector is likely to experience volatility, but analysts believe the long-term AI growth story is still intact. Nvidia's earnings report will be closely watched for further insights into the AI trade.