Big Tech Earnings: AI Takes Center Stage Amid Mixed Results

With earnings season winding down, Amazon and Nvidia remain the only two Big Tech giants to release their quarterly performance. Despite varying reports from industry leaders thus far, artificial intelligence (AI) continues to dominate the narrative on Wall Street.

Missed Targets and Cloud Challenges

Microsoft (MSFT) and Meta (META) kicked off earnings last week, exceeding analyst expectations on both revenue and earnings. However, a closer examination reveals some underperformances.

Microsoft's cloud revenue fell short of the $41.1 billion estimate, posting only $40 billion. The company attributed this to capacity constraints and a strategic shift to prioritize AI growth over non-AI cloud services.

Meta declined to provide full-year guidance but emphasized growth potential through its substantial AI investments. The company plans to allocate $65 billion towards AI development this year, including the launch of its Llama 4 AI model.

AI's Promise Amid Economic Headwinds

Amid concerns over slowing growth and macroeconomic headwinds, analysts remain optimistic about Big Tech's long-term AI investments.

"Tech sector volatility is likely to continue, but we believe the AI growth story remains intact," UBS's Chief Investment Office stated.

Analysts believe that AI could mitigate the impact of President Trump's tariffs and the emergence of DeepSeek's low-cost AI models.

Big Spenders and AI Ambitions

Google's parent company Alphabet (GOOG) witnessed a stock drop after falling short of cloud revenue expectations. Similar to Microsoft, Google cited increased demand outpacing its current capacity. The company plans to inject $75 billion into AI development in 2025, a significant increase over analysts' estimates.

Apple (AAPL) met expectations on revenue and earnings, but iPhone sales fell below forecasts. While the company's Apple Intelligence AI platform was expected to boost sales, its current availability only in English limits its reach.

The Future of AI in Big Tech

Big Tech companies are betting heavily on AI's future. Microsoft, Meta, Google, and Apple are all investing billions in AI development, recognizing its potential to drive growth and innovation.

Investors and analysts are eagerly awaiting further updates on these AI initiatives and their impact on Big Tech's financial performance.