Mixed results for Magnificent 7
The narrative around the Magnificent 7 mega-cap technology stocks has become mixed, even in the face of mostly positive earnings news.
Microsoft stock sold off on Tuesday even after the company narrowly beat Wall Street expectations for its fiscal fourth-quarter results and handily surpassing results from a year ago. Investors have been scrutinizing figures for AI operations in particular; Microsoft’s Intelligent Cloud revenue rose 19% year over year and contributed 8 percentage points of growth to its Azure and other cloud services revenue, which grew 29%. Evidently, that wasn’t enough.
Facebook and Instagram owner Meta Platforms, by contrast, easily bested analyst forecasts for the second quarter. It boosted net income by 73% over the same quarter last year and is gaining advertising market share over archrival Alphabet. Compared to its Mag 7 peers, Meta has been a stock-market laggard since 2022 but undertook a cost- and job-cutting campaign that now appears to be paying off.
Apple likewise surpassed expectations for revenue and earnings, posting particularly strong results in its iPhone and iPad divisions. Cloud services, computers and wearables were in line with estimates.
Amazon was punished after missing the analyst consensus for revenue, even though it beat estimates for earnings. Though Amazon Web Services performance was strong, the company’s core retail and advertising businesses disappointed.
Microsoft, Meta, Apple, Amazon earnings highlights
Currency figures in this section are reported in USD.
- Microsoft (MSFT/NASDAQ): Earnings per share of $2.95 (versus $2.94 predicted). Revenue of $64.7 billion (versus $64.5 billion estimate).
- Meta Platforms (META/NASDAQ): Earnings per share of $5.16 (versus $4.63 expected). Revenue of $39.07 billion (versus $38.31 billion estimate).
- Apple (AAPL/NASDAQ): Earnings per share of $1.40 (versus $1.35 expected) . Revenue of $85.78 billion (versus $84.53 billion estimate).
- Amazon (AMZN/NASDAQ): Earnings per share of $1.26 (versus $1.03 expected). Revenue of $147.98 billion (versus $148.56 billion estimate).
The U.S. Fed stands pat for now
There were no assassination attempts or presidential nominees dropping out of the race for the White House this week. The news out of Washington, D.C. on Wednesday, however, was just as closely watched by markets.
The U.S. Federal Reserve elected to hold its overnight lending rate at 5.5%. In a statement, the central bank’s Open Market Committee acknowledged signs of a slowing economy but said it would not cut rates “until it has gained greater confidence that inflation is moving sustainably toward 2%.” The market continues to pin its bets on a rate cut in September, which would be the first since 2020.
That leaves the Bank of Canada, which has cut rates in both of the last two months, a full percentage point below the U.S. Fed. The Canadian dollar nonetheless gained slightly against the greenback, at USD$0.72485, in the wake of the announcement, suggesting the policy decision was expected.
