Tesla, Meta and Microsoft Earnings Shake Up Market Amid Federal Reserve Rate Decision
The Federal Reserve decision to maintain its benchmark interest rate at the 4.25% to 4.5% range did little to sway the stock market on Wednesday, as the S&P 500 remained relatively flat throughout the day. However, after the market closed, quarterly earnings reports from some of the largest tech companies, including Tesla, Meta, and Microsoft, quickly took center stage, driving significant stock movement.
Tesla’s Earnings Disappoint, But Optimism Drives Stock Surge
Tesla’s latest earnings report came in below expectations, with the company posting revenue of $25.71 billion, falling short of the forecasted $27.21 billion. The earnings per share (EPS) of $0.73 also missed expectations of $0.75. Despite the disappointing financial figures, Tesla’s stock surged by 4.3% after hours. The reason behind the upbeat stock movement stemmed from CEO Elon Musk’s remarks about Tesla’s future. Musk pointed to the Optimus robot and full self-driving technology, suggesting they would eventually make Tesla more valuable than the next five largest companies in the world combined, fueling investor optimism.
Meta Reports Record Revenue and Promises AI-Fueled Growth
Meta’s performance exceeded expectations with revenue of $48.39 billion, surpassing the forecast of $47.04 billion. The company also reported earnings per share of $8.02, which was well above the expected $6.77. Following the earnings announcement, Meta’s stock rose by 2.2% in after-hours trading. Meta saw record revenue, with a 21% increase in sales, thanks to the strength of its advertising business, bolstered by AI innovations. Despite the strong revenue growth, Meta’s Metaverse division continues to face challenges, bleeding billions of dollars as the company aggressively pursues its virtual reality ambitions.
Microsoft’s Cloud Struggles Weigh on Stock
Microsoft’s quarterly results were mixed, with revenue of $69.6 billion surpassing the expected $68.8 billion. The company also posted earnings per share of $3.23, beating the expected $3.13. However, Microsoft’s stock dropped 5.1% in after-hours trading after the company disclosed that it had faced challenges in its cloud business and had been impacted by data center supply constraints. These issues prevented Microsoft from fully capitalizing on the surging demand for AI-powered services. The company also announced plans to invest $80 billion in AI infrastructure in fiscal 2025, signaling its commitment to AI despite the cloud struggles.
Tech Rivals Respond to Musk’s Optimism and Meta’s Strong Report
Tesla’s optimistic comments on the potential of full self-driving technology led to a dip in shares of Uber, Lyft, and Pony AI, while Rivian and Lucid saw gains as investors took Musk’s remarks as a positive sign for other electric vehicle makers. Meta’s strong earnings had a ripple effect, boosting shares of Alphabet as investors anticipated a similar strong performance from other major tech players. Conversely, Microsoft’s weaker cloud guidance led to concerns about the future performance of other cloud-based companies like Salesforce, Snowflake, and Workday.
DeepSeek’s Impact Still Unclear
While there has been significant market movement following earnings reports, the launch of China’s DeepSeek AI largely went unaddressed in these earnings calls. However, Scott Helfstein, Global X’s head of investment strategy, suggested that DeepSeek will not drastically affect the forward guidance of the U.S. tech giants. He emphasized that companies like Microsoft and Meta continue to hold strong competitive advantages and are well-positioned to withstand competition from emerging international players.
As earnings season continues, all eyes remain on how these tech giants will adapt to the evolving landscape, balancing growth with challenges from new competitors and shifting market dynamics.
