Meta Guidance Lifts Shares 9%; Microsoft Drops 7%, Tesla Edges Up 2%

Tech Titans Face Market Judgment: Meta Soars While Microsoft Stumbles

The major U.S. stock indexes showed little movement following the release of key earnings reports from tech giants Meta, Microsoft and Tesla. However, there was movement in the aftermarket session where Meta Platforms jumped 9% after the company’s earnings showed a stronger-than-expected first-quarter sales forecast. Tesla shares were also up, advancing 2% after the company’s fourth-quarter results beat expectations. Microsoft shares fell nearly 7% after its earnings report showed that cloud growth had slowed in the fiscal second quarter and quarterly capital expenditures and finance leases came in higher than analysts expected.

Meta’s Bullish Forecast Sends Shares Surging 9% in After-Hours Trading

Now the details. Social media giant Meta is a big winner in the aftermarket with a 9% rise after the company called for first-quarter sales to range from $53.5 billion to $56.5 billion, beating the analysts’ consensus call for $51.41 billion.

Fourth-quarter earnings of $8.88 per share on revenue of $59.89 billion also beat the LSEG consensus of $8.23 per share and $58.59 billion. Additionally, Meta’s Reality Labs unit posted a greater operating loss than expected.

Tesla Squeaks Past Expectations Despite Recording First Annual Revenue Decline

Tesla investors were also rewarded in the aftermarket with a 2% gain after the company posted better-than-expected fourth-quarter results. Tesla also reported adjusted earnings of 50 cents per share on revenue of $24.9 billion. These numbers beat LSEG analyst poll estimates of 45 cents per share and revenue of $24.79 billion. Not great, but just enough to satisfy investors.

Although the fourth-quarter results were better-than-expected, Tesla’s revenue for the year dropped 3% for the period, marking the first time on record the automaker has recorded an annual decline.

Microsoft’s Cloud Growth Concerns Trigger Sharp 7% Selloff

Unlike the other two stocks, the earnings news impacting Microsoft was not very good. Shares of the software maker giant fell 7% in extended trading on Wednesday on slowing cloud growth.

Earnings per share came in at $4.14 adjusted, better than the $3.97 expected and revenue was $81.27 billion, higher than the $80.27 billion forecast.

Capital Expenditure Anxiety: Investors Question Microsoft’s AI Spending Strategy

What encouraged investors to sell after the report was the jump in capital expenditures, which hit a record high in the latest quarter. Additionally, sales only slightly beat Wall Street expectations, which raised concerns among investors, who had expected a major payoff from the massive spending on artificial intelligence including a cloud megadeal with OpenAI, Reuters reported.

Azure’s Modest Growth Fails to Justify Record Infrastructure Investment

Investors didn’t like what the Azure cloud division numbers were saying either, after Microsoft said the division grew just 39%, barely beating the 38.8 forecast, according to Visible Alpha.

The Verdict: Profitability Beats Promises as Markets Reward Concrete Results

This afternoon’s major takeaway is that investors will reward a profitable outlook and punish companies who are still struggling to make the grade. Meta seems to be on the path that investors prefer, while Microsoft’s big stake in OpenAI appears to be at risk with ChatGPT losing ground to competitors Gemini and Anthropic.

More Information in our Economic Calendar.