Thematic Spotlight: US Mega Cap Stocks on Earnings Roller Coaster

As of April 27th, 57% of the S&P 500 had reported, with average earnings per share across the market 5% ahead of expectations.1 Markets are seemingly pleased with these efforts, as the S&P 500 rallied 2.67% last week in its best performance since November 2023.2 Four of the ‘Magnificent Seven’ – Tesla, Meta, Google, and Microsoft – recently reported, marking a massive week for big tech investors. Let’s recap their highlights:

Tesla outperformed in the face of many analysts expecting a set of poor results. It’s stock even jumped 10% despite misses on revenue, margins and EPS.3 Instead of worrying about financial metrics, investors were enamoured by a 148% YoY revenue growth in the company’s energy storage business and Musk’s announcement of an accelerated launch for a low-priced entry-level EV to combat increasing competition.4,5

Meta, expected by many to outperform, was the poorest performer of the bunch. Despite beating on both revenue and EPS, investors sold the stock down 18% after hours on concerns that the company may be over-investing in AI after the company raised capex estimates for the year.6 Meta estimated range for capital expenditure over the year now ranges from US$35-40 billion, up from the original US$30-37 billion.7

Google released a solid print with both revenue and EPS comfortably beating consensus. This time, investors lifted the stock as expected with Google rising 13% after hours.8 Key positives that drove Google’s rally include revenue re-acceleration in its search business and google cloud, as well as a surprising initiation of a small but meaningful dividend policy.9

Microsoft beat analyst expectations on both revenue and EPS. Yet, investor reactions were muted after it was revealed that the majority of the company’s outperformance was attributed to PC revenue, not AI growth.10 Nonetheless, Microsoft’s cloud computing business Azure saw an accelerated growth of 31% YoY, warranting a slight bump in stock price of ~4% after market hours.11

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Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 30/04/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.