It was a mixed bag for the ‘Magnificent Seven’ in the latest quarterly earnings reporting season, with the likes of Nvidia, Meta and Amazon coming out on top while there was disappointment for investors in Tesla and Alphabet.
All seven stocks (with Apple and Microsoft completing the group) have risen substantially over the past year and have grown to dominate global markets – leaving many investors reliant on their performance for returns.
Chip maker Nvidia was the last of the big names to report, with results out last night after the closing bell, ending the season with a bang.
Revenue of $22.1bn more tripled that of the previous year and net income was nearly nine times higher, with the company forecasting even better numbers in the current quarter. Shares are up 40% so far in 2024 and popped another 13.3% in pre-market trading this morning.
Stephen Innes, managing partner at SPI Asset Management, said: “Despite concerns about a significant decline in sales in China, Nvidia presented an unambiguously upbeat revenue outlook for the upcoming quarter.”
Tejas Dessai , research analyst at Global X ETFs, added: “Nvidia crushed expectations, carrying its remarkable run into another quarter. The beat was again driven by explosive growth in the data centre segment, which supplies AI processors to large data centre vendors, hyperscalers and enterprise customers, which grew revenues by 409% year on year.
“The pace of growth gives us confidence that we’re far from seeing this investment cycle come to an end.”
Below, Trustnet rounds up how the other six members of the Magnificent Seven have got on over the past few weeks.
Meta – winner
The firm behind Facebook, Whatsapp and Instagram became the fourth member of the Magnificent Seven to despite acknowledging the need to invest in AI infrastructure.
Meta intends to pay dividends every quarter, beginning with a 50 cents per share payment. On an annualised basis that equates to $2 per share and a 0.4% yield based on a $461 share price.
Fourth quarter revenue was up 25% year-on-year to $40.1bn – ahead of expectations – and the company also announced a $50bn share buyback. Shares are up 36.2% so far this year and bounced 20% on the day of the results.
Tesla – loser
Tesla’s fourth quarter earnings results were below Wall Street expectations, with a pessimistic full-year outlook compounding the misery for investors.
Revenue was 3% higher at $24.3bn but lagged market predictions during the final three months of 2023, while profits fell amid declining demand for electric vehicles, compressing margins.
It continues the downward trend for the firm’s share price, which has been on a slide since the start of the year. Overall the stock is down 22% so far in 2024.
Chris Beauchamp, chief market analyst at IG Group, said: “Tesla's soaring valuation had been built on the narrative of relentless growth; however, with the company issuing a warning about slowing growth, investors have started to question its sky-high valuation.”
Apple – mixed
The iPhone maker cheered a turnaround of sorts after revenues rose 2% in the final quarter of 2023 to $119.6bn, arresting a four-quarter run of falling revenues.
Profits were up 13% to $34bn but there were concerns over declining sales in China and shares dropped slightly on the day. So far this year shares are just in the red, down 2.2%.
Beauchamp said: “Apple's recent performance has been a wake-up call. Despite being a dominant player in the tech industry, its heavy reliance on the Chinese market for both sales and manufacturing has made it vulnerable to geopolitical tensions and the whims of the Chinese economy.”
Amazon – winner
The online retailer was a winner of this reporting season, with sales up 14% to £170bn in the final three months of 2024, while profits rose substantially to £13.2bn – blowing through estimates. Year to date, shares are up 11.4%.
Julian Wheeler, partner at Shard Capital, said: “More stable than the rest perhaps, it is running the divisions better now (not burning $10bn a year on things like Alexa), margins are improving after the downturn last year and it will grow advertising through its introduction on Prime Video.”
Alphabet – loser
Google parent company Alphabet missed advertising earnings forecasts, which grew 11% to $65.5bn but was around $500m below target. Shares tumbled 7.4% on results day but remain 2.7% higher over the course of the year so far.
Wheeler said: “My problem with Google is that it has everything to lose and little to gain from a change in the status quo to the digital advertising market.”
Google was the dominant online search engine but now Microsoft has a chance to harness AI to snap at its heels, he said.
“In short form video, there used to only be YouTube; now they compete with Facebook’s Reels, Instagram, Tik-Tok and Snapchat. Meanwhile Netflix, Amazon and Disney now want a share of the advertising pie too. Yes, Google is growing in Cloud, but very much the third player.”
By its own admission, when it comes to AI Language Models, Alphabet has no defensive “moat”, he added.
Microsoft – mixed
The software behemoth beat expectations as revenue rose 18% to $62bn – a record quarter for the firm. Gaming did particularly well, with its Xbox revenue up 61%, and the Azure Cloud business climbed on the back of the AI boom.
Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund, said: “Microsoft delivered another excellent result, with good cost controls. AI is taking centre stage boosting Azure’s top line growth to 30%. [Chief executive Satya] Nadella makes the point that the business has moved from talking about AI to applying AI at scale”.
But the market remained unconvinced on the day, ending 2% lower. Over the course of 2024 so far shares are up 7.9%.