Magnificent Seven Earnings Review

While each company operates in distinct verticals, several common themes emerged that reflect broader shifts in technology and macroeconomic conditions.

AI investment drives capital allocation

Generative AI continues to dominate strategic planning across the group. Microsoft, Amazon, Alphabet, and Meta all reported a significant increase in capital expenditure guidance, in many cases forecasting more than $70 billion in spending annually. These investments are focused on building and expanding the infrastructure required to support AI model development and deployment.

Nvidia remains the primary beneficiary of this trend. The company posted a 73% year-on-year increase in data centre revenue, driven by demand for its GPU chips that underpin most large-scale AI systems. Tesla, while not a traditional software company, reaffirmed its AI-centric roadmap, pointing to developments in its Dojo supercomputer and Full Self Driving (FSD) platform.

Apple was more measured in its AI messaging. While confirming ongoing research and development, the company has been slower in rolling out AI-integrated products such as an updated version of Siri. Nevertheless, it views AI as a long-term strategic priority.

Cloud and data centre expansion accelerates

Growth in cloud services was another consistent theme. Microsoft Azure, Amazon Web Services, and Google Cloud each recorded double-digit revenue growth for the quarter, reflecting demand from enterprises integrating AI capabilities into operations. In response, capital expenditure plans were revised sharply higher.

Meta, for example, raised its 2025 capex guidance to between $64 billion and $72 billion—its largest investment forecast to date. Alphabet and Amazon reported similar increases in spending, citing the need to expand server capacity, data centre footprint, and supporting power infrastructure. The AI buildout is now being treated as a long-term infrastructure cycle, comparable in importance to historical phases of cloud and mobile investment.

Advertising recovery supported by AI tools

Meta, Alphabet, and Amazon all posted strong growth in advertising revenue. Meta’s ad business expanded 16% year-on-year, YouTube ad sales increased 20%, and Amazon’s ad division grew 19%. Company executives pointed to AI-powered tools that improve targeting precision, creative optimisation, and advertiser return on investment.

Meta also highlighted strong ad demand from Chinese e-commerce firms, which contributed to overall growth despite the broader context of geopolitical uncertainty. AI’s role in making advertising more efficient and performance-based was consistently referenced as a core reason for revenue improvement.

Companies adapt to geopolitical and trade risks

Geopolitical developments, particularly involving US-China relations, featured prominently in this quarter’s disclosures. Nvidia took a $4.5 billion charge tied to US export restrictions on advanced AI chips sold to China. The move underscores the regulatory risks facing firms with material exposure to Chinese markets or dependencies.

Apple described how it has diversified its production base. A growing share of iPhones sold in the US are now assembled in India, with iPad and Mac manufacturing shifting increasingly to Vietnam. Amazon reported a projected $900 million cost impact in Q2 related to tariffs on Chinese imports, further illustrating the need for global firms to adjust their supply chains.

These developments suggest an acceleration in strategic decoupling from China—at least from a production and compliance standpoint—even as demand from Chinese consumers remains relevant in some areas.

Profitability remains strong despite elevated spending

Despite significantly higher investment in AI and cloud infrastructure, most companies reported strong profitability. Alphabet’s earnings per share rose 46% year-on-year to $2.81. Meta’s EPS increased 37% to $6.43. Amazon recorded net income of $17.1 billion, up 64% compared to the prior year.

Cost control was a recurring theme. Meta, Microsoft, and Amazon all noted operating leverage and productivity gains from prior restructuring efforts. Apple, while quieter on AI, continued to deliver solid margins and announced a $100 billion share buyback, indicating a preference for maintaining investor confidence despite slower AI feature adoption.

Shareholder returns remain a priority

Shareholder capital returns remained a central part of earnings announcements. Apple authorised a $100 billion share repurchase and raised its dividend. Alphabet announced its first-ever dividend and a $70 billion buyback. Microsoft and Meta also continued with substantial buyback programs.

These moves suggest that while investment in AI and infrastructure is being scaled up, capital allocation policies continue to balance long-term growth with returns to shareholders.

AI is framed as a foundational platform

Finally, a consistent narrative emerged about the role of AI. All companies described it not simply as a product enhancement but as a foundational layer that will underpin all future products and services. Microsoft said AI is being infused into every product line. Amazon explained that AI is now central to customer experience across its ecosystem. Meta positioned its AI strategy as the development of general intelligence to serve billions of users.

This messaging reflects a shift away from treating AI as a discrete revenue vertical and toward viewing it as a general-purpose platform—analogous to the operating systems or cloud layers of previous tech cycles. Firms are investing not just to use AI, but to shape and own the systems and models that define it.

Solid earnings, easing trade risks drive NASDAQ

Robust results from Nvidia, Microsoft, Meta, and Amazon reaffirmed the momentum behind AI-led investment, while solid profitability and continued capital returns helped underpin investor confidence. At the same time, markets have responded positively to signs that U.S. trade hawkishness is easing, reducing a key source of macro uncertainty.The NASDAQ 100 has rebounded sharply in recent weeks, supported by strong earnings from the Magnificent Seven and a moderation in trade policy volatility. The index has resumed its upward trend, with the post-earnings rally lifting it well above its recent lows and reinforcing a broader recovery in tech sentiment.

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