Before the bell: Trump and Xi Jinping reach an agreement

Alphabet reports its first-ever quarterly revenue above 100 billion dollars, and Microsoft also beats expectations. Meta disappoints investors with a one-off tax charge, while Trump lowers his tariffs on China.

The S&P 500 ended flat yesterday, but the Nasdaq gained another half percent. Nvidia (+3%) performed well again, though Caterpillar (+11.6%) outshone everyone after excellent results driven by surging demand for energy equipment such as turbines and generators. Among the Magnificent Seven, Microsoft and Alphabet both beat expectations. Microsoft’s quarterly revenue rose 18% to 77.7 billion dollars, while profit jumped 22% to 30.8 billion dollars, or 4.13 dollar per share versus a forecast of 3.67 dollar. The cloud division delivered slightly better-than-expected growth, up 28% to 30.9 billion dollars. In just three months, Microsoft invested 35 billion dollars in AI and cloud infrastructure—half in chips and half in data centers. That figure startled investors, and Microsoft’s shares fell 4% after hours. Chipotle Mexican Grill issued a profit warning and was punished with a 16.5% drop in late trading.

This morning, Japanese shares are up an average of 0.7%, while Hong Kong is down 0.4%. The two largest economies in the world appear to have found common ground: Trump and Xi Jinping reached an agreement guaranteeing the export of rare earth metals to the U.S., while Trump has taken a softer stance on Chinese exports. BYD reports results today, with investors watching closely how the carmaker performs in China’s fiercely competitive domestic market. The stock has lost 32% since May, wiping out 45 billion dollars in market value. In Seoul, Samsung (+3%) reported a 19% quarter-on-quarter increase in chip sales. In Belgium, we’ll see results today from Argenx, Recticel, Ontex and AB InBev. Volkswagen reports in Germany, while TotalEnergies and ING Group also release figures. In the U.S., we’re expecting pre-market results from pharmaceutical firms Merck, Eli Lilly, Insmed and Baxter, followed after hours by heavyweights Amazon and Apple.

Meta’s déjà-vu moment

Exactly three years ago, investors dumped Meta shares after disappointing quarterly results and news that the company would pour even more money into the metaverse the following year. Yesterday, the company served up a variation on that same theme. Quarterly profit fell 83% due to a non-cash tax impact from Trump’s “One Big Beautiful Bill Act.” Net income dropped to just 2.71 billion dollars, or 1.05 dollar per share, while analysts had expected 6.69 dollar. Zuckerberg reiterated that he would rather “overinvest than underinvest” in artificial intelligence. This year, Meta will spend between 70 and 72 billion dollars—at the top end of previous guidance—and next year investments will be “significantly higher.” That was not what investors wanted to hear, and Meta’s shares fell 7.4% after hours. We remain convinced shareholders nonetheless. Meta’s quarterly revenue reached a record 51.2 billion dollars, up 26%. Excluding the one-time tax expense, profit would have been 7.25 dollar per share, 8.4% above expectations. As of September 30, Meta sat on a comfortable 44.45 billion-dollar cash pile. And if necessary, Zuckerberg could easily slash spending on AI and virtual reality. In that latter segment, quarterly losses totaled 4.43 billion dollars on revenue of only 470 million.

Alphabet rewards its shareholders

Another déjà-vu—though a positive one—at Alphabet. Earnings of 2.87 dollar per share were 27% above the average analyst estimate of 2.26 dollar and 35% higher than last year’s 2.12 dollar. Quarterly revenue came in at 102.4 billion dollars (expected: 99.85 billion), surpassing the 100 billion mark for the first time. A year earlier, revenue was just 88.3 billion. The cloud division’s profit grew 34%. Like Microsoft and Meta, Alphabet continues to invest heavily, raising this year’s capital-expenditure forecast to 92 billion dollars, up from 85 billion. Unlike its peers, however, investors applauded the move—Alphabet’s shares jumped 6.2% after hours. We remain shareholders here as well.

Did you know…

that U.S. Steel became the world’s first company valued at 1 billion dollars in 1901? It then took 54 years before General Motors reached 10 billion. In 1995, General Electric hit 100 billion, and by 1999 Microsoft climbed to 500 billion. In 2018, Apple became the first to reach 1 trillion—and yesterday, Nvidia crossed the historic 5 trillion-dollar mark.

This article was translated from Dutch and was originally published on Spaarvarkens.be.