- Big Tech’s earnings reveal solid growth but expose rising risks, from cloud slowdowns to competitive pressures.
- AI remains a dominant theme, but each company faces unique challenges, including regulatory scrutiny and market saturation.
- All eyes are now on Nvidia’s upcoming earnings, which could determine whether the AI-driven rally continues or stalls.
The Magnificent Seven have long been the superstars of Wall Street, but this year, their share prices have faced significant headwinds. Geopolitical tensions, inflationary pressures, and concerns about global economic growth have weighed on these tech giants. Yet, despite the rocky start, the Magnificent Seven remain an exciting prospect for long-term investors, thanks to their leadership in AI, cloud computing, and digital services.
As earnings season unfolds, it’s crucial for investors to focus on fundamentals rather than short-term market volatility. During this earnings season, we’ve seen six of them step into the spotlight with numbers that ranged from spectacular to sobering. But beyond the headlines, each of these tech titans faces growing challenges that could reshape their future. From AI showdowns to regulatory hurdles, here’s a breakdown of what went right—and what risks lie ahead.
1. Amazon (NASDAQ: AMZN): E-commerce Giant Flexes Muscle
Amazon delivered a knockout quarter, with Q4 revenue soaring 10% year-over-year (YoY) to US$187.8 billion, easily surpassing expectations. Profit surged 48% to US$10.6 billion, driven by cost-cutting and faster deliveries. Amazon Web Services (AWS) posted a 19% revenue jump, but looming chip shortages remain a concern. The advertising business—often overlooked—now runs at a US$69 billion annualized pace.
Risk: Soft guidance and foreign exchange headwinds pose challenges for Amazon. AWS growth, while solid, faces supply chain constraints and intensifying competition from Microsoft and Google. Additionally, consumer spending trends in a high-interest-rate environment remain a wildcard.
2. Alphabet (NASDAQ: GOOGL): AI Gains, Cloud Pains
Alphabet’s Q4 results featured a 12% YoY revenue increase to US$96.5 billion and a 30% surge in Google Cloud. YouTube ads also grew 14%, signaling resilience in the face of competition. But investors punished the stock, sending it down 8% post-earnings as cloud growth missed sky-high expectations. Alphabet’s heavy AI investments, including its Gemini model, have promise—but the market wants results, not just vision.
Risk: Cloud growth deceleration raises concerns, especially as Microsoft and Amazon pull ahead in the AI arms race. Regulatory pressures, particularly from China’s antitrust investigation, add another layer of uncertainty. Advertising revenue growth might slow if macroeconomic conditions deteriorate.
3. Apple (NASDAQ: AAPL): Record-Breaking, but China Woes Persist
Apple posted record revenue of US$124.3 billion for Q1 2025, fueled by strong iPhone 16 sales and surging services revenue. EPS hit US$2.40, up 10%. The services segment alone grew 14%, contributing over 20% of total sales. However, an 11% drop in China due to rising competition from Huawei and Xiaomi is raising red flags. With Apple Intelligence set to expand globally, investors hope innovation can reignite growth.
Risk: China’s slowdown and increased competition from domestic brands like Huawei could continue to weigh on iPhone sales. Additionally, regulatory scrutiny of Apple’s App Store practices and ongoing currency headwinds might challenge future growth.
4. Tesla (NASDAQ: TSLA): The Self-Driving Dream Meets Harsh Reality
Tesla’s Q4 revenue of US$25.2 billion fell short of forecasts, while EPS missed marginally at US$0.73. But Elon Musk didn’t dwell on the numbers—instead, he hyped Tesla’s self-driving software, predicting an ‘unsupervised’ rollout this year and a future dominated by humanoid robots. Investors remain skeptical, given the margin squeeze from price cuts and battery production challenges.
Risk: Tesla’s ambitious bets on self-driving technology and humanoid robots carry significant execution risk. Margin pressures from price cuts, battery production constraints, and growing EV competition could impact profitability. Regulatory challenges surrounding autonomous vehicles also loom large.
5. Meta Platforms (NASDAQ: META): Ad Comeback and AI Ambitions
Meta delivered a monster quarter, with revenue jumping 21% to US$48.4 billion and EPS smashing estimates at US$8.02. Ad revenue surged as Meta’s AI-powered tools proved effective. Meanwhile, 700 million users are already engaging with Meta AI, and the success of its Ray-Ban smart glasses suggests a growing appetite for augmented reality.
Risk: Meta’s escalating AI infrastructure investments could strain margins if revenue growth slows. Regulatory scrutiny over privacy practices and its dominance in social media could result in costly penalties. Competition from TikTok and emerging platforms remains fierce.
6. Microsoft (NASDAQ: MSFT): Cloud King’s AI Growth
Microsoft posted US$69.6 billion in Q2 revenue, up 12%, with EPS of US$3.23 exceeding forecasts. AI-related sales hit a US$13 billion annual pace, up 175%. Yet, Azure’s 31% growth—while solid—disappointed those hoping for more. Microsoft’s Copilot AI is gaining traction across enterprise customers, but increased capital expenditures and cloud infrastructure constraints have investors cautious.
Risk: Azure’s growth, while impressive, is slowing relative to past quarters, raising concerns about future AI-driven growth. Heavy capital expenditures in AI infrastructure could weigh on profits if adoption lags. Increasing competition from AWS and Google Cloud adds further pressure.
The Missing Piece: Nvidia’s Turn Next
The Magnificent Seven continue to captivate Wall Street with impressive earnings, but cracks in growth trajectories and rising risks are becoming harder to ignore. As these tech giants double down on AI, cloud, and hardware innovations, investors should stay vigilant. With Nvidia’s earnings on deck for February 26, all eyes will be on the chipmaker that has become synonymous with the AI revolution. If Nvidia delivers another blockbuster quarter, it might reignite enthusiasm for the entire Magnificent Seven. Nvidia’s upcoming earnings will serve as a critical pulse check for the AI boom.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.
