Tech Stocks Decline Following Disappointing Earnings Reports
US equities opened higher on Friday, recovering some losses from Thursday when the Nasdaq Composite and S&P 500 dropped 1.8% and 1.2%, respectively.
The selloff was primarily driven by tech stocks, following disappointing outlooks from Meta and Microsoft, which reported earnings after market close.
Despite exceeding expectations in certain earnings metrics, both companies saw declines in share prices: Microsoft fell 4% and Meta 3% during after-hours trading. Analysts linked these drops to lower revenue projections. Microsoft estimates Q4 revenues between $68.1 billion and $69.1 billion, below Wall Street's forecast of $69.83 billion, anticipating a slowdown in its cloud computing platform, which recorded a 33% quarter-over-quarter revenue increase in Q3.
Meta reported better-than-expected earnings per share and revenue for Q3 but indicated continued high spending through 2024, projecting capital expenditures between $38 billion and $40 billion, an increase from prior guidance. The company also forecasts significant increases in AI-related infrastructure expenses in 2025.
Tom Essaye, founder of Sevens Report Research, noted that the decline in equities was not solely due to Big Tech; other companies like Uber, eBay, and Intercontinental Exchange also reported disappointing earnings. Additionally, economic data suggests sustained higher interest rates may be forthcoming.