US tech giants Tesla, Microsoft and Meta report mixed earnings results

The Magnificent Seven kicked off earnings season on Wednesday with Tesla, Microsoft, and Meta Platforms. The results were mixed, as Tesla and Microsoft fell short of market expectations in the growth of their core businesses, while Meta Platforms exceeded analysts' estimates across all metrics, despite ongoing legal challenges.

Tesla's shares jumped more than 4% after an initial drop, Microsoft's shares fell by 4.6%, and Meta climbed 2.3% in after-hours trading. Why did investors react differently to these tech giants' results? Here are the key reasons.

Tesla: Optimism in autonomous vehicles

Tesla missed market expectations for both earnings per share and revenue in the fourth quarter, with its shares initially dipping before sharply rebounding. Investors looked beyond the weak earnings report and focused instead on Tesla's growth prospects in 2025 and beyond.

The company stated in its earnings report that new vehicles, including more affordable models, remain on track for production to begin in the first half of 2025. It noted that the process will be more "capex efficient" and expects a maximum production capacity of close to three million vehicles, allowing for more than 60% year-on-year growth.

Additionally, its highly anticipated autonomous vehicle, the Robotaxi product Cybercab, is scheduled for volume production in 2026. "We expect the vehicle business to return to growth in 2025", Tesla said in the earnings statement.

In the fourth quarter, Tesla's overall revenue rose by 2% year on year, down from 8% growth in the previous quarter. The core business, total automotive sales, fell by 8% year on year. Its gross margin declined to 16.3%, compared to 17.6% in the same period in 2023, marking the lowest level in the past four quarters.

However, the bright spot remained in its energy storage unit, where revenue grew by 113%, achieving record deployments and a record gross profit for the quarter. The company expects its energy business to expand by at least 50% this year.

Tesla's share price is down 0.26% year to date as of market close on 29 January, as the so-called Trump Trade faded since mid-December. The company also disappointed investors with its annual vehicle delivery figures.

Microsoft: Cloud growth slows on ongoing capacity constraints

Microsoft disappointed investors with slower growth in its core business, Azure Cloud, despite exceeding market expectations for profit and revenue.

The artificial intelligence–focused segment saw revenue growth of 31%, down from 33% in the previous quarter. CFO Amy Hood said in an interview that the company does not have sufficient data centre capacity to meet customer demand, which affected growth. She expects Azure Cloud to grow at a rate of between 31% and 32% in the current quarter, indicating flat growth.

In other metrics, overall revenue rose by 12.3% year on year in the fiscal second quarter of 2025, marking the slowest growth since June 2023. Earnings per share came in at $3.23 (€3.10), compared with the estimated $3.12 (€2.99).

The company’s expenditure exceeded analysts' expectations, signalling continued heavy investment in AI infrastructure. Hood stated: "We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure."

CEO Satya Nadella commented: "We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead." He noted that Microsoft's AI business had reached an annual revenue run rate of $13 billion (€12.5bn), up 175% year on year.

Microsoft's shares are up nearly 4% this year as of market close on Wednesday.

Meta Platforms: Conservative outlook despite robust results

Meta Platforms reported revenue of $48.39 billion (€46.42 billion) in the final quarter of 2024, a 21% year-on-year increase, up from 19% in the previous quarter. Profit came in at $8.02 (€7.69) per share, well above the estimated $6.77 (€6.49).

While advertising revenue remained its core business, the social media giant emphasised the rapid growth of its Meta AI chatbot, which reached 600 million users in December. CEO Mark Zuckerberg expects its AI app to reach one billion users in 2025.

The company provided revenue guidance for the current quarter that fell short of market expectations. It did not give an outlook for 2025, stating: "We expect the investments we are making in our core business this year will give us an opportunity to continue delivering strong revenue growth throughout 2025."

Meta also warned that regulatory challenges in the EU and the US could "significantly impact our business and financial results". Just before the earnings release, The Wall Street Journal reported that Meta had reached a $25bn (€24bn) settlement with President Trump. Zuckerberg expects 2025 to be a pivotal year in redefining the company's relationship with governments.

Zuckerberg also referenced the recent unveiling of DeepSeek, an open-source Chinese AI model similar to Meta's Llama 3. He indicated that open-source models will be widely adopted globally, competing with rivals, and stated: "For our own national advantage, it's important that it's an American standard.”

Meta's stock has been the top performer among the Magnificent Seven so far this year, up 14.71% as of market close on 29 January.