The earnings season for “Magnificent 7” has started on a sour note with both Alphabet (GOOG) (GOOGL) and Tesla (TSLA) plunging following their respective confessionals, with the latter crashing over 14% on Thursday, July 23, and fell again on Friday. Both companies beat on revenues while missing on the bottom line, and as has been a recurring theme on tech companies’ earnings calls over the last couple of years, both bumped up their capex budgets.
While the ever-growing capex is music to the ears of chip, memory, and other artificial intelligence (AI) infrastructure plays, they have drained tech companies’ coffers. Far from generating the stellar free cash flows that they then splurged on repurchases, tech giants are now on a capital-raising spree to fund their burgeoning investments, which at least a section of the market believes will never generate commensurate returns.
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Meanwhile, earnings season for the Mag 7 gains pace this week, with Meta Platforms (META), Microsoft (MSFT), Amazon (AMZN), and Apple (AAPL) set to report, leaving only Nvidia (NVDA), which reports outside the usual season.
What to Expect From Mag 7 Earnings This Week?
I don’t think anybody realistically expects any of the Mag 7 reporting this week to announce a cut in their capex. We are in an AI arms race, and no tech company would like to lag behind their peers. However, what markets would watch out for is the increase in 2026 capex, as investors are now increasingly jittery about the mammoth numbers Big Tech companies are committing to build AI infrastructure.
It would also be crucial to watch any commentary on the 2027 guidance. While companies would refrain from providing a hard number, any color on the directionality would be crucial to watch. I specifically look forward to hearing Microsoft’s comments, as it is the company’s fiscal Q4 earnings call, and it should provide commentary for the current fiscal year, which would overlap with half of the next calendar year.
Incidentally, in a blog post earlier this month, Microsoft CEO Satya Nadella discussed the data privacy aspect of AI and wrote, “You essentially pay for intelligence twice, once with money, and again with something even more valuable: the proprietary knowledge you must reveal to make that intelligence useful. The better you want the model to perform, the more of that knowledge you have to feed it!”
Cloud Growth
Apart from the AI capex, the cloud businesses of Amazon and Microsoft, the two biggest U.S. cloud companies in that order, will also get outsized attention, particularly as Alphabet really shattered estimates with an 82% year-over-year (YoY) growth. While Amazon and Microsoft aren’t expected to grow their cloud revenues anywhere near that lofty number, Alphabet’s earnings have raised the bar for two of its bigger competitors.
On a related note, Meta Platforms might elaborate on its plans to enter the cloud computing business. Earlier this month, Bloomberg reported that Meta is planning to launch a cloud business to utilize excess compute capacity. Among hyperscalers, Meta is the only company that does not have a cloud business, and, in the past, CEO Mark Zuckerberg has touted the possibility of launching one.
AI Monetization
Markets would also look for more signs of AI monetization during the upcoming earnings calls. Meta, whose 2026 capex budget as a percentage of revenues is the highest among hyperscalers, has particularly been announcing a flurry of measures to monetize its investments, including testing subscriptions. During the earnings call, I would look for commentary on the subscription business of Microsoft and Meta to examine whether customers are really paying up for AI services for which tech giants are spending like no other industry has ever done in history.
All said, by sending shares of the remaining Mag 7 shares lower on Thursday and Friday, markets have already priced in some bit of earnings pessimism. The remaining constituents would need to come up with strong earnings and outlooks and upbeat commentary on their monetization plans to steer the AI trade, which has of late shown signs of weariness.
On the date of publication, Mohit Oberoi had a position in: AMZN , TSLA , MSFT , META , NVDA , GOOG . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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