Mag 7 Earnings Start Off as A Drag as Alphabet (GOOG) and Telsa (TSLA) Underwhelm
Disappointing earnings takeaways came from today’s Mag 7 reports from Alphabet (GOOG) and Tesla (TSLA) as concerns related to concentration, 2H earnings growth slowdown and elevated AI capex vs monetization have had investors waiting to see what the industry leaders would report.
Alphabet reported mostly better Q2 results citing momentum in core Search and Cloud with AI segment producing quarterly revenue over $10Bn for the first time which provided a bright spot on the company report. However, capex on ramp in AI investments and higher depreciation related to infrastructure investment is seen as a margin headwind and another drag on the report.
Takeaways from the Q2 Tesla report illustrate continued struggles in its autos business while AI continues to be pushed to the company forefront. Tesla beat revenue estimates citing growth of 2% driven by strong energy storage and larger than expected $890M regulatory credit boost. However, its profits are down 45% y/y and auto margins fell again as Musk reaffirmed deliveries will likely remain notably lower y/y but increased the Q3 production forecasts. The Robotaxi event is confirmed for October 10th as analysts believe it to be the biggest longer-term opportunity for the company. However, much uncertainty on its adoption and success continues to swirl.
