US Tech Giants Face AI Capital Expenditure Test in Earnings Reports, Microsoft Emerges as Temporary Winner, Meta, Tesla, and Alphabet Under Scrutiny

On July 30, the earnings season for the seven major US tech giants enters a critical window. As of the close of trading on July 29 in the Eastern US, Alphabet, Tesla, Microsoft, and Meta have reported their results, while Apple and Amazon will announce their earnings after the market closes on July 30. Nvidia will wait until August 26 to disclose its latest quarterly performance. The reported earnings indicate that AI capital expenditures continue to rise significantly, with the market beginning to scrutinize return on investment, free cash flow, and growth sustainability more rigorously.

Alphabet was the first to raise market awareness regarding AI spending. The company reported second-quarter revenue of $119.8 billion, a 24% year-on-year increase, with Google Cloud revenue reaching $24.8 billion, a staggering 82% increase year-on-year, and an overall operating profit margin rising to 34%. However, the company's quarterly capital expenditures soared to $44.9 billion, and free cash flow turned negative at -$5.9 billion, prompting an upward revision of its 2026 capital expenditure guidance from $180 billion to $190 billion to $195 billion to $205 billion. The strong cloud business could not offset concerns about deteriorating cash flow, leading to pressure on the stock price after the earnings report.

Tesla's pressure is more concentrated on profits and cash flow. The company reported second-quarter revenue of $28.24 billion, a 26% year-on-year increase, with deliveries of 480,100 vehicles, a 25% increase year-on-year, and energy storage deployments of 13.5 GWh, a 41% increase year-on-year. However, the adjusted EPS was $0.33, below market expectations; operating profit fell 57% year-on-year to $398 million, and free cash flow was -$1.092 billion. The company expects capital expenditures to exceed $25 billion in 2026, directed towards Robotaxi, Optimus, Dojo computing power, and manufacturing capacity, but the market's patience for high investment in exchange for future returns has waned.

Microsoft provided a few positive examples. The company reported fourth-quarter revenue of $90 billion, an 18% year-on-year increase, with an EPS of $4.81, both exceeding expectations; net profit was $35.8 billion, a 31% year-on-year increase. Microsoft Cloud revenue reached $59.3 billion, a 27% year-on-year increase, with Azure growing 43%, and the number of paid users for Microsoft 365 Copilot exceeding 30 million. The company's quarterly capital expenditures were approximately $41 billion, with no contraction in AI and cloud infrastructure investments, but Azure and Copilot have already provided clearer monetization paths, leading to a relatively positive market reaction.

Meta's earnings report has once again sparked controversy over AI spending. The company reported second-quarter revenue of $60.8 billion, a 28% year-on-year increase, with advertising revenue of approximately $59.36 billion, a 27% year-on-year increase; however, the EPS was $6.18, below market expectations, and net profit fell 14% year-on-year to $15.85 billion. Costs and expenses surged 55% year-on-year to $42.03 billion, with capital expenditures reaching $31.08 billion, and free cash flow plummeting from $8.55 billion in the same period last year to $784 million. The company adjusted its full-year capital expenditure guidance to $130 billion to $145 billion, and the third-quarter revenue guidance indicates a slowdown in growth, suppressing after-hours performance.

Next, Apple and Amazon will be the last two major events of the week. Market attention for Apple focuses on iPhone, service revenue, AI pace, and cost pressures; Amazon is concentrated on AWS growth rate, AI cloud demand, and whether capital expenditures will continue to be revised upward. Although Nvidia's earnings report will not be available until the end of August, it has already become a direct reflection of this round of major companies' capital expenditure cycle.

Overall, the trading narrative of the earnings reports from the seven major US tech giants has shifted from the scale of AI investments to the returns on those investments. Microsoft has temporarily proven that cloud and AI can generate visible revenue, while Alphabet, Meta, and Tesla are being asked to provide stronger evidence of cash flow. The upcoming earnings reports from Apple, Amazon, and Nvidia will determine whether the anxiety over AI capital expenditures continues to spread or returns to a growth narrative.

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