Major technology firms are encountering a surprising trend where surpassing Wall Street estimates is not enough to satisfy investors. This has led to a decline in stock prices, despite positive earnings reports.
What Happened: Major technology companies are experiencing a paradox where surpassing Wall Street estimates is insufficient to satisfy investors.
On Thursday, Microsoft MSFT reported quarterly revenue exceeding expectations by $1 billion and an 11% increase in net income compared to the previous year.
Despite these impressive figures, Microsoft’s shares fell by 6.1% due to a conservative forecast for the upcoming quarter, marking its worst performance since October 26, 2022, CNBC reported on Friday.
Apple AAPL faced similar investor reactions. Despite exceeding Wall Street estimates, the stock began sliding down during Friday pre-market due to investors concerns about weak guidance for December quarter sales.
Even Alphabet GOOGL, which initially saw a nearly 3% rise in shares following its earnings report on Wednesday, experienced a 1.9% decline on Thursday after OpenAI announced rolling out of Chat GPT Search, a competition for Google Search.
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Ross Mayfield, an investment strategist at Baird Private Wealth Management, commented on the situation, stating, "I think we're getting to the point where AI enthusiasm and potential is not enough. These companies are not quite delivering the growth that is priced into them."
Why It Matters: The comment comes at a time when companies like Microsoft, Apple and Meta are banking on the AI buzz. Microsoft’s AI Business is on track to surpass $10 billion in annual revenue, marking a significant milestone.
CEO Satya Nadella emphasized the rapid adoption of AI across Microsoft’s product portfolio, highlighting strong customer demand.
Jim Cramer noted that Alphabet’s plans to increase AI infrastructure investments next year could significantly benefit NVIDIA Corp NVDA. Alphabet’s recent earnings report revealed a 15% revenue increase, underscoring its strategic focus on technology advancements.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Images via Shutterstock, Edited via Canva
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