"Much better than expected"! Mag7 stabilized the US stock market this earnings season

Against the backdrop of unpredictable trade policies under Trump, despite a decline in earnings expectations across many sectors of the S&P 500 during this earnings season, the performance of American tech giants has been surprisingly strong.

According to Bloomberg data, the earnings of the Mag7 are expected to grow by 21.6% in 2025, while revenue is projected to increase by 9.7%. Both estimates have risen over the past week.

Demand for businesses such as electronic devices, cloud computing services, software, and digital advertising has generally remained strong, alleviating investors' concerns about the worst-case scenarios that could arise from Trump's trade policies.

Although Apple's performance has been disappointing, overall, these earnings reports have provided strong support for a rebound in the stock market.

"Many investors were prepared to hear very pessimistic news," said Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott:

"Even slightly weak data is far better than the worst-case expectations. This allows the market to maintain a half-full glass attitude, although the situation remains unclear, and any emerging signs of economic slowdown could jeopardize the rebound momentum."

Earnings Highlights: Cloud Computing and AI Investments Remain Strong

Among the Mag7 that have already reported earnings, four companies provided revenue forecasts that were either broadly in line with or exceeded Wall Street expectations.

Microsoft's revenue forecast exceeded expectations due to strong performance in its Azure cloud computing business, with demand continuing to outstrip its data center capacity.

Amazon's operating profit outlook, while weaker than expected, saw CEO Andy Jassy stating that the company "has not seen any signs of demand weakening." Meta provided confidence in the digital advertising spending outlook with forecasts that were roughly in line with analyst expectations.

AI Capital Expenditures Remain Strong, Chip Manufacturers Benefit

This earnings season has also alleviated concerns about capital expenditures for artificial intelligence computing devices, which have been the engine of revenue growth for companies like Nvidia and Broadcom. Meta raised its capital expenditure forecast for this year, while Microsoft indicated that growth in such expenditures would slow next year but would still increase.

Hanna Howard, portfolio manager at Gabelli Funds, stated. These comments drove up the stock prices of chip manufacturers and computing hardware manufacturers:

"Tech companies have gained more freedom in spending because they have proven that these expenditures can yield returns and support growth."

However, not all news is positive. Tesla has abandoned its previous forecast of restoring revenue growth by 2025, while Apple indicated that tariffs are expected to increase costs by $900 million this quarter. Apple has faced downgrades from at least two Wall Street firms, with analysts citing tariff resistance and growth concerns as reasons.

"People are very worried about seeing a more severe pullback, but based on what we've seen, the situation is much better than expected," said Howard from Gabelli:

"Of course, people are concerned that things could worsen, but for the most part, the situation is quite positive."