MAG 7 Earnings Reveal Cracks in Big Tech’s AI Gold Rush
The Magnificent Seven kicked off earnings season with a thud rather than a bang. TeslaTSLA, MetaMETA, and MicrosoftMSFT delivered uneven results that exposed growing strains beneath sky-high valuations built on AI optimism and future promises. Tesla’s annual profit fell to $3.8B from $7.1B in 2024 as BYD overtook it in EV sales, yet investors shrugged it off, keeping shares near highs.
- Microsoft beat expectations with Q2 EPS of $5.16 on $81.27B in revenue, but shares sank after market as cloud growth slowed and AI capacity constraints persisted.
- Meta posted a $6.02B Q4 loss in Reality Labs, pushing cumulative metaverse losses past $75B since 2020 as the company cut 1K+ jobs to refocus on AI and wearables.
Delaying the payoff: The tech giants are facing a credibility test. Tesla’s pretax margin has slipped to ~6%, with analysts saying the stock needs real progress on Robotaxi, FSD, and Optimus to move higher. Microsoft plans capex above last year’s $88.2B to clear AI bottlenecks, while Meta shuttered VR studios amid “VR winter” fears despite insisting the bet lives on. The MAG 7’s stumble is a reminder that betting on tomorrow’s breakthroughs doesn’t always pay today’s bills.