Alphabet is experiencing a sharp drop of over 10% in premarket trading, which could lead to its worst post-earnings reaction ever if it falls more than 9.77% during the day.
This decline follows a disappointing earnings report where the company missed both earnings per share (EPS) and revenue forecasts for the second consecutive quarter, raising alarms about the impact of AI chat and agents on its search business. Analysts, including Gil Luria from D.A.
Davidson, have expressed concerns that this quarter may reflect the fears surrounding Alphabet's search revenue, which is crucial for funding its heavy investments in AI infrastructure. In contrast, Microsoft is seeing a positive reaction in its shares, with Azure revenue growing 48%, and the company forecasting up to $97 billion in second-quarter revenue, surpassing expectations.
However, its reduced capital expenditure guidance has negatively affected neocloud companies like Coreweave and Nebius, which rely on Microsoft as a key customer. Additionally, cybersecurity stocks are under pressure following a significant drop in Fortinet's shares after it missed margin expectations.
Looking ahead, Amazon is set to report earnings later today, with analysts predicting continued negative free cash flow amid substantial capital expenditures. Overall, the market is showing signs of divergence among major tech stocks, indicating that investors need to be more selective in their choices