Ahead of the earnings releases, market sentiment was broadly tense. Analysts at Deutsche Bank noted that large-cap tech stocks represented by Meta, Microsoft, Tesla and Apple had generally pulled back 10–15% from their recent highs. In the end, the market cast its vote with real money, delivering a fresh repricing of different business models and strategic outlooks: Tesla relied on “dreams” to halt its slide, Meta advanced on “fundamentals”, while Microsoft came under pressure from “growing pains”.

Key Earnings Metrics at a Glance

Tesla:
Revenue came in at USD 24.9 billion, down 3% year-on-year; non-GAAP EPS was USD 0.50, beating expectations of USD 0.45. Energy business revenue rose 25.5% year-on-year, hitting a record high. The stock rose more than 4% at one point in after-hours trading.

For now, the market is looking past the deterioration in the auto business and instead focusing on the future narrative: the USD 2 billion investment in xAI, the removal of safety drivers from Robotaxi operations, and the build-out of Optimus production lines.

Meta:
Revenue was USD 59.89 billion, up 24% year-on-year and well ahead of expectations; EPS was USD 8.88, also beating forecasts. Ad impressions grew 18% year-on-year, while price per ad rose 6%. The stock jumped more than 11% after hours.

The market not only endorsed the quarter’s results, but also gave a strong vote of confidence to Meta’s 2026 capex guidance of USD 115–135 billion, viewing it as a necessary investment to secure AI leadership.

Microsoft:
Revenue was USD 81.27 billion, up 17% year-on-year; EPS was USD 5.16, well above expectations. Azure cloud revenue grew 39% year-on-year, a slight slowdown versus the previous quarter. The stock slumped nearly 7% after hours.

Despite the earnings beat, the deceleration in Azure growth and a record USD 37.5 billion in quarterly capex stoked concerns, with the market questioning the efficiency of Microsoft’s heavy investment.

Breaking Down the Drivers Behind the Moves

1.Tesla: Why Did “Weak” Fundamentals Still Lead to a Share Price Rise?

Tesla’s rally is a textbook case of “bad news fully priced in” plus “narrative reignited”.

The company suffered its first-ever annual revenue decline in 2025, and vehicle deliveries were sluggish – all of which should have been major negatives. But the market had long anticipated these issues and already reflected them in the share price.

The real value of this earnings release lies in the new fuel it provided for Tesla’s future story:

• Stronger AI linkage:
  The announcement of a USD 2 billion investment in Musk’s AI start-up xAI, and its inclusion in Tesla’s “Master Plan”, significantly strengthens the company’s positioning as a “leader in physical-world AI” and provides a fresh anchor for its high valuation.

• Key progress on Robotaxi:
  Tesla confirmed that from January 2026 it has removed some human safety drivers from the Robotaxi fleet in Austin. This is seen as a crucial step toward the commercialisation of full self-driving and helps dispel doubts that progress was merely over-hyped.

• Validation of business diversification:
  The energy (storage) business, with a record 14.2 GWh deployed and rapid growth, demonstrates that Tesla has a “second pillar” capable of cushioning automotive cycle volatility.

  This gives investors more conviction to stay the course: even if the auto business faces short-term pressure, the company is simultaneously advancing rapidly across multiple frontier verticals.

The market is increasingly valuing Tesla not as a pure carmaker, but as a technology and energy platform. As a result, the weight of short-term earnings is falling, while the weight of progress against long-term narratives is rising.

2.Meta: Why Didn’t a Doubling of Capex Guidance Scare Investors – But Instead Trigger a Surge?

Meta’s sharp rally reflects the “certainty premium” that the market awards to “clear and powerful current growth”, in sharp contrast to Microsoft’s decline.

• Core business growth both strong and healthy:
  A 24% top-line increase is already impressive. More importantly, this growth is powered by both higher ad impressions (+18%) and higher price per ad (+6%).

  This shows that Meta’s AI technologies are directly enhancing the efficiency and quality of its core advertising business, with investments delivering immediate returns. Zuckerberg explicitly noted that AI spending is improving ad targeting precision and performance.

• Aggressive investment gets market “approval”:
  Investors reacted positively to Meta’s capex upper bound of USD 135 billion (almost double last year’s), because management clearly linked it to a well-defined strategic goal of building “personal superintelligence”, while also providing strong Q1 revenue guidance of USD 53.5–56.5 billion, well above expectations.

  The market believes this huge spend is aimed at seizing leadership in the generative AI era – and that Meta has robust core cash flows to support it. Put simply, investors think Meta “knows how to spend, and can afford to spend.”

3.Microsoft: Why Did a Across-the-Board Beat Still Result in a Sharp Selloff?

Microsoft’s decline reveals that investor patience with its transition from “AI investment phase” to “AI monetisation phase” is wearing thin. The central issue is the efficiency of its growth.

• Worries about slowing growth:
  Azure’s 39% growth, while in line with analyst expectations, marks a subtle but crucial slowdown from the previous quarter’s 40%.
  In a landscape where rivals like Meta and Amazon are also pouring massive sums into capex, any hint of deceleration raises concerns about Microsoft’s market position and future share gains.

• Capex efficiency under scrutiny:
  Quarterly capex surged 66% year-on-year to a record USD 37.5 billion, exceeding market expectations. Crucially, this massive spend did not deliver a positive growth surprise; instead, it coincided with gross margin slipping to a near three-year low.

  This triggered the core question raised by Stifel analyst Brad Reback: investors are laser-focused on whether Azure’s revenue growth can outpace the growth in spending.

  In addition, of Microsoft’s USD 625 billion in commercial remaining performance obligations, around 45% is related to a single customer, OpenAI. This concentration is fuelling concerns over the independence and potential risks of its growth.

• “One-off gains” masking underlying issues:
  The headline earnings beat was flattered by a USD 7.6 billion one-off gain from Microsoft’s investment in OpenAI. Once this effect is stripped out, attention shifts even more squarely to the operational issues exposed beneath the surface.