Futures Slide as Tech Giants Post Mixed Earnings—What to Expect Next?

As traders navigate the latest wave of quarterly reports from major technology firms, US stock futures are trending lower. After a rollercoaster of earnings that sparked both excitement and concern, the market is poised for a careful assessment of economic data and corporate outlooks.

Futures Down Amid Tech Earnings

On Thursday morning, US stock futures pointed downward as investors digested the latest financial results from industry giants like Microsoft and Meta Platforms. By 6:13 AM EDT, the Dow futures had dipped by 217 points, or 0.50%, while S&P 500 futures and Nasdaq 100 futures fell by 0.81% and 1.12%, respectively. The previous trading session had already seen the major averages in the red, and the anticipation surrounding tech earnings has added an air of caution.

Alphabet, the parent company of Google, was a bright spot, posting better-than-expected revenue and earnings. However, this optimism was overshadowed by disappointing forecasts from chipmaker Advanced Micro Devices and wireless products manufacturer Qorvo, both of which contributed to the market's downward pressure.

One notable drop came from Super Micro Computer, whose shares plummeted over 30% after announcing the resignation of EY as its auditor. This has raised concerns, particularly for Nvidia, which relies heavily on Super Micro's ability to package its GPU chips into server systems. The fallout from these earnings reports has left investors questioning the sustainability of the tech rally.

Microsoft Faces Mixed Reaction

Shares of Microsoft took a hit in premarket trading following their quarterly report. While the tech giant revealed a robust 16% increase in fiscal first-quarter revenues, reaching $65.6 billion—surpassing Wall Street's expectations—the company also issued a cautionary note. Executives indicated that revenues from the Azure cloud computing segment were showing signs of softening.

Although Azure reported a solid 33% revenue growth year-over-year, the CFO, Amy Hood, projected a slowdown to between 31% and 32% in the upcoming quarter. This news dampened the initial excitement among investors, especially in light of Microsoft’s significant capital expenditures to expand its AI capabilities.

Microsoft’s investments in AI, buoyed by its partnership with OpenAI, have positioned it as a leader in this booming sector. However, rising expenses may raise questions about future profitability and margins.

Meta Platforms' AI Ambitions

Meta Platforms also attracted attention as it unveiled better-than-anticipated quarterly results, reporting revenues of $40.6 billion and a net profit of $15.7 billion. However, investors remain wary of the company’s heavy spending on artificial intelligence. CEO Mark Zuckerberg highlighted strong momentum in AI investments, forecasting a “significant” surge in capital expenditures in 2025.

This focus on AI comes amid ongoing scrutiny over Meta's foray into the metaverse, which has not yet yielded profitable returns. The pressure on Meta, along with its tech counterparts, continues to mount as stakeholders question when these massive AI investments will translate into substantial profits.

Samsung's Chip Division Misses Expectations

In the semiconductor space, Samsung Electronics reported a sharp 40% decline in operating profit in its crucial chip division, falling short of estimates. The company noted that one-off expenses, including employee incentives and foreign exchange challenges, contributed to this downturn. Despite these setbacks, Samsung reassured investors of its progress in securing a significant supply deal, which could bolster future sales of high-bandwidth memory chips crucial for AI applications.

Although the earnings report was disappointing, shares in Samsung showed slight gains, suggesting some investors remain optimistic about the company’s strategic direction.

Oil Market Choppy Amid Mixed Data

The oil market also experienced volatility, with prices fluctuating after a surprise drop in US inventories. As of 6:13 AM EDT, Brent crude was down 0.4% at $71.91 per barrel, while US crude futures saw a slight uptick of 0.41% at $68.89. This choppy performance follows earlier gains after a significant drop earlier in the week.

Data from the Energy Information Administration indicated that US gasoline stockpiles had fallen to a two-year low, further complicating the market's outlook.

Looking Ahead

With more tech giants like Amazon and Apple set to report their earnings soon, all eyes will be on how these companies address their AI investments and economic forecasts. As the November 5 presidential election looms, traders will closely monitor economic indicators, making for a tense and potentially volatile trading environment.