The second-quarter earnings season for the influential “Magnificent Seven” technology stocks begins this week with results from Alphabet Inc. and Tesla Inc., setting the stage for how Big Tech will shape the broader S&P 500’s financial performance.
The group—comprising Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla—is expected to report combined earnings growth of 14.1% from the year prior.
In stark contrast, the other 493 companies in the S&P 500 are projected to post a more modest 3.4% year-over-year increase.
The concentration of growth once again puts the spotlight on Big Tech’s earnings, particularly on Alphabet and Tesla, as potential catalysts or spoilers for broader market sentiment.
Alphabet faces scrutiny on AI monetization and regulatory risk
Alphabet’s results come at a delicate time.
While the Google parent continues to pour billions into artificial intelligence and cloud infrastructure, questions about how well it can monetize its AI investments and defend its core search business from disruption are growing louder.
Analysts generally expect a strong showing for the quarter, particularly from YouTube and the Google Cloud segment.
Truist’s Youssef Squali said that search demand likely remained solid, and any AI-related competitive threats were already priced into the stock.
“Concerns over AI evolution in Search (and regulatory pressures to a lesser degree) have weighed on [Alphabet],” he said.
“We believe that current valuation reflects much of those concerns, and that AI Search remains Google’s war to lose,” he said.
Alphabet shares are down about 2% year to date.
Some of the caution stems from increasing competition from AI-driven chatbot alternatives like OpenAI’s ChatGPT and Anthropic’s Claude, which provide new avenues for users to seek information without traditional search.
More bearish analysts at Bank of America have pointed to these AI competitors as possible drags on Alphabet’s click-through ad revenue.
Concerns have also surfaced about Alphabet’s legal vulnerabilities following setbacks in antitrust cases, as well as skepticism over how it plans to profit from the AI overviews embedded in its search results.
Morgan Stanley, others raising PTs on GOOG ahead of earnings
Still, bulls believe Alphabet remains firmly entrenched in the digital landscape.
They point to the company’s mountain of first-party user data and longstanding relationships with publishers, which could prove critical as AI reshapes content usage online.
Additionally, segments like Google Cloud, YouTube, and autonomous vehicle arm Waymo are seen as underappreciated contributors to Alphabet’s long-term value.
Morgan Stanley recently raised its price target on Alphabet to $205 from $185, citing the company’s improved innovation pace, clearer disclosures, and productization of AI.
The investment bank noted that a key question for investors is whether Alphabet can chart a path to more than $10 in earnings per share by 2026.
Another key development will be how the market interprets post-earnings guidance, particularly any indications of benign regulatory outcomes or a possible AI partnership with Apple, following the Department of Justice’s review of Alphabet’s competitive practices.
Rothschild & Co Redburn too adjusted price target on Alphabet to $215 from $205, and maintained a Buy Rating.
Tesla braces for tough quarter as EV headwinds mount
Tesla, which also reports on Wednesday, enters the earnings season under pressure.
Analysts expect earnings per share of 39 cents on revenue of $22.1 billion, down from 52 cents and $25.5 billion a year ago.
The company sold 384,000 vehicles in the quarter, representing a 13.5% year-over-year decline in unit sales.
Shares of Tesla were up 1.4% on Monday morning to $334.48, though the stock remains down 18% year-to-date despite a 38% gain over the past 12 months.
Baird analyst Ben Kallo struck a cautious tone, citing risks to full-year earnings from the delayed launch of Tesla’s lower-priced EV model and the recent elimination of the federal EV tax credit under President Donald Trump’s new tax legislation.
Both factors could weigh on demand through the remainder of 2025.
RBC’s Tom Narayan, however, maintained a “Buy” rating, expressing hope that the affordable vehicle would debut later this year and reinvigorate Tesla’s growth trajectory.
He also expects updates on Tesla’s expansion into autonomous vehicles and robotics.
Tesla launched a limited robo-taxi service in Austin, Texas, in June and aims to sell humanoid robots at scale in 2026.
The outcome of the upcoming earnings call could offer more clues on timelines and monetization plans for these futuristic bets.
Options mkts pricing in a 7% swing in TSLA post earnings.
Beyond EV demand, Tesla faces new policy headwinds. Congress recently revoked a waiver allowing California to regulate its own air emissions—legislation that had underpinned much of Tesla’s zero-emission vehicle (ZEV) credit revenue.
The company reported $595 million in ZEV credit sales last quarter, but Wells Fargo analyst Colin Langan expects that figure to drop significantly in the coming quarters.
He rates the stock a “Sell” with a price target of $120.
Then there is Elon Musk. After a quiet period, the Tesla CEO returned to the spotlight, reigniting a feud with President Trump and hinting at political ambitions of his own.
Over the weekend, Musk claimed to be sleeping at Tesla’s office once again—a symbolic move that investors may interpret either as recommitment or distraction.
Options markets are pricing in a 7% swing in Tesla shares following earnings.
The company has posted an average move of 11% across the last four earnings reports, with three upside surprises and one decline.
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