Alphabet Boosts AI Spending, Tesla Misses Revenue, IBM Earnings Up 8% in Tech Earnings Open

The U.S. tech earnings season opened with contrasting performances from Tesla, Alphabet, and IBM, offering a mixed glimpse into the sector’s health as investors scrutinized results for clues about growth and resilience. Alphabet emerged as the standout, surpassing revenue and earnings forecasts while boosting its AI investment pledge. Tesla reported weaker-than-expected automotive sales and revenue, citing political controversies and production hurdles, while IBM delivered robust results but faced post-earnings stock declines.

Alphabet’s second-quarter revenue of $96.43 billion exceeded the $94 billion forecast, driven by strong growth across core businesses. The company’s AI ambitions intensified, with its 2025 capital spending target rising to $85 billion from $75 billion, reflecting confidence in cloud and search services. Google Cloud revenue hit $13.62 billion, outpacing estimates, and ad revenue grew 10.4% year-over-year to $71.34 billion. The increased AI investment aligns with broader industry trends, as competitors like Microsoft and Amazon also scale their bets on artificial intelligence [1].

Tesla, however, struggled to meet expectations. Adjusted earnings per share came in at $0.40, below the $0.42 forecast, while total revenue of $22.5 billion fell short of the $22.74 billion estimate. Automotive revenue dropped 16% year-over-year to $16.7 billion, with regulatory credit sales plummeting to $439 million from $890 million. The company attributed part of the decline to production challenges and a shift in focus toward lower-cost models, with plans to launch a cheaper EV in 2025. Political controversies surrounding CEO Elon Musk, including high-profile endorsements and policy changes at his DOGE initiative, compounded consumer sentiment risks [2].

IBM reported a strong turnaround, with revenue rising 8% year-over-year to $16.98 billion, surpassing the $16.59 billion forecast. Adjusted earnings per share reached $2.80, above the $2.64 estimate. The software division reported $7.39 billion in revenue, and hybrid cloud services grew 16%. Despite beating expectations, IBM shares declined 5% in after-hours trading, though the stock remained up 28% year-to-date, outperforming the S&P 500’s 8% gain. The company reaffirmed its $13.5 billion free cash flow target for 2025 and highlighted strategic moves like the z17 mainframe launch and the Hakkoda acquisition [3].

The earnings reports underscored divergent strategies within the tech sector. Alphabet’s aggressive AI push and IBM’s cloud-focused growth signaled confidence in long-term innovation, while Tesla’s struggles highlighted near-term volatility in EV markets. Analysts noted that Alphabet’s results demonstrated its ability to monetize AI-driven services, particularly in search and cloud computing [1]. For Tesla, the company’s guidance for cost reductions and a more affordable EV model offered a path to volume growth, though investors remained cautious about its profitability [2]. IBM’s performance, meanwhile, reflected the value of strategic acquisitions and enterprise AI integration [3].

Market concentration risks remain elevated, as Alphabet, Tesla, and IBM collectively account for over 5% of the S&P 500’s weight. The earnings season’s opening day left investors parsing the balance between optimism for AI-driven growth and caution over sector-specific challenges. With the tech-heavy index showing mixed momentum, attention will now turn to subsequent reports from other “Magnificent Seven” firms to gauge whether the trends observed in the initial trio persist [5].

Source: [1] [Alphabet boosts AI investment to $85B by 2025] https://www.cryptopolitan.com/tesla-alphabet-ibm-lead-off-earnings/

[2] [Tesla earnings miss expectations] https://finance.yahoo.com/news/live/earnings-live-tesla-results-miss-google-boosts-ai-spending-chipotle-plunges-201333895.html

[3] [IBM stock nears decade highs] https://www.investors.com/news/technology/ibm-stock-q2-earnings-preview-ai-cloud/

[5] [U.S. stock market concentration risks] https://www.aol.com/news/us-stock-market-concentration-risks-101509724.html