The importance of artificial intelligence to life now - and certainly in the future – has helped boost performance of two Magnificent 7 companies, pleasing the markets after hours.
But Wall Street was gaining before Microsoft and Meta posted their first quarter earnings reports, despite the latest reading of the US economy showing a slowdown in the first quarter; real GDP decreased 0.3% according to the Bureau of Economic Analysis.
Compared to the fourth quarter, the downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending that were partly offset by upturns in investment and exports.
Investors determined that a slowing economy – the previous quarter delivered a positive 2.4% - moves the Fed closer to the long-awaited cuts in interest rates and could even force President Trump to ease tariffs or speed up deals with trading partners.
The S&P 500 and Dow Jones both closed slightly higher Wednesday thanks to a late-day rally although the Nasdaq was marginally lower, although was the only one of the three to end April higher overall.
Futures for all three gained after the market closed, with the big tech sector’s latest earnings reports in focus.
Microsoft reported strong performance for the third quarter of its fiscal year 2025:
· Revenue was $70.1 billion and increased 13% (up 15% in constant currency)
· Operating income was $32.0 billion and increased 16% (up 19% in constant currency)
· Net income was $25.8 billion and increased 18% (up 19% in constant currency)
· Diluted earnings per share was $3.46 and increased 18% (up 19% in constant currency)
“Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth," said Satya Nadella, chairman and CEO of Microsoft. “From AI infra and platforms to apps, we are innovating across the stack to deliver for our customers.”
Meta also achieved stronger results:
· Revenue was $42.3 billion and increased 16%
· Operating income was $17.6 billion and increased 22%
· Net income was $16.6 billion and increased 35%
· Diluted earnings per share was $6.43 and increased 37%
"We've had a strong start to an important year, our community continues to grow and our business is performing very well," said Mark Zuckerberg, Meta founder and CEO. "We're making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives."
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