#USEarningsSeason The third-quarter earnings season is in full swing in the U.S. stock markets. The results reported by Tesla and Meta indicate that the market’s focus has shifted beyond mere revenue and profit figures toward the tangible returns on artificial intelligence (AI) investments, capital expenditures, and forward-looking guidance. So, what do these earnings reports tell us, and what lies ahead in the coming days?
Tesla and Meta: Two Different Stories in the Same Season
Tesla’s third-quarter results presented a mixed picture. While the company’s revenue remained flat at $28.05 billion, its GAAP net profit fell by 43% to $787 million. However, the automotive gross margin—excluding regulatory credits—rose to 18.1%, up from 16.3% in the previous quarter. Energy storage deliveries reached 13.7 GWh, and the margin for the "services and other" segment hit a record high of 15.9%. Furthermore, free cash flow turned positive at $1.53 billion. In short, although Tesla showed signs of a recovery in profitability, the sharp decline in net profit and the fact that the Robotaxi business has yet to generate revenue could not prevent the stock from falling by more than 3% in after-hours trading.
Meta, meanwhile, delivered a strong performance in terms of revenue. The company’s revenue reached $64.6 billion—a 26% increase compared to the same period last year—surpassing market expectations. However, underlying this picture are a one-time legal payment of $9.89 billion and rising investments in AI. Capital expenditures for the third quarter reached $34.91 billion, while free cash flow stood at negative $2.1 billion. The company has raised its full-year 2026 capital expenditure forecast to a range of $135–$145 billion. In other words, while Meta generates strong cash flow from its advertising revenue, it is simultaneously investing that cash aggressively into AI infrastructure. The market responded positively to this, with the stock climbing as much as 4% in after-hours trading.
Key Dates and Market Focus
The earnings reports to be released in the coming days will be the true defining factors of this season. Microsoft and Alphabet are set to report on October 28, Amazon on October 29, and Apple on November 2. Nvidia is expected to release its earnings around November 18.
What the market is primarily looking for from these companies is a tangible return on their AI investments. Cloud business segments, in particular, stand out as the stars of the season. Analysts anticipate growth in the 85–90% range for Google Cloud and over 40% for AWS. Microsoft Azure is projected to grow by 44–45% on a constant-currency basis. These figures are critical, as they indicate that the massive expenditures on AI infrastructure are beginning to translate into revenue.
As for Apple, the situation is somewhat different. UBS expects Apple to report revenue of $112.8 billion and earnings per share of $1.97 in its November 2nd earnings release. However, rising component costs—particularly for memory chips—could cause the gross margin to decline from 50.1% to 47.5%. Meanwhile, Morgan Stanley notes that Apple is projecting low-to-mid single-digit revenue growth for the December quarter.
"Will Stocks Automatically Rise If Earnings Beat Expectations?"
This is one of the most frequently asked questions by investors, yet it is based on a highly misleading assumption. The short answer is: No, not always. When the market evaluates whether a company has exceeded expectations, it actually focuses on two key questions: "by how much did it beat?" and "what does this signal for the future?" If a stock has already rallied significantly ahead of its earnings report—meaning the positive results were largely "priced in"—the market may exhibit a reaction known as "beat and fade." We have seen this dynamic play out this season: while Tesla’s margin recovery was a positive, the decline in net profit and uncertainty surrounding its "Robotaxi" project triggered a sell-off. Conversely, for Meta, strong revenue growth and the long-term potential of its AI investments spurred buying, despite short-term cash burn.
So, Which Company Am I Watching Most Closely?
The true test this season is whether AI-related expenditures are translating into profitability. For this reason, the earnings reports I am monitoring most critically are those of Microsoft and Alphabet. Both companies will help define the broader direction of the sector through growth in their cloud business segments and the realization of AI-related revenue. On November 18, Nvidia will provide the clearest picture regarding the demand for the chips that underpin all these investments. While short-term volatility may persist, the medium-term returns on AI investments will remain a common theme across these earnings reports.
This text does not constitute investment advice. The analysis is based on publicly available information and does not guarantee future results.
