Alphabet and Tesla in Focus as Markets Demand More from Big Tech

Alphabet and Tesla will headline this week's earnings calendar, with investors looking beyond headline numbers to determine whether billions of dollars in artificial intelligence (AI) investment are translating into sustainable growth, according to Josh Gilbert, Lead Market Analyst, APAC & Middle East at eToro.

"The Magnificent Seven have carried markets for the past two years, but investor patience is clearly wearing thinner," said Gilbert. "The equal-weighted Magnificent Seven ETF has returned just 1.5% this year compared with 8.7% for the S&P 500, while recent weakness in semiconductor stocks has put AI spending firmly under the microscope."

Alphabet: AI returns take centre stage

Alphabet enters earnings following the strongest market reaction of any Magnificent Seven company last quarter, yet its shares have gained only 1.2% since reporting, well behind the broader market.

Consensus forecasts second-quarter revenue of around USD 117 billion, up 21% year-on-year, with earnings per share expected at USD 2.89.

"For Alphabet, Cloud remains the key growth engine," Gilbert said. "Cloud revenue grew 63% in the first quarter, and the company's AI infrastructure backlog has expanded dramatically. Investors will want to see that demand converting into recognised revenue."

Markets are also expected to focus on Alphabet's substantial investment programme after the company increased annual capital expenditure guidance to USD 180–190 billion and signalled even higher spending next year.

"Three months ago investors were comfortable funding aggressive AI investment," Gilbert added. "Today they're asking tougher questions. Markets now want proof that this level of spending will generate durable returns."

One bright spot remains Alphabet's AI monetisation strategy, with Gemini now exceeding 900 million monthly users.

"The big question is whether AI expands Google's advertising opportunity or gradually cannibalises it," Gilbert said. "That's likely to be one of the defining themes of this earnings report."

Tesla: Margins matter more than deliveries

Tesla heads into earnings as the weakest-performing Magnificent Seven stock this year, down 18% year-to-date, despite reporting second-quarter deliveries well ahead of expectations.

The market expects Tesla to report USD 26.3 billion in revenue and earnings per share of USD 0.50.

"Strong deliveries weren't enough to satisfy investors last quarter," Gilbert said. "This time the focus shifts squarely to margins and whether the core automotive business remains healthy enough to fund Tesla's increasingly ambitious AI strategy."

Consensus expects automotive gross margins, excluding regulatory credits, of 19.5%, although investors will closely examine whether those margins are supported by underlying operations rather than one-off benefits.

"Tesla is increasingly valued as an AI and robotics company rather than simply a car manufacturer," Gilbert said. "Investors are already paying today for businesses like Optimus and Cybercab, even though meaningful revenues remain several years away."

With annual capital expenditure expected to reach USD 25 billion, Tesla is prioritising long-term growth over near-term cash generation.

"Elon Musk has always encouraged investors to think in decades rather than quarters," Gilbert concluded. "But with AI investment now facing greater scrutiny than at any point in this cycle, this earnings report will test just how much confidence investors still have in Tesla's long-term vision."