Earnings were the main driver of price action on Thursday, as market participants parsed quarterly results from some of Wall Street's largest companies. A highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping sparked plenty of chatter, too.
Facebook parent Meta Platforms (META, -11.3%) and tech giant Microsoft (MSFT, -2.9%) made two of the most notable post-earnings moves today. Both Magnificent 7 stocks ended sharply lower as spending concerns overshadowed quarterly beats.
Meta, for one, reported higher-than-expected third-quarter earnings and revenue and strong fourth-quarter guidance. It also raised the lower end of its full-year expense forecast by $2 billion, now expecting total expenses of $114 billion to $118 billion in 2025 – up nearly 22% at the midpoint from 2024.
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And in Meta's earnings call, Chief Financial Officer Susan Li said the company expects "total expenses will grow at a significantly faster percentage rate than 2025, with growth primarily driven by infrastructure costs, including incremental cloud expenses and depreciation."
Microsoft beat on the top and bottom lines for its fiscal 2026 first quarter, but the company's capex of $34.9 billion came in above the $30 billion it forecast in July.
Additionally, Chief Financial Officer Amy Hood said on the earnings call that the capex growth for fiscal 2026 will "be higher than fiscal year 2025" amid increased spending on "GPUs and CPUs" to power its artificial intelligence (AI) infrastructure.
Wall Street isn't worried about Alphabet's AI spending
Increased spending isn't a concern for Alphabet (GOOGL), though, with the communication services stock jumping 2.5% after its earnings report.
The Google parent said third-quarter earnings rose 35% year over year to $2.87 per share, while revenue increased 16% to $102.3 billion – both figures higher than analysts expected.
Google Services revenue jumped 14% on solid YouTube ad sales, while Google Cloud revenue, which houses its AI segments, surged 34%. Alphabet also increased its full-year capital expenditures amid "growth across our business and demand from Cloud customers."
"Alphabet just delivered its first-ever $100 billion quarter, silencing the doubters with standout performances in both Search and Cloud," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "AI Overviews and AI Mode are clearly resonating with users, helping to ease fears that Google's core search business is under threat from generative AI."
Chipotle suffers its biggest one-day drop in 13 years after earnings
Elsewhere on the earnings calendar, Chipotle Mexican Grill (CMG) plunged 18.2% after its third-quarter results, marking the blue chip stock's biggest one-day drop since July 20, 2012, whe it fell 21.5%.
The burrito chain's Q3 earnings of 29 cents per share were in line with estimates, but revenue of $3 billion fell short, as traffic declined 0.8%. It also said it expects full-year same-store sales to contract by a low single-digit percentage.
"Our third-quarter performance fell short of our expectations due to persistent macroeconomic pressures," said Chipotle CEO Scott Boatwright in the earnings call.
He pointed to the 25- to -35-year-old age group – a key demographic for Chipotle – as "facing several headwinds, including unemployment, increased student loan repayment and slower real wage growth."
Trump says he'll cut tariffs on China
In one of the week's high-stakes events, President Trump and Chinese President Xi Jinping met in their first face-to-face meeting in six years.
The two leaders reached agreements on several issues, with Trump saying he will lower tariffs on China related to fentanyl to 20% from 10% and extend the pause on reciprocal tariffs for the next 12 months.
Xi, meanwhile, authorized the purchase of agricultural products, including soybeans, from the United States. Beijing will also delay restrictions on rare earth minerals for one year.
The leaders also discussed Ukraine and Russia, with Trump telling reporters that the two countries are "both going to work together to see if we can get something done."
But the agreements weren't enough to overcome disappointing mega-cap earnings. The blue-chip Dow Jones Industrial Average fell 0.2% to 47,522, the broader S&P 500 shed 1% to 6,822, and and the tech-heavy Nasdaq Composite slumped 1.6% to 23,581.
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