Big Tech is stepping up to the earnings plate. Stock markets need impressive results to continue their recent rally, but reactions to Tesla's big spending plans and ServiceNow's margin guidance are a reminder of the hazards.
Tesla kicked things off for the Magnificent Seven, top performing tech stocks, with operating profit that more than doubled. But the cheer faded during its earnings call as CEO Elon Musk unveiled a hike in capital expenditure. While electric-vehicle maker Tesla is something of an outlier among its Mag 7 peers in terms of its products -- cars and robots -- hefty spending on infrastructure is likely to be a common theme when the likes of Alphabet and Amazon report next week.
If investment needs are one part of the tech earnings threat, software company ServiceNow highlighted the other -- the danger that artificial-intelligence will undercut and possibly replace existing products. Although the company raised its own AI revenue forecast, lowered margin guidance was enough to spook investors and send the stock tumbling in after-hours trade. The fragile sentiment around software is particularly relevant for Microsoft, which is a Mag 7 laggard this year so far -- down 10% through Wednesday's close, compared with a 0.7% rise for the Roundhill Magnificent Seven ETF.
There is a silver lining. All of that capex and AI investment is great news for chips and networking stocks. Just look at stellar earnings from memory-chip maker SK Hynix and network infrastructure company Nokia on Thursday. The Philadelphia semiconductor index has rallied for 16 consecutive sessions, advancing more than 35% during this period. That's its longest winning streak since June 2014.
The rise of AI is likely to mean some volatile reactions across tech earnings season. Watch out for capex-related scares, but it's worth being ready to pounce on the winners of all that spending as well.
-- Adam Clark
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Tesla's Elon Musk Optimistic as Usual. Spending Will Rise.
Tesla CEO and megabillionaire Elon Musk was as optimistic as usual on the electric-vehicle maker's call to discuss earnings. Higher-than-expected capital spending -- Tesla's planning $25 billion for new plants and equipment this year, up from $20 billion before -- will pay off "in a very big way," he said.
-- Everyone is still waiting for the third version of Tesla's humanoid robot,
Optimus, and for robo-taxi profits, which will come in 2027, Musk said.
First-quarter earnings were 41 cents a share on sales of $22.4 billion,
beating expectations. Operating profit soared 136% from a year ago to
$941 million.
-- Automotive gross profit margins excluding the impact of regulatory credit
sales were 19.2%, better than the roughly 15% Wall Street expected.
Profit per car improved by roughly $4,500 from a year ago, with lower
costs and better price realizations helping. Credit sales fell to $380
million.
-- Tesla still plans to expand its robo-taxi service to nine cities in the
first half of 2026, the same as in January. Tesla now says it is "ramping
unsupervised" service in Austin, Dallas, and Houston. Cities to come
include: Phoenix, Miami, Orlando, Tampa, and Las Vegas.
-- As for robotics, the company is making preparations for its first
large-scale Optimus factory. Tesla is also designing a production line in
Texas with the capacity to produce 10 million robots a year. Tesla's
Cortex 2 AI data center also is up and running.
What's Next: Eventually, Tesla's robo-taxi operations need to yield billions of dollars in profit to justify Tesla's $1.7 trillion valuation. Musk said the robo-taxi rollout would remain slow, with safety the priority. He doesn't expect significant revenue in 2026, but expects "significant" sales in 2027.
-- Al Root
A Dire Jet Fuel Shortage Could Crimp Summer Travel Plans
A jet fuel shortage is forcing airlines to cut flights and raise ticket prices, and could cause a severe slowdown in travel this summer -- particularly in Europe. American carriers aren't in danger of running out of fuel, but they are cutting flights to save money, too.
-- German carrier Lufthansa said this week it is canceling 20,000 flights
from now through October, immediately reducing its flight schedule by 120
trips a day. Reductions are happening all over, including at the
company's hubs in Frankfurt, Munich, Zurich, Vienna, Brussels, and Rome.
-- The Iran war has caused upheaval in the market for jet fuel, and Europe
has been hardest hit. The Middle East is normally the world's largest
source of jet fuel exports. Today, it has few ways to export that fuel,
because the Strait of Hormuz has been effectively closed.
-- Middle Eastern producers can't get their crude oil to Asia, which
normally refines the oil into fuel and sends it to Europe and elsewhere.
Instead, Asian countries such as China are suspending fuel exports, to
save supplies for their own populations.
-- Normally Europe uses about 1.6 million barrels a day of jet fuel,
importing about one-third of its supply. Three-quarters of those imports
come from the Middle East. That supply has now fallen to a trickle.
Prices of jet fuel in Europe have already doubled since the war began.
What's Next: U.S. jet fuel exports have doubled to around 400,000 barrels a day, recently reaching a record weekly average of 442,000. But carriers like Southwest Airlines expect fuel costs to rise, estimating $4.10 to $4.15 a gallon this quarter from $2.73 in the first quarter.
-- Avi Salzman and Kit Norton
Netflix Going After Social Media Platforms With New Videos
Netflix is trying to flip the page with its recent disappointing outlook, planning to roll out new videos for mobile devices to compete more directly with major social-media platforms like TikTok and Meta's Reels. It's a way to boost viewers' attention and engagement, particularly younger audiences.
-- The so-called vertical videos are formatted specifically for mobile
devices, filling the screen vertically to optimize viewing. JPMorgan
analyst Doug Anmuth said Netflix could capture share of the shorter,
"snackable moments," popularized by TikTok and other short-video
platforms.
-- Netflix investors are closely watching user engagement as competition
heats up with other streamers like Disney+, Paramount+, and HBO Max.
People spend a lot of time consuming social media on mobile screens,
especially younger people who gravitate toward short-form videos.
-- Netflix has been changing some of its content, hosting social media
personalities like YouTuber Ms. Rachel to keep users engaged for longer.
It also recently started uploading video podcasts to the platform, and
has been hosting live sporting events. Anmuth thinks highlighting this
type of content is a smart move.
-- Meanwhile, Texas started an investigation into whether music streaming
platforms such as Spotify and SiriusXM's Pandora are accepting
undisclosed payments to promote certain songs, artists, or playlists. The
companies, also including Alphabet, Amazon, and Apple, couldn't be
reached for comment.
What's Next: As digital streaming platforms now dominate music distribution, Texas Attorney General Ken Paxton said concerns have risen that record labels or artists are paying to be included in editorial or algorithmic playlists and song suggestions. He didn't cite any specific examples.
-- Angela Palumbo and Janet H. Cho
Move Over FICO, Alternative Credit Scores Have Arrived
Two of the U.S. government's main mortgage agencies, the Federal Housing Finance Agency and the Department of Housing and Urban Development, will let borrowers use alternative credit scores to apply for loans, potentially opening the housing market to renters and others who lack access to traditional credit scores.
-- It affects credit-scoring company Fair Isaac, which for years has had a lock on the market with its FICO score. FHFA Director Bill Pulte said mortgage giants Fannie Mae and Freddie Mac would allow mortgage lenders to use FICO competitor VantageScore when making lending decisions. -- Fannie and Freddie until now have used only FICO, relying mainly on one of Fair Isaac's older models. VantageScore, a joint venture of Equifax, TransUnion, and Experian, uses alternative data like rent payments to score borrowers' risk level, allowing them to consider borrowers with less traditional credit history. -- HUD Secretary Scott Turner said the Federal Housing Administration, popular among first-time home buyers, wouldn't accept the new scores immediately but planned to accept both VantageScore and a newer FICO model incorporating alternative credit data in coming months. -- Silvio Tavares, President and CEO of VantageScore, said the change will modernize the mortgage industry, deliver reduced mortgage risk, lower costs for consumers and mortgage lenders, and enhance mortgage access for credit-worthy borrowers.
What's Next: Allowing lenders to accept either FICO or VantageScore could kick off a price war between the competitors. Pulte said VantageScore prices its model at 99 cents a borrower and that FICO's CEO called him shortly before Wednesday's press conference offering to lower its price to 99 cents from $10.
-- Joe Light and Janet H. Cho
IBM Earnings Beat Expectations But Software Fears Remain
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April 23, 2026 06:44 ET (10:44 GMT)
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