Big Tech Struggles: Tesla and Alphabet Disappoint Markets

Major tech earnings from Tesla and Alphabet are weighing on Wall Street, with futures indicating a lower opening on Wednesday. This negative sentiment is expected to extend to European markets.

Tesla's shares dropped over 7% in extended trading following disappointing second-quarter results. The company reported earnings per share of $0.52 on revenue of $25.5 billion, missing estimates of $0.62 per share and $24.6 billion in revenue. 

Despite a 2% increase in total revenue from the previous year, automotive sales fell by 7%, marking the second consecutive quarterly decline. Net income also decreased by 42% to $1.8 billion. The company’s energy generation and storage revenue doubled to $3 billion, indicating a shift towards new growth areas. Despite this, Tesla's shares are down 10% year-to-date, with investor dissatisfaction over its EV sales and AI business developments like Robotaxi and the Optimus humanoid robot.

Alphabet also faced market disappointment, with shares falling 2% in after-hours trading due to a miss on YouTube ad revenue. The company reported total revenue of $84.74 billion, up 14% from last year, with earnings per share of $1.89, beating the estimated $1.84. 

Alphabet has set ambitious targets, aiming for a combined Google Cloud and YouTube annual run rate exceeding $100 billion by the end of 2024. Despite heavy investment in AI, with capital expenditures reaching $13.2 billion, Alphabet's performance did not meet investor expectations for significant AI advancements. Nevertheless, Alphabet remains a strong performer among top tech stocks, with shares up 28% this year driven by the AI boom.