GOOGL, TSLA, IBM Earnings: Why Two Stocks Are Crashing and One Isn't

Three bigname stocks just reported earnings yesterday. Google, Tesla, and IBM. Today, two of them are dropping while one has hardly moved. So, let's get into it. All right, guys. Welcome back. Thank you all so much for being here. Today, we are breaking down three big earnings reports. Tesla right now is down over 12%, Google down 6 and a.5% and IBM, who actually missed estimates and cut their own guidance, is basically flat. So, what is going on? Well, earning beats and record numbers aren't enough anymore. Nowadays, it's all about future spending. So, we're going to take a look at each of these companies, the highlights and low lightss from their latest earnings report, and how Wall Streets are reacting to the news. You can check out the latest earnings report summaries over on the Tip Ranks website. And if you enjoy today's video, make sure you hit that thumbs up button and that you're subscribed to the channel. Now, let's dive right in. We're going to kick things off with Alphabet. Trading under the ticker G OG L. The shares are currently down just over 6%. They dropped from a close of 342 down to a low of about 3:15 and have been climbing back a bit throughout the day. Now, here's the thing. They didn't actually have that bad of a quarter. It was actually fairly strong. Revenue came in at about 119.8 billion, which was up 24% year-over-year and their 12th consecutive quarter of double-digit revenue growth. Google Cloud was the standout with revenue up 82% year-over-year to 24.8 billion and their cloud operating income more than tripled with margins jumping from 20.7 to 35.6%. Their cloud backlog also grew by over 50 billion in a single quarter, now sitting at 514 billion. So on paper, Alphabet is firing on all cylinders. But the part that spooked investors is their spending. Their Q2 capital expenditures of 44.9 billion drove negative free cash flow of 5.9 billion for the quarter. And Alphabet raised its fullear capex guidance to 195 to 205 billion, up from 180 to 190 billion. Also saying that capex will rise significantly again in 2027. Management also did flag some supply constraints in AI infrastructure, meaning they'll lean more on third-party capacity in the third quarter, which creates near-term margin pressure for cloud. Add in rising operating expenses and a slight FX headwind expected next quarter, and you can see why Wall Street got nervous. In fact, we had quite a slew of analysts lowering their price targets on the Alphabet stock. You can see a list of analysts lowering price targets here following the report while maintaining buy ratings. One analyst at UBS said that Alphabet's results were solid but lacked major upside with higher AI investment and hiring expected to weigh on margins and free cash flow. We did have some analysts actually increase and upgrade the stock including one at Freedom Broker. They noted the strong Q2 results and confirmed the durability of search, accelerating enterprise AI monetization, and Google's cloud growing contribution to operating income. So, this is a classic strong quarter scary guidance moment. Investors loved the growth, but didn't love the increase in spending and the fact that free cash flow was now negative. The Alphabet stock does still maintain a strong buy consensus. The average price target of $437 implies an upside potential of over 36% with 29 buys and five holds. Looking at those price targets down below, the recent ones range from an upside of 21% all the way up to 109%. Now for the biggest mover of the day, we have Tesla. Under the ticker TSLA, their stock is currently down 13% today. It dropped from a close yesterday of about 374 down to around 320. Tesla came out with some mixed results, including an earnings miss, but a revenue beat. While earnings per share of 33 cents missed the estimates by 20 cents, their revenue of 28.24 billion beat expectations by 1.8 billion and grew 25% year-over-year. Of course, there were several highlights, including record Q2 deliveries as Tesla delivered over 480,000 vehicles with sequential growth across every region. Their full self-driving monetization is accelerating, too. About 1.5 million paid FSD customers worldwide, and roughly 55% of North American deliveries now have an FSD subscription enabled at delivery. But there were some lowlights as well, and this is where it gets a little rough. We once again have an increase of spending and negative free cash flow. Free cash flow was negative for the quarter primarily because capex more than doubled sequentially. The company expects fullear capex to exceed 25 billion and to grow over the next 2 to 3 years creating near-term cash outflow pressure. We also saw automotive gross margins excluding regulatory credits fall from 19.2% 2% to 16.3% quarterover-arter and energy gross margins cratered from 39.5% down to just 20.4%. Elon Musk weighed in on what he said is a massive capex year, saying, "I am confident that all the things we're investing in are what will yield incredible returns, the best capex returns that we have ever seen, and that they are going as fast as humanly possible in scaling robo taxi while trying to ensure that they do not harm anyone at all." So, a similar story to Alphabet, but perhaps just a bit louder. And once again, we have quite a few Wall Street analysts who are lowering price targets. That includes an analyst at Canacord. They said that Tesla is currently a story of stagnant margins, negative free cash flow impacted by long-term investments, and breakthrough promises anchored to timelines hard to measure and model. They said they would like to see some material robo taxi developments over the next 6 months, more momentum around a SpaceX union, and more EV momentum. Of course, Wall Street is often divided on Tesla, and they do come in with a hold rating overall. With five buy ratings, 13 holds, and three sells, the average price target of 374 does imply an upside of 15%. But you can see we have a wide range of price targets from a low of just $25 all the way up to $500. Third on our list is the surprising one. We're looking at IBM. Now, they actually missed expectations and cut their guidance, but the stock is basically flat. It's actually up a fraction of a percent. Under the ticker IBM, we can see the stock taking a dip after the initial earnings report, but bouncing back since and is slightly positive afterwards. Let's start with the low lightss. As I mentioned, they did miss on earnings and revenue estimates with earnings per share missing by 2 cents and revenue missing by over $300 million and coming in relatively flat growth year-over-year. And like I also mentioned, they did cut their future guidance, lowering their fullear revenue growth guidance to 4 to 5%, down from the prior guidance of 5% plus. Management pinned the blame on delayed large capex deals. Infrastructure revenue declined 7%. Transaction processing software fell about 9% and mainframe revenue was down sharply due to launch seasonability. But underneath that, the core business did hold up well. Software revenue grew 5% and annual recurring revenue hit 24.6 billion, up 8% year-over-year, with almost 80% of software revenue now recurring. Distributed infrastructure had its best quarter on record, up 37%. IBM also announced a major long-term bet, more than $10 billion into quantum computing over the next 5 years. There is a smaller amount of Wall Street analysts weighing in on the IBM stock compared to Google and Tesla, but it is similar where we are seeing them lower price targets. An analyst at Goldman Sachs did maintain their buy rating, but dropped the price target to 270, saying that IBM shares are expected to remain rangebound after lowered guidance as cost controls, and a less severe than feared outlook provide support, but weaker software growth, hardware mix shifts, and execution concerns may limit multiple expansion. With 16 current analyst ratings, the IBM stock does come in as a moderate buy with 10 buys, five holds, and one sell. The average price target of 293 implies an upside of 42%. Once again, a pretty wide range of price targets from a low of 191 to a high of 375. So, that is a quick look at three bigname earnings report that have shook the market in this past day. Let me know your thoughts on these companies, if you're buying any dips or staying on the sidelines, and what you think this capex spending trend is going to look like throughout the rest of earning season. I always appreciate hearing from you guys. Keep in mind that these videos are never a suggestion to buy or sell any specific stock. Please always do your own research and due diligence. Thank you so much for watching. Have a wonderful day. I'll see you back here next time.