Stocks Defy Fears of Worst-case Scenario After Big Tech Earnings

Investors with stakes in America’s leading technology companies have found some reassurance after last week’s earnings season, which indicated that most of these firms continue to thrive despite the uncertainty caused by President Donald Trump’s evolving trade policies.

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A series of quarterly results from tech powerhouses such as Amazon.com Inc. and Microsoft Corp. revealed that customer demand remains steady across core areas including electronic gadgets, cloud infrastructure, digital advertising, and software solutions. Although there were some disappointing numbers—Apple Inc.’s results stood out as a notable miss—the broader tone of the reports helped ease growing fears that trade tariffs might soon take a serious toll on tech sector profits.

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The earnings reports arrived at a crucial time for equity investors who had been looking for clues on whether the recent stock market rally had room to run. The Nasdaq 100 Index, heavily weighted with tech companies, extended its two-week gain to 10%, rising nearly 3% beyond its April 2 level—right before Trump moved to impose tariffs on nearly all major U.S. trading partners. Microsoft emerged as a standout performer among the so-called Magnificent Seven, logging its strongest weekly gain in more than two years.

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“A lot of people in the market had braced themselves for very bleak news,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “But even the weaker results weren’t disastrous. That’s giving investors the confidence to adopt a cautiously optimistic view, even if the outlook remains clouded and fragile.”

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Nonetheless, the threat of renewed market volatility continues to loom as the trade dispute drags on. It could take another full earnings cycle to understand the actual impact of Trump’s tariffs on corporate performance. Until that happens, Luschini said he’s steering clear of making aggressive sector bets, instead favoring a mix of defensive stocks and technology shares that are tied to broader, longer-term growth narratives.

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Over the course of this year, Big Tech has been central to the stock market’s struggles, as investors took profits in high-growth names and moved their money into more conservative assets. The broader concern is that tariffs might drive up inflation while simultaneously hurting global economic activity. However, Friday’s upbeat jobs data and hints of renewed U.S.-China trade discussions helped restore some investor confidence.

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Despite the persistent uncertainty, many major technology companies defied the cautious stance adopted by businesses in other sectors. Airlines, retailers, and apparel manufacturers have either pulled guidance or slowed spending plans, wary of the possible fallout. In contrast, most of the biggest tech names maintained or even improved their outlooks.

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Among the six Magnificent Seven firms that have reported earnings so far, four provided revenue forecasts that met or exceeded analyst expectations. Alphabet Inc., Google’s parent company, did not provide guidance as per its usual practice. Nvidia Corp. is the last of the group to report, with results due on May 28.

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Microsoft impressed investors with its projections for the current quarter, fueled in part by surging demand for its Azure cloud services—so strong that it continues to outpace the company’s data center expansion. Amazon’s operating profit forecast was somewhat underwhelming, but CEO Andy Jassy noted that consumer demand remains stable. Meanwhile, Meta Platforms Inc. offered a digital advertising forecast that was in line with what analysts had projected, reinforcing optimism around ad-driven revenue.

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The earnings season also calmed fears about a slowdown in capital expenditures on AI-related infrastructure. Spending on artificial intelligence technology has been a major driver of revenue for companies such as Nvidia and Broadcom Inc. Meta actually raised its capital expenditure forecast for the year, while Microsoft said its investment growth would moderate next year but still continue to rise. These updates helped push up share prices for chipmakers and hardware producers.

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“Investors are giving tech firms more flexibility when it comes to spending,” said Hanna Howard, a portfolio manager at Gabelli Funds. “That’s because these companies have demonstrated they can generate solid returns from those investments.”

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That said, not everything was rosy. Tesla Inc. walked back its previous guidance, suggesting it no longer expects to return to revenue growth in 2025. Apple also projected that tariffs would increase its costs by $900 million in the current quarter. As a result, the iPhone maker received two analyst downgrades, citing both the effects of tariffs and broader growth risks.

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Still, while earnings projections in many sectors of the S&P 500 have been trimmed this quarter, those for the major tech firms are on the rise. Bloomberg Intelligence data shows that earnings for the Magnificent Seven are now expected to grow by 21.6% in 2025, with revenue anticipated to climb 9.7%—both metrics reflecting upward revisions in the past week.

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“There was real concern we’d see a major pullback,” said Gabelli’s Howard. “But based on these results, the picture is looking significantly more favorable than many expected. Risks remain, but for now, the news has been encouraging.