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Traders work on the floor of the New York Stock Exchange on Jan. 28, 2025 in New York City.
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S&P 500 futures fell Tuesday night after Google-parent Alphabet posted disappointing revenue, following a positive session for the major averages.
S&P 500 futures and Nasdaq 100 futures slid 0.30% and 0.42%, respectively. Dow Jones Industrial Average futures was lower by 42 points, or 0.09%.
Alphabet shares tumbled 8% in extended trading after the Google-parent posted a cloud revenue miss, even as it ramps up spending on artificial intelligence, spooking investors who worried the megacap tech company will take longer to capitalize on its AI ambitions.
"These companies, the hyper scalers, are damned if they do and damned if they don't, because they have to spend a lot to remain competitive, but they are cutting into their cash flow," Bank of America's Savita Subramanian said Tuesday on CNBC's "Fast Money."
"I don't think it's game over for big cap tech. I think these are big companies with lots of optionality. They can do what they did in 2023, cut costs, they can shore up balance sheets, do big buybacks, and they're doing a lot of that," the firm's head of U.S. equity and quantitative strategy continued. "But they have to hire more, they have to spend more. It's not the same profit story that it used to be."
Alphabet
Elsewhere, Chipotle shares slid 5% after the burrito chain reported fourth-quarter same-store sales that rose less than expected. On the other hand, Snap shares advanced about 6% after the social media company's fourth-quarter results beat estimates.
Wall Street is coming off a positive session. The Nasdaq Composite and S&P 500 rose Tuesday, gaining nearly 1.4% and 0.7%, respectively. The 30-stock Dow rose 134 points, or 0.3%. The S&P 500 and Nasdaq were bolstered in part by strong results from Palantir, which hit a fresh record high during the session.
Investors also shrugged off the latest tariff headlines, after the Chinese government hit the U.S with duties of up to 15% on imports of coal and liquefied natural gas, as well as a 10% higher duty on crude oil, farm equipment and selected cars. The move comes after President Donald Trump over the weekend announced a 10% levy on Beijing.
On Monday, the U.S. had agreed to pause more aggressive levies on Canada and Mexico.
"Where we are is an environment where you want to sort of prepare yourself for upside pressure, to rates, to inflation, to the idea that we don't have an all-clear on policy decisions, until maybe closer to the second half," Bank of America's Subramanian said.
Earnings season continues Wednesday, with Walt Disney and Uber Technologies reporting results before the open.
On the economic front, investors are anticipating the latest ADP private payrolls report, international trade data, and the ISM Services Index.
Alphabet's post-earnings drop is an 'overreaction,' Gene Munster says
Alphabet's stock drop after its latest earnings results is an "overreaction," according to Deepwater Asset Management's Gene Munster.
Shares slid 8% Tuesday night after the Google-parent posted a cloud revenue miss — even as it ramps up spending on artificial intelligence — spooking investors who worried the megacap tech company will take longer to capitalize on its AI ambitions.
Alphabet posted Google Cloud revenue of $11.96 billion in the fourth quarter, lower than the $12.19 billion StreetAccount consensus estimate. The company said it will invest about $75 billion in capital expenditures in 2025, more than the $58.84 billion expected, according to FactSet.
Still, Deepwater Asset Management's Munster said investors focusing on the cloud revenue disappointment are missing the point, saying that the AI hardware trade still has room to run.
"I think this is an overreaction," Munster told CNBC's "Fast Money" on Tuesday. "I think the stock should be flat-ish on these results, versus down 8%."
"I think that this AI hardware trade still has another year or two years left in it," he added.
— Sarah Min
Stocks making the biggest moves after hours
Check out the companies making headlines after hours.
- Alphabet — Shares dropped 7.4% after Google parent Alphabet posted a revenue miss. Fourth-quarter revenue of $96.47 billion fell short of the $96.56 billion expected by analysts polled by LSEG. On the other hand, earnings per share of $2.15 exceeded the $2.13 consensus estimate.
- Chipotle Mexican Grill — Shares of the burrito chain fell nearly 5% after fourth-quarter same-store sales rose less than expected and the company said the key metric would show only low- to mid-single digit growth in fiscal 2025. In the fourth quarter, Chipotle earned 25 cents per share, after adjustments on revenue of $2.85 billion. Earnings were stronger than expected, while revenue was in line with consensus expectations from LSEG.
- Electronic Arts — Shares of the video game company rose 1% even after Electronic Arts posted third-quarter results that exceeded expectations. Electronic Arts reported earnings of $1.11 per share on revenue, known as net bookings, of $2.22 billion. Analysts polled by LSEG had expected earnings of $3.07 per share on revenue of $2.32 billion.
— Sarah Min
English (US)