Earnings live: Meta stock tumbles, Microsoft slides, and Alphabet jumps as Big Tech earnings pour in

The Q3 earnings season is off to a positive start, with S&P 500 companies anticipating a 9.2% EPS increase. Big Tech results were notable, with Amazon surging on robust AWS growth and AI investment plans, while Apple, despite a slight iPhone revenue miss, projected record December quarter revenue. Elsewhere, Cigna's shares plunged due to PBM margin pressure, Altria faced declining cigarette volumes, and Merck fell on patent expiration concerns, contrasting with Eli Lilly's strong performance driven by demand for weight-loss drugs and Microstrategy's gains tied to its Bitcoin strategy.

Analysis

The Q3 earnings season is off to a moderately positive start, with 29% of S&P 500 companies having reported and analysts anticipating a 9.2% increase in EPS, though this marks a deceleration from Q2's 12% growth. Big Tech results were a key highlight, with Amazon's stock surging 10% following a 20.2% year-over-year jump in AWS revenue, driven by AI investments, and CEO Andy Jassy's bullish outlook. Apple, despite a slight miss on iPhone revenue, saw its stock turn higher after CEO Tim Cook projected the December quarter to be the company's "best ever" for revenue and iPhone sales.

Conversely, Cigna's stock plunged over 12% after the company warned of margin pressures in its Pharmacy Benefit Services segment due to reduced government reimbursements and increased Medicare Advantage utilization, despite beating Q3 EPS estimates. Altria also experienced a 7% stock drop as smokeable product volumes declined 8.2% in Q3, indicating a shift away from traditional cigarettes and leading to moderated Q4 EPS growth expectations. Merck's stock fell over 2% despite an earnings beat, as investor focus remained on the impending 2028 Keytruda patent expiration, overshadowing the FDA approval of a subcutaneous version.

In contrast, Eli Lilly's stock rose 6% after raising its full-year forecast, propelled by robust demand for its weight-loss and diabetes drugs, Zepbound and Mounjaro. Microstrategy (MSTR) shares increased 3% post-earnings, reporting a 10.9% YoY revenue rise and strengthening its Bitcoin holdings, which now total 640,808 BTC. Coinbase also beat estimates, with Q3 profit boosted by increased trading volumes stemming from crypto market volatility.

Key Decisions for Investors

• Monitor Big Tech's AI investment impact on cloud growth, particularly AWS, as a bellwether for broader tech sector performance and potential future innovation drivers.
• Exercise caution with healthcare insurers like Cigna facing government reimbursement pressures and PBM margin erosion, despite overall earnings beats, as these headwinds could persist.
• Evaluate pharmaceutical companies such as Merck based on pipeline strength and patent cliff mitigation strategies, rather than solely on current earnings, to assess long-term value.
• Consider exposure to companies benefiting from strong secular trends like weight-loss drugs (Eli Lilly) or those with unique asset strategies (Microstrategy's Bitcoin holdings) for differentiated growth opportunities.