Magnificent 7: What’s Next for Tesla, Google, and Others After Q1 Updates?

The Magnificent 7 weighs more than 50% of the Nasdaq 100, and more than 30% of the S&P 500; for that reason, it's worth studying their latest business outlooks and potential price targets.

Tesla: Beat on Margin, EPS Below Expectations

Tesla (NASDAQ:TSLA)'s first-quarter 2025 earnings per share (EPS), excluding non-recurring items, reached $0.27. This figure, while below the consensus estimate of $0.38, still represented a slightly better outcome than anticipated overall. The gross profit margin, at 16.3%, experienced downward pressure from increased customer incentives and lower average selling prices for their vehicles, yet it surpassed expectations.

Operating expenses saw an increase due to ongoing investments in artificial intelligence and other research and development initiatives.

Robotaxi is Coming

On the positive side from the first-quarter earnings call, Tesla highlighted several key developments: the planned launch of their Robotaxi service in Austin by June 2025, with significant scaling potential by mid to late 2026; confirmation that their affordable vehicle remains on track for unveiling in the first half of 2025, despite recent speculation; the anticipated launch of unsupervised Full Self-Driving (FSD) in select US cities by the end of the year; and the geographically diverse nature of Tesla's supply chain, which mitigates tariff risks for their automotive operations.

Affected by Macro

Conversely, headwinds identified were primarily linked to the prevailing macroeconomic environment, particularly tariffs and the US-China relationship.

These challenges include: a disproportionate impact of tariffs on the energy business due to the sourcing of LFP batteries from China; a temporary pause in volume guidance attributed to tariff uncertainty; potential negative effects from China's restrictions on rare earth minerals used in electric motor magnets; and the sourcing of a significant portion of manufacturing equipment from China.

Consistent year-over-year (YoY) growth in a company's revenue serves as a critical indicator of its overall business health and future trajectory. It signifies that the fundamental operations of the company are expanding, reflecting strong demand for its offerings and the effectiveness of its implemented strategies.

This positive momentum is often a key factor in attracting investors, who view sustained revenue growth as a strong signal of future profitability and potential appreciation in stock value. Furthermore, revenue growth provides the necessary financial resources for a company to pursue its strategic goals, such as increasing its market presence, developing innovative products, and expanding its operational footprint.

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That said, the new products and developments coming for Tesla must be watched, for the very long term the landscape for the company is good, but for 2025 all the macro context and the ability to be successful in with the Robotaxi and FSD are essential for a sustained bounce. $465 is a reasonable price target for this year.

Good News in Sales and More People Paying for Things

Google (NASDAQ:GOOGL)'s sales for the first three months of 2025 were a bit better than what experts were expecting, bringing in $76.5 billion. This was mainly because their search engine made more money, their advertising network did well, and more people signed up for their paid services. Specifically, the money from Google Search grew by 10% compared to last year, which is important because some people were worried about competition. Their cloud computing business also grew a solid 28%, which was above what the street expected.

Making More Money Than Expected

Google also made more profit per share than expected, $2.81 compared to the $2.00 that analysts predicted. This was partly because they had some extra income from investments ($11.2 billion, much higher than the expected $0.9 billion) and they spent less money on some elements like the cost of other products they sell, marketing, and stock-based compensation for employees. Overall, the money they made before taking out operating costs was a healthy 40% of their sales, which is better than last year. So, it was a pretty good three months for them financially.

Focusing on New AI Features is Going Well

Google is trying hard to compete with companies like OpenAI and Perplexity in using artificial intelligence. Google has some advantages because they have a lot of data and their products are used by a lot of people. They also seem to have caught up in terms of how well their AI models perform. Google pointed out that their new AI Overviews feature in search is being used a lot (1.5 billion people) and it's leading to more people clicking on ads that make them money. This good performance in search, along with positive comments about their Gemini AI model and how people are using AI Overviews, might ease some worries that investors had about Google falling behind in AI.

Expectations for More Sales and Profit, Stock Price Target Goes Up

Because Google's sales are growing faster than expected and the exchange rates for different currencies are working in their favor, the expectations for Google's total sales and profit for the whole year of 2025 are higher.

This company presents a sustainable growth in revenue and operating income (remember that Tesla didn’t have that alignment). The cash has seen a contraction, but it is still at $ 95 billion. However, it's also possible that Google's capital expenditures would include investments in the physical infrastructure necessary to support their AI initiatives, such as data centres and servers optimised for AI workloads. These types of investments would fall under CapEx.

AI Might Make the Stock More Valuable, So It's a "Buy"

The strong results this quarter support the idea that Google can actually benefit from the rise of AI. It could help them make more money from search and create new ways of doing business. While there are still some risks, like how their business model might change and competition, the stock market might not fully appreciate how much money Google could make from things like AI Overviews and increased demand for their AI-powered cloud services. Even though there might be some slowdown in sales in the next quarter due to issues in China and the overall economy, the current stock price of around $160 seems low compared to how much profit they're expected to make in the future.

The monthly chart for GOOG presents a candle that has been seen in bounces previously. This time it is not bouncing from the lower Bollinger band (Nov 2022), or from the 20-monthly average (Sept 2023); the support this time is the annual level of $146.

$175 is an achievable target for Google in the coming weeks.

Apple: Uncertainty Limits Stock Growth

Apple (NASDAQ:AAPL)'s June quarter sales outlook lacks specific product growth details due to tariff, demand, and legal uncertainties. While the immediate earnings impact is low and long-term tariff navigation is expected to improve, caution is key on near-term profit margins, anticipating further decline after June. Despite this, Apple raised its dividend and buybacks, expressing confidence. The stock shows strong cash flow.

Tariffs: Minimal March Impact, $900M June Cost

March saw a limited tariff impact thanks to supply chain management. However, June costs are projected to rise by $900M (net of one-time items) assuming current tariff policies remain. Most US-bound iPhones will be from India, and most iPads, Macs, Watches, and AirPods from Vietnam. The main tariff concern is the 20% rate on Chinese imports, with a total of 145% on some Chinese revenues.

Profit Margins Likely to Dip

June's profit margin forecast (46% midpoint) suggests a slight 0.26% year-over-year drop, the first since early 2023. Product profit margins have been declining for five quarters. Long-term margin improvement is expected via tariff offsets and service growth.

The revenues and cash from operations in 2024 neared the highs of 2022, the operating income continued growing, as the cash pile.

Lowered Expectations, Price Target to $226, considering the annual level shared in the latest Weekly Compass.

Solid Start, Second Half Uncertain

Amazon's (NASDAQ:AMZN) reported revenue/profit of $155.7bn/$18.4bn beat expectations, thanks to international performance. Unit growth slowed a bit to 8% year-over-year. AWS growth matched forecasts at 17%. Overall, results and the Q2 outlook (slight revenue acceleration) were better than expected, with positive comments on product mix and third-party sellers.

Tariffs Not Yet a Problem, Prepared if They Become One

Management sees limited tariff impact in Q2 profit, citing pre-bought inventory and stable third-party seller prices. April sales were strong. Low-priced essentials are growing fast in the US. Amazon believes its wide selection and strategic buying should help it outperform if retail conditions worsen due to tariffs.

Estimates Going Up on Good Outlook

The Q2 revenue forecast is around $160bn due to stronger retail, while slightly lowering AWS growth. Q2 profit forecast consensus are around to $16.5bn on better AWS margins. The third quarter could see peak tariff uncertainty. Anyway Amazon looks strong with an annual revenue growing constantly and a huge operating income. Capital expenditures are jumping bigly, which is something to watch. $240 is a reasonable annual target.

Strong Azure & AI Lead Microsoft's Earnings Beat

Microsoft's (NASDAQ:MSFT) Q3 results and outlook were strong, mainly driven by Azure. Azure's cloud growth hit 35% (constant currency), significantly above the expected 31.5%. This was due to both hardware deliveries and solid cloud migration deals. OpenAI contributed a strong 16 percentage points to Azure's growth (up from 13% in Q2), easing partnership concerns.

Office Growth Remains Solid

The Office business showed good performance with 14-15% constant currency revenue growth, hitting the high end of guidance. Subscriber growth was steady at 7%, though some moderation is expected next quarter. However, strong E3/E5 sales and increasing Copilot adoption support our positive outlook for continued strong growth.

Capex Near Peak, Still Expanding for the Future

Q3 capital expenditures were slightly lower than expected (-4% quarter-over-quarter). However, the full-year H2 capex forecast remains the same, and FY26 capex growth is expected to moderate. It’s reasonable to expect around $97bn of capex in FY26 as the peak in the investment for future expansion.

AI Powerhouse in Apps & Cloud

Q3 results suggest that returns on Microsoft's capital expenditures are appearing sooner than anticipated. Azure's core growth is accelerating due to cloud market share gains and AI benefits. Office is also poised for AI-driven growth via Copilot. With accelerating growth, peaking capex, and AI-driven efficiency, free cash flow growth can increase to the high teens in FY27. Considering this context, $475 is a reasonable target for this year.

Nvidia (NASDAQ:NVDA) is set to publish earnings in a couple of weeks, stay tuned for the update.

Are you surprised by the recent rally? Read the latest premium publication in my homepage , the title speaks for itself, and it was written on Friday: "A Squeeze is Coming" and it came.

Written By: Paulo Celig