Tesla reported an 8.7% decline in sales, the largest year-over-year drop since 2012:
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Its profits were USD 1.1 billion, which represents a drop of 55%. Additionally, gross margins fell to 17.4%, compared to 29.1% two years ago.
How did the market react? Partying. Tesla shares rose 12% the next day. How is it explained? Expectations is the key word. Elon Musk revealed that they plan to start production of new models earlier than planned, possibly in early 2025.
He also highlighted investments in artificial intelligence infrastructure and mentioned talks with a major automaker to license its driver assistance system, called “full autonomous driving” In U.S.A.
Meta, unlike Tesla, exceeded market expectations. Its sales grew by 27% in the last year, recording its highest growth rate since the third quarter of 2021:
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Its profits increased by 117% compared to the previous year, reaching USD 12,000M. Operating margins rose to 38%, compared to 25% last year. In addition, the workforce was reduced by 10% year-on-year, totaling 69,000 employees.
How did the market react? Total destruction. Its shares fell 10.5% the next day. How is it explained? Mark Zuckerberg announced that they expect more moderate growth and significant spending on artificial intelligence in the coming years. This is due to the lack of a defined path on how this technology will become a source of income for the company. Let us remember that it currently depends almost exclusively on advertising to obtain profits.
And Google? It differentiated itself from Tesla and Meta as it presented great results and a great announcement for the future.
Over the last year, Google’s sales experienced an increase of 15%, reaching a record in the first quarter of USD 80.5 billion:
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Profits increased 57% year-on-year, reaching a record of USD 23.7 billion. Likewise, operating margins rose to 32%, compared to 25% the previous year. In addition, the first quarterly dividend of USD 0.20 was announced and USD 70,000M was allocated for share repurchases.
How did the market react? Euphoria. Its shares rose 10% the next day. Google’s balance sheet had no weak points in either its results or its projections, and the market celebrated it with a brutal increase.
In conclusion, the balance sheets of Tesla and Meta were two clear examples that the market is looking forward, beyond the results they may present. That is, what truly matters in the market are expectations.
Note: The material contained in this note should NOT be interpreted under any circumstances as investment advice or a recommendation to buy or sell a particular asset. This content is for educational purposes only and represents the opinion of the author only. In all cases it is advisable to seek advice from a professional before investing.
