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Earnings

Lucy Brewster

brewmarkets.com

Meta investors are more freaked out by the company’s AI spending than you were by your Sephora receipt at checkout.

 guidance to between $70 and $72 billion from its previous $69 billion when it reported Q3 earnings yesterday—and forewarned even more gargantuan spending in 2026. Shares fell 11.33% today on the heels of the earnings report.

That wasn’t the only news that spooked Meta investors: The company reported earnings per share of $1.05, far under estimates of $6.72. But to be fair, that steep miss was due to a 

The company’s operating margin dropped 40%, down from 43% last year. The reason? AI hiring spiked research and development expenses up 28%. Revenue, however, came in strong for the quarter. Meta reported that its revenue jumped 26% to reach $51.2 billion for the quarter.

Today, right after the earnings miss, the company is pricing a nearly $30 billion bond sale, 

While $71 billion is certainly no number to scoff at, Microsoft, Alphabet, and Meta all reported earnings yesterday, and all three companies announced major spending. So why is Meta the one that investors are punishing?

Part of the reason is that Microsoft and Alphabet already make money from AI in their cloud computing businesses, 

 which makes analysts and investors give them less of a hard time about spending so much on building AI infrastructure.

In addition, Meta’s spending plan is also just plain higher compared to its Silicon Valley peers. To put its guidance in perspective, capital spending of $72 billion this year would equal 37% of the company’s projected revenue.

But CEO Mark Zuckerberg doubled down on Meta’s 

 during a call with analysts, arguing that the technology will help the company better advertise and recommend content to users of its social media apps Instagram and Facebook.

Now the question is: Will Meta upping the ante make its peers want to spend more, too? Or will that form of FOMO just be too expensive? —

Meta’s spendy AI tab 

Meta's earnings report reveals it's spending up a storm on AI.

IBM is an old dog trying to learn new tricks.

After paring early losses, the tech stock ended the day down 0.87% following a lukewarm reception to it latest earnings report. IBM not only beat third-quarter earnings and revenue estimates, but also announced that its AI book of business reached $9.5 billion, up from $7.5 billion last quarter—all seemingly good news.

“Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI,” explained CEO Arvind Krishna 

But the stock’s dip today seems to indicate a lack of faith from investors. Part of the reason could simply be sky-high expectations, given the stock’s 31% rise year to date before Wednesday’s close. But the company’s cloud software division also raised red flags, 

: Sales in its cloud unit slowed to 14% from the 16% growth it achieved last quarter.

So is IBM a new AI favorite that just took a breather—or is today a sign not everyone can pull off a modern rebrand? Management is doing everything it can to keep up with the AI competition: for example, the company 

 earlier this month to allow IBM software to access Anthropic’s Claude. And on top of that, IBM has gone all-in embracing this brave new world in every part of its business, even bragging in May that it replaced 200 HR roles with AI.

But it’s still an open question whether or not the century-old company can compete in today’s dog-eat-dog AI era. IBM’s market cap is dwarfed by fellow AI darlings like Nvidia, Microsoft, and OpenAI, and the company brings in far less revenue, 

Then again, not everyone is counting out IBM. “We continue to believe IBM is well-positioned to capitalize on the current demand wave for hybrid cloud and AI applications as more enterprises are looking to leverage these capabilities across organizational workflows,” explained Wedbush analyst Dan Ives in a note yesterday. “We would be buyers of any modest knee-jerk weakness in the stock.”

As of today, it doesn’t seem like investors are convinced.—

IBM logo on a screen with blurred out people walking in front

IBM is the black sheep of the AI trade

The company announced decent earnings, but failed to impress investors.

The black sheep of the AI trade

It's a retail traders’ world now, and we’re just all living in it.

At least that was the takeaway from Charles Schwab's latest earnings report. The brokerage revealed a 

: Third-quarter revenue jumped 27% to $6.14 billion, at the same time that net interest revenue increased 37%. But perhaps the biggest flex of all was that the firm’s net new assets popped 48% from the year prior to reach $134.4 billion, while daily average trading volume increased 30% to 7.4 million.

And who does the storied Wall Street firm have to thank for last quarter’s booming business? Not legacy money managers or deep-pocked institutional clients, no—it was humble retail traders who padded the company’s bottom line.

“Our unwavering focus on delivering for clients helped us attract $137.5 billion in 3Q core net new assets plus over 1 million new brokerage accounts for the fourth straight quarter,” said President and CEO Rick Wurster.

Wurster noted that one third of new retail accounts were opened by Gen Z investors, so it makes sense that the company is trying to entice 

. For example, Schwab is working to expand its crypto offerings, as well as give traders a way to put money in private markets—both growing trends across the rest of the Street, too.

Small investors keep betting on the market

Retail investors may not necessarily be deep-pocketed, but they can still move markets—as hedge funds learned the hard way back during the 2021 GameStop debacle. And as they proved once again last week, it pays to follow the crowd

The S&P 500 fell 2.7% last Friday after President Trump threatened new tariffs on China. But instead of backing off, retail traders doubled down, taking a far more aggressive “buy the dip strategy” than the professionals.

According to data reported by MarketWatch, investors placed 

 on Friday, higher than the previous record of 102.6 million contracts in early April, and only the second time in history when options contracts topped 100 million. Individual investors bought 11% more bullish call options and 23% less bearish put options than institutional investors.

While brokerages are profiting, short sellers are struggling in this brave new world: Individual investors’ drive to buy the dip has contributed to 

 for short sellers since 2020, according to the FT.

With all this retail trading, it’s no wonder that brokerages are shifting their strategy: They’ve gone from shunning the debauchery to embracing it with open arms and dollar signs in their eyes.—

Charles Schwab profits from retail investors

Small traders mounted a big rally last quarter, and Charles Schwab raked in the money

Small traders boost brokerages

There’s a chill in the air, football is on TV, and soon Skelly will be gracing every lawn in town. You know what that means: Corporate earnings season is kicking off.

Just like any classic annual tradition, there’s a whole lot of anticipation for what this earnings season could bring. But this quarter is set to be especially high-stakes, given that investors, analysts, and executives are 

“Earnings results will take on even greater prominence than usual for markets during the US government shutdown,” explained COO of Mortgage Capital Management Matt Gabbard in a note this week. “The longer the federal stoppage drags on, the more clouded the picture of the economy will become for investors as key data releases dry up, making it hard to divine the path of interest rates.”

Analysts see plenty of reason to go into this earnings season optimistic. After all, the US has 

 of the economic downturn fears (so far), the 

 fueling the entire economy is still going strong (despite concerns the circular trade could implode), and the past few quarters have been marked by explosive 

: The S&P 500 climbed 8% during Q3, while the Nasdaq surged 11%.

 for the S&P 500, though Deutsche Bank thinks it will be more like 10.7%. A slew of analysts, including Ed Yardeni of Yardeni Research and Evercore ISI’s Julian Emanuel, have upped their 

But there’s a palpable anxiety underneath Wall Street’s celebratory tone. After all, even while the economy has managed to defeat the 

 allegations, the labor market and consumer spending remain on shaky ground. And we still have yet to see the ultimate impact of President Trump’s tariffs on a range of sectors.

Not to mention the obvious weakness in the economy: While AI is flying high now, 

 the entire market if a few key Silicon Valley favorites miss expectations. Over the past few quarters, investors have only raised the bar for tech favorites like Nvidia and the rest of the Mag 7, grading them on a harsh curve.

So if they’re not on their A game, it could be an immediate F.—

Earnings season preview: Wall Street's bullish

But if AI stocks fall short of high expectations, expect a serious selloff.

Corporate America's report card

Delta Air Lines has arrived, and brought a new earnings season along with it.

: Not only did the airline beat top- and bottom-line earnings expectations, but its Q3 profit rose 11% year over year. Delta also projects adjusted earnings per share will land between $1.60 and $1.90 per share in Q4, above the $1.65 analysts were expecting, while full-year EPS should hit $6, higher than Wall Street forecasts of $5.80.

Delta credited increased travel demand for the boost, especially from premium and corporate customers: Delta’s Q3 corporate sales jumped 8%, while premium revenue increased 9%. In fact, the company thinks 

 will outpace sales from coach cabin seats next year.

Delta’s enjoying a nice tailwind during a year of serious turbulence.

The airline originally issued full-year guidance of $7.35 late last year, but withdrew that outlook after President Trump announced a slew of tariffs that rocked the economy. It was one of the first companies to pull guidance, setting the stage for a domino effect of withdrawn forecasts across the market as companies struggled to keep up with the moving tariff target.

Today, management seems confident that it can better anticipate what lies ahead, while investors could interpret Delta’s solid earnings as a bellwether of good things to come for the rest of the airlines sector.

But maybe investors are celebrating a little too soon, given a major headwind for the industry just arrived: The government shutdown is adding more pressure to the already-fragile air travel ecosystem. Air traffic controllers and TSA screeners still have to work during the shutdown, but they aren’t getting paid until it ends. That’s why air traffic controllers are beginning to 

, leading to staffing shortages and subsequent delays at airports nationwide.

Air travel is a tight-margin business, so airlines don’t leave much time between flights—meaning that one delay or cancellation can start a chain reaction that throws off an entire schedule.

Delta had a great third quarter, but the longer the shutdown lasts, the tougher it’ll be to make up for lost flights this quarter.

image of delta airline boeing plane taking off

Delta Air Lines kicks off earnings season

Delta reported a great quarter, but a government shutdown threatens flights.

Delta takes off

President Trump floats a lot of off-the-cuff ideas via Truth Social—but it seems like his comments about trimming down the corporate earnings calendar might actually be for real.

Today, SEC Chair Paul Atkins announced that the agency will 

 to switch from a quarterly earnings schedule to a semiannual cadence, reversing a requirement that’s been around since 1970. If the rule change is passed, it would be up to companies to decide whether their report card comes out four times a year or just twice.

Trump’s argument, which he laid out in 

, is essentially that reporting every quarter is too onerous and expensive for management, and keeps companies too focused on short-term earnings results instead of investing for the long term.

“For the sake of shareholders and public companies, the market can decide what the proper cadence is,” Atkins said on CNBC’s 

 back in 2018, arguing public companies are fixated on the short term (although they were talking about limiting guidance, not throwing away quarterly earnings altogether). We’ve also 

 about how onerous paperwork is part of the reason there are fewer and fewer companies going public in the US these days.

But most economists and analysts have strongly pushed back against the idea.

“Students don’t like grades and many business leaders don’t like quarterly earnings reports. The reason is the same,” wrote 

 “Being monitored and accountable for results is painful. The President's idea of eliminating quarterly reports will cause companies and the markets to function less well.”

What would fewer earnings mean for investors?

For companies, less homework would be welcome. But for investors, limiting earnings reports would reduce transparency, and inevitably lead to more volatility when earnings 

This would especially hurt everyday retail investors, who don’t have the ample information infrastructure that Wall Street does. The gap in publicly available information would also increase the 

On top of that, it’s unclear if reporting twice a year instead of quarterly would really change the way executives invest for the long haul. After all, six months 

The US wouldn’t be the first to go down this route, either: In 2013, the EU allowed companies to choose whether they report quarterly or semiannually. The Wall Street Journal noted that there hasn’t been a surge of better management or more successful companies in Europe as a result. In fact, studies on Europe’s change have shown fewer earnings announcements lead to less accurate analyst forecasts.

Perhaps the most devastating impact of all, however, would be fewer 

The SEC may make companies report earnings twice a year

President Trump's recent suggestion has been taken to heart by regulators. 

Investors need consistent corporate report cards

Figma proved today that being a successful public company is a marathon, not a sprint.

Shares plunged 19.93% after Figma’s first-ever 

—making today its worst day of trading since its IPO in July.

On the surface at least, Figma’s debut earnings weren’t terrible. In fact, revenue jumped 41% to reach $249.6 million, slightly above analyst expectations. But Figma forecasts Q3 revenue to come in between $263 million and $265 million—just a 33% year-over-year increase, marking a serious growth slowdown from last quarter.

Part of what’s spooking investors is just how high expectations were for the design startup out of the gate. Shares of Figma jumped a staggering 250% in its market debut, giving the company an unrealistically high bar. Since its IPO, shares of Figma have sunk nearly 36%.

But there’s another factor that’s putting pressure on the company: Figma also disclosed that September 5 (tomorrow) marks the end of its lock-up period for Early Release Shares.

A lock-up period is the 90 to 180 days after a company goes public when pre-IPO shareholders aren’t allowed to sell their stock. But tomorrow, the 25% of Figma shares that are held by certain employees and early investors will flood the market all at the same time, and inevitably pushing Figma’s share price lower.

Analysts are also wary of another headwind: Generative AI, which could pull market cap away from design tools like Figma.

“We continue to see Figma's platform well positioned to address the consolidation of workflows and users involved in design, but expect the pace of penetrating into the opportunity to take time given the recent roll-out of new products and preference to drive broad adoption of GenAI tools before monetization,” Morgan Stanley analyst Elizabeth Porter wrote in a note today. She also lowered her price target from $80 down to $70, which is still 28% higher than shares trade now.

Maybe Figma can draw a brighter future?—