Well, let's get straight to the point, because yesterday the first two members of the Magnificent Seven reported earnings, and they painted two completely different pictures.
On one side, Alphabet, Google's parent company, delivered an excellent quarter. On the other, Tesla grew its revenue, but its profits headed in the opposite direction.
Let's start with Alphabet.
The company reported $119.8 billion in revenue, up 24% from a year ago and nearly $3 billion above analysts' expectations. Earnings per share came in at $9.11.
But the real star of the quarter was Google Cloud.
Cloud revenue surged 82% to $24.8 billion, comfortably beating expectations of around $22.4 billion. And here's where things get really interesting. Alphabet's backlog, meaning contracts that have been signed but haven't yet been recognized as revenue, reached $514 billion.
In fact, Google is now growing faster than both Microsoft and Amazon in cloud computing, something that would have sounded almost unbelievable just a year ago.
So where is all this growth coming from?
Artificial intelligence.
Google is pouring enormous amounts of money into building AI infrastructure. Capital expenditures, investments in data centers and computing equipment, doubled, reaching $44.9 billion in a single quarter.
And that's the big bet.
Investors are asking whether these billions will generate massive returns or whether the industry is simply inflating another bubble.
Now for the biggest surprise.
Alphabet reported nearly $98 billion in "other income." The reason? A $99 billion gain from equity investments in companies such as Anthropic and SpaceX.
For comparison, that figure was just $1.3 billion a year ago.
That single item pushed Alphabet's total quarterly profit to roughly $112 billion.
And there's more.
The Gemini app reached 950 million active users, processing 22 billion tokens every minute, up from 16 billion in the previous quarter.
Perhaps even more impressive, nearly 90% of Fortune 100 companies are already using Gemini Enterprise.
Now let's look at the other side of the story.
Tesla's results were far more mixed.
Revenue increased 26% to $28.24 billion, beating expectations. The company also crossed $100 billion in trailing twelve month revenue for the first time in its history.
But earnings disappointed.
Earnings per share came in at $0.32, well below the $0.51 analysts were expecting. A year ago, Tesla earned $0.40 per share.
So how can revenue grow while profits fall?
Simple.
Expenses are rising much faster than sales.
Tesla's operating margin fell to 1.4%, down from 4.1% a year ago. Gross margin came in at 16.8%, below the 19.4% analysts had expected.
Operating expenses jumped 47%, while capital expenditures soared 142% to $5.79 billion.
As a result, Tesla posted negative free cash flow of $1.1 billion, marking the first time in more than a year that free cash flow has turned negative.
So why is the company spending so aggressively?
Because Elon Musk has shifted Tesla's focus beyond cars toward artificial intelligence, Robotaxi, the Cybercab, and the Optimus humanoid robot.
At the same time, Tesla delivered 480,000 vehicles during the quarter and ended it with $43.5 billion in cash.
So the company isn't facing financial trouble.
Instead, it's paying the price today for what it hopes will become tomorrow's biggest opportunity.
