When Quarterly Earnings Move the Market

The market reacts in seconds

The immediate stock market reaction was extra­or­di­nary: Amazon rose about 15% follo­wing the earnings report, and Micro­soft rose about 16%. For Micro­soft, this repre­sented an increase in market value of appro­xi­m­ately $450 billion in a single trading day. This illustrates just how sensi­tive the stock prices of large techno­logy compa­nies are to even relatively small devia­tions from market expec­ta­tions.

Two Strong Results, One Common Driver

Amazon increased revenue by 20% to $200.6 billion in the second quarter and opera­ting profit by 43%. The main driver was Amazon Web Services. AWS grew by about 37% and achieved an opera­ting margin of 39.4%. The adver­ti­sing business also performed very strongly, with growth of 26%.

Micro­soft increased its quarterly revenue by 18% to $90.0 billion and its net income by 31%. The Azure cloud platform grew by 43% and exceeded the $100 billion revenue mark for the first time in a full fiscal year. Further­more, more than 30 million paid Copilot licenses demon­strate that monetizing artifi­cial intel­li­gence is incre­a­singly becoming part of the core business, even though it currently accounts for only a fraction of Microsoft’s total revenue.

Heavy Invest­ment: A Burden Now, but a Prere­qui­site for Growth

Both compa­nies are investing on an extra­or­di­nary scale. Amazon raised its 2026 capital expen­diture forecast to $220 billion, while Micro­soft expects appro­xi­m­ately $175 billion. The majority of these funds are going toward data centers, chips, networks, and other AI infras­truc­ture.

In the short term, this puts pressure on free cash flow. At Amazon, free cash flow turned negative on a 12-month basis, even though opera­ting cash flow rose sharply. Micro­soft reports signi­fi­cant future obliga­tions under data center contracts.

What matters here is not just the amount of the invest­ment, but whether it generates sustained additional revenue and attrac­tive returns on invest­ment.

Quarterly Results Are a Snapshot

At Amazon, AWS growth accele­rated for the fifth conse­cu­tive time. At Micro­soft, the cloud and AI businesses performed signi­fi­cantly better than the weaker PC and Xbox segments. Even though this repres­ents a positive trend for both compa­nies, a quarterly report remains a snapshot.

The long-term invest­ment thesis remains intact

Three questions are central to our assess­ment: Will demand remain struc­tu­rally high? Can the compa­nies defend their leading market positions? And do future cash flows justify current valua­tions and invest­ments?

We believe that Amazon and Micro­soft continue to meet these criteria in principle. The strong order backlog, accele­ra­ting cloud demand, and growing use of AI appli­ca­tions support the positive funda­mental assess­ment. At the same time, the coming quarters will show how effici­ently the enormous invest­ments are being converted into additional revenue and free cash flow.

Don’t Chase Every Price Spike

A positive long-term outlook does not mean extra­po­la­ting every short-term price movement. After double-digit daily gains, the risk increases that investors will pay twice for good news regar­ding an already high valua­tion and rising expec­ta­tions. Conver­sely, it would be just as wrong to prema­tu­rely abandon a sound invest­ment thesis based on a single disap­poin­ting forecast.

Impli­ca­tions for the Portfo­lios

This leads to a disci­plined middle ground in portfolio manage­ment. We remain committed to high-quality compa­nies with sustainable compe­ti­tive advan­tages, but we conti­nuously review position sizes and valua­tions. Precisely because Amazon and Micro­soft have large index weights and are key portfolio holdings in the Classic strate­gies, their funda­mental strength must be balanced with delibe­rate concen­tra­tion manage­ment.

Conclu­sion

Amazon and Micro­soft have had a noticeable short-term impact on the stock market. However, this price spike is not the most important signal for our invest­ment decis­ions. What matters most is that the long-term drivers have been confirmed: accele­rated cloud growth, incre­a­sing AI monetization, strong market positions, and high demand for digital infras­truc­ture.

We there­fore remain positive about both compa­nies over the long term. At the same time, we view each quarterly report as a new data point rather than a defini­tive judgment. This perspec­tive helps us put short-term market movements into context and consist­ently align portfo­lios with long-term earnings poten­tial rather than the next headline.

Contact: Andreas Borer, Senior Portfolio Manager, a.​borer@​tareno.​ch

Publisher: Tareno AG, Garten­strasse 56, 4052 Basel, Tel. +41 61 282 28 00, info@​tareno.​ch, www.tareno.ch. We welcome feedback on our publi­ca­tion. The content herein is provided for infor­ma­tional purposes only. This publi­ca­tion does not contain legal or invest­ment advice or invest­ment recom­men­da­tions, nor does it consti­tute an offer or a solici­ta­tion to make an invest­ment. Images / Charts: The charts were prepared by Tareno AG using publicly available market data.