What a week. Five of the biggest companies in the S&P 500 all stepped into the earnings box, and for the most part, they delivered. Microsoft, Amazon, Alphabet, and Meta all reported Wednesday evening, all four beat revenue estimates. Apple followed Thursday night with its own strong result, reporting fiscal second-quarter revenue of $111.18 billion, up roughly 17% from a year ago, and earnings per share of $2.01 against Wall Street’s $1.94 expectation. That marked Apple’s eighth consecutive quarterly earnings beat. The company also authorized a fresh $100 billion share buyback and raised its dividend. Shares jumped about 3% Friday morning, pushing the S&P 500 past the 7,200 level for the first time ever and capping the index’s best month since November 2020. April ended with the S&P 500 up more than 10% on the month, adding over $10 trillion in market value.
A few highlights from the big earnings week: Alphabet was the standout, with shares jumping as much as 6% after hours after it reported Google Cloud revenues surpassing $20 billion for the quarter, a 63% increase year-over-year, and raised its full-year capital expenditure guidance as it continues its massive artificial intelligence buildout. Amazon and Microsoft also pointed to strong cloud demand, with both companies guiding for continued heavy AI infrastructure spending. Meta beat on both revenue and earnings. They reported $56.31 billion in revenue, up 33% year over year, its strongest quarterly growth since 2021. However, the stock proceeded to drop more than 6% after hours and nearly 10% the following day, wiping out roughly $175 billion in market value. The culprit was not the results themselves but the outlook: Meta raised its full-year capital expenditure guidance to $125–$145 billion, up from a prior range of $115–$135 billion, reigniting investor fears that the company’s enormous AI spending bets may take years to pay off. Meta’s slide was a useful reminder that in this market, it is not enough to beat, you also have to convince investors that the spending is worth it. Taken together, the week reinforced a central tension in tech right now: AI investment is accelerating, the early returns are real, but the market is increasingly impatient for proof that the enormous capital outlays will translate into new revenue streams.
The other major headline this week came Thursday morning when the government released its first estimate of first-quarter economic growth. The U.S. economy expanded at a 2.0% annualized rate in the first three months of the year which is a significant rebound from the near-stall of just 0.5% growth in the fourth quarter of 2025. The number came in slightly below economist forecasts of around 2.3%, but the underlying picture was encouraging. Investment drove a large portion of the growth, led by spending on computers and AI-related equipment. Consumer spending contributed as well. A measure of the economy’s underlying strength that strips out volatile items like exports and inventories grew at a 2.5% annual rate, picking up from 1.8% in the prior quarter. The fine print contains one important caution: the Fed’s preferred inflation gauge (the PCE price index) rose 3.5% year over year in March, up from 2.8% in February. That is well above the Fed’s 2% target, and it effectively removes any near-term possibility of interest rate cuts while the Iran conflict continues to push energy prices higher.
Speaking of Iran, there was a flicker of optimism on that front Friday. Reports emerged that Pakistan is serving as a mediator and that Iran sent a response to U.S. amendments to a draft peace framework. Oil prices fell on the news, with West Texas Intermediate dropping toward $103 a barrel. That is still elevated, and gasoline prices nationally are averaging around $4.30 per gallon, up 42–44% since the conflict began in February. But the market’s reaction to the peace signals was a useful reminder: a credible path toward resolution would send oil prices meaningfully lower, ease pressure on consumer budgets, and open the door for the Fed to eventually resume cutting rates. We are not there yet, but the situation is worth watching very closely.
Interesting to Note
This earnings season is shaping up to be one of the best in years, with about 84% of S&P 500 companies beating estimates so far, which is well above the historical average of 76%. As I reiterate time and time again, expectations drive everything in this market. When beats are this consistent and the bar is set this high, it actually becomes harder to surprise to the upside, and any stumble gets punished quickly. We saw that play out in real time with Meta this week, a 33% revenue gain wasn’t enough because the spending outlook spooked investors. But stepping back, the bigger picture is encouraging. Corporate America is healthy, AI investment is translating into real results, and the market has shown remarkable resilience in the face of an ongoing conflict and elevated energy prices.
Looking Ahead
- Iran — Remains the #1 Watch Item: The Strait of Hormuz remains effectively closed to normal tanker traffic. Friday’s peace signal from Pakistani mediators was encouraging, but ceasefires in this conflict have collapsed before.
- Fed Decision on May 7: The Federal Open Market Committee meets next week. With Q1 inflation running at 3.5% and oil prices still elevated, no rate change is expected. But the statement and any shift in language around the inflation outlook will be closely scrutinized.
- Fed Chair Nomination: Kevin Warsh cleared a key hurdle this week when the Senate Banking Committee voted to advance his nomination. A final confirmation vote is expected the week of May 11, putting him on track to replace Jerome Powell before his term expires on May 15.
Have a wonderful weekend!
Written by: Steven C. Dengler, CFP®
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