Alphabet (GOOGL) and Tesla (TSLA) Earnings Disappoint as AI Investment Costs Mount

TLDR

• Stock index futures declined Thursday morning, with tech-heavy Nasdaq futures falling 0.5–0.7%
• Alphabet reported weaker-than-expected EPS and boosted 2026 capital spending guidance to $195–$205 billion, recording its first negative free cash flow
• Tesla fell short of Q2 profit expectations and also posted negative cash flow due to elevated AI and robotics investments
• Crude oil prices surged toward $100 per barrel on Middle East geopolitical tensions, pushing bond yields higher and reigniting inflation worries
• Thursday’s earnings calendar includes Intel, Lockheed Martin, and RTX

US equity index futures tumbled Thursday morning as market participants digested underwhelming quarterly results from two tech behemoths while escalating Middle East tensions sent energy prices soaring.

S&P 500 futures declined approximately 0.4–0.5%. Contracts tied to the Nasdaq 100 fell as much as 0.7%. Dow Jones Industrial Average futures retreated roughly 0.4–0.6%.

E-Mini S&P 500 Sep 26 (ES=F)

The weakness extended Wednesday’s uneven trading session, during which technology shares faced significant selling pressure.

Alphabet and Tesla Deliver Subpar Results

Alphabet unveiled second-quarter financial results that fell short of Wall Street’s adjusted EPS consensus. The search and cloud computing giant also elevated its capital expenditure outlook for 2026 by $15 billion, establishing a new range of $195 billion to $205 billion.

Company executives attributed the spending boost to robust demand for artificial intelligence capabilities and cloud computing infrastructure. Google Cloud’s revenue expansion surpassed analyst projections during the quarter.

However, the tech titan recorded negative free cash flow for the first time since going public. This development rattled shareholders already anxious about mounting AI-related capital requirements throughout the technology sector.

Alphabet’s stock price declined approximately 2.4% during extended trading Wednesday evening.

Tesla similarly underwhelmed investors. The automaker failed to meet profit forecasts for the April-June period and also reported negative cash flow.

Tesla’s primary electric vehicle revenue showed sequential improvement during the quarter. However, intensified spending on artificial intelligence initiatives, robotics development, and data center expansion compressed overall profitability and squeezed automotive segment margins.

Chief Executive Elon Musk indicated that 2026 would represent a “massive capex year,” emphasizing investments in Optimus humanoid robots, autonomous taxi services, and computing infrastructure. Tesla’s shares dropped nearly 4% in after-hours trading.

Crude Prices Surge on Expanding Mideast Crisis

Brent crude futures advanced to $97 per barrel Thursday, approaching the psychologically significant $100 threshold. West Texas Intermediate climbed to $89 per barrel.

The rally followed Iranian-aligned Houthi assaults on commercial tankers navigating the Red Sea. President Donald Trump also issued threats to target civilian infrastructure within Iran, intensifying the US-Iran confrontation.

Elevated energy costs propelled US government bond yields to their highest points since May. Both the benchmark 10-year and longer-dated 30-year yields climbed as inflationary pressures resurfaced.

This development undermined market expectations that the Federal Reserve could potentially reduce interest rates during the current calendar year.

Additional Corporate Reports Expected

Intel is scheduled to release quarterly results Thursday afternoon. Wall Street forecasts year-over-year profit improvement, supported by expanding artificial intelligence processor demand. While Intel has trailed competitors in AI chip development, analysts anticipate the company will close this performance gap through 2026.

Aerospace and defense manufacturers RTX and Lockheed Martin will also publish financial statements, alongside mining companies Freeport-McMoRan and Newmont.

Market participants are additionally monitoring the 8:30 a.m. ET publication of weekly unemployment claims figures.

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