Alphabet Q4 revenue miss dampens earnings

General market commentary

U.S. equities finished higher on Tuesday, following a volatile session on Monday driven by tariff headlines. President Donald Trump had signed an executive order imposing 25% tariffs on goods from Canada and Mexico, but a last-minute agreement postponed these tariffs for at least one month. Meanwhile, the 10% tariff on imports from China came into effect overnight, with China retaliating by imposing tariffs on select U.S. exports. Despite the ongoing trade tensions, the market was lifted by gains in growth-focused sectors, such as technology and communication services, while energy shares also rose after strong earnings from Marathon Petroleum. Defensive sectors like consumer staples and utilities lagged. Overseas, Asian and European markets largely shrugged off the tariff concerns, closing higher on the day.

On the economic front, the latest JOLTS report showed a decline in job openings to 7.6 million in December, falling short of expectations for 8 million. This signals a continued moderation in labour-market conditions. The report contributed to a drop in bond yields, with the 10-year Treasury yield falling to around 4.5%. U.S. equities showed a solid rally, with the S&P 500 rising by 0.7%, and the Nasdaq gaining 1.2%, largely driven by strong guidance from Palantir, which surged 24% following its positive outlook. However, shares in PepsiCo and Merck fell sharply after weaker-than-expected forecasts, and Estee Lauder tumbled following disappointing demand and job cuts. Despite the continued trade concerns, market sentiment remained cautiously optimistic, supported by hopes for a potential de-escalation in tensions, particularly after Trump’s decision to delay tariffs on Canada and Mexico.

Latest market and economic update

Asian equities were mixed on Wednesday, with Chinese shares falling amid heightened U.S.-China trade tensions, while South Korea and the Philippines saw gains driven by stronger-than-expected inflation figures. Japan and Indonesia’s indices were largely unchanged, while Australia's S&P/ASX 200 advanced 0.6%.

U.S. equity futures were lower this morning following disappointing earnings from Alphabet and Chipotle, with investors focusing on upcoming reports from major companies like Uber and Walt Disney. Market sentiment remains cautious as global trade tensions and tariff developments continue to influence investor expectations.

European equities closed higher on Tuesday, driven by strong corporate earnings and reduced trade war concerns after President Trump delayed tariffs on Mexico and Canada. The STOXX 50 gained 1%, led by gains in banks like BNP Paribas and Intesa Sanpaolo, while the healthcare sector lagged ahead of upcoming earnings reports.

The dollar index fell below 108 on Wednesday, extending its losses as U.S.-China trade tensions proved less severe than expected. Against the euro, the dollar weakened further, with the exchange rate trading at 1.0377, reflecting a shift in market sentiment.

Oil prices were steady in Asian trading on Wednesday, with U.S.-China tariff tensions weighing on sentiment, while tougher sanctions on Iran provided some support. Prices fluctuated amid concerns over global demand and rising U.S. crude inventories, as markets await further data from the U.S. Energy Information Administration.

U.S. President Donald Trump proposed that the U.S. take control of the Gaza Strip, rebuild it, and create economic opportunities for its people, suggesting that Palestinians could be relocated to other countries. He described Gaza as a "demolition site" and claimed that his plan would bring stability to the Middle East, despite ongoing concerns over the region's humanitarian crisis.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Alphabet's fourth-quarter revenue grew 12% to $96.47 billion, slightly missing Wall Street's expectations, while earnings of $2.15 per share exceeded the $2.07 forecast. Google services saw strong growth, with ad revenue rising to $72.46 billion, and the Google Cloud segment grew to $11.96 billion, driven by AI-powered solutions. However, shares fell by 7.6% in after-hours trading, despite the positive earnings report.

Advanced Micro Devices posted higher quarterly revenue, driven by a 69% jump in its data-centre business, but fell short of Wall Street expectations, causing shares to drop almost 9% in after-hours trading. Despite strong demand for its Ryzen processors and AI chips, the company’s gaming and embedded segments saw declines, and overall profits fell from the previous year.

Snap surpassed Wall Street profit estimates, driven by improvements to its advertising platform, and saw a 6% increase in shares. The company also plans to raise its Snapchat+ subscription price and expand new ad features, with strong growth from small and mid-sized businesses.

PayPal's shares fell 13% after its unbranded payment processing business saw significant slowdown in growth, with total payment volume rising only 2% in the fourth quarter. Despite reporting higher-than-expected profits, concerns over slow growth in branded products and shrinking margins weighed on investor sentiment.

Spotify reported its first annual profit and forecasted stronger-than-expected Q1 earnings, driven by user growth, price hikes, and cost-cutting measures. The company added a record 35 million monthly active users in Q4, with premium subscribers reaching 263 million, and raised its gross profit margin to 32.2%.

Ferrari's Q4 earnings and revenue exceeded expectations, with EPS of €2.14 and revenue of €1.74 billion, driving a 7% rise in its US-listed shares. For fiscal 2025, the company expects EPS of at least €8.60 and revenue of at least €7 billion, slightly below analysts' forecasts.

BNP Paribas reported a 15.7% rise in quarterly net income, driven by a surge in trading activity, and announced a dividend increase and share buyback. However, the bank lowered its 2025 profit target and plans further cost cuts, while maintaining a cautious outlook despite investment banking gains.

UBS exceeded expectations in Q4 with a net profit of $770 million, driven by strong investment banking performance, though its asset management division struggled. The bank announced a $3 billion shareholder return for 2025 and expects modest declines in net interest income in Q1, with potential risks from inflation and geopolitical factors.

Publicis Groupe's shares rose over 2% after reporting stronger-than-expected Q4 growth of 6.3%, exceeding analysts' forecasts. The company’s 2025 guidance suggests steady growth, with organic growth projected at 4-5%, and a slightly higher operating margin, while analysts remain optimistic about the stock's performance.

Infineon raised its full-year revenue outlook after a smaller-than-expected decline in Q1 revenue, driven by favourable currency effects, with shares rising 10%. The company now expects flat or slightly higher annual revenue, with its auto division outperforming expectations.

Vodafone's shares dropped over 7% after its Q3 results showed ongoing struggles in Germany, with service revenue declining 6.4%. While other markets, including the UK and Turkey, showed growth, concerns over Germany's performance and future earnings dragged investor sentiment, leading Barclays to set a neutral stance with a price target of 85 GBp.

PepsiCo forecast lower-than-expected annual profits and missed quarterly revenue estimates, as weakening demand for sodas and snacks in the U.S. hurt sales. The company is focusing on promotions and new product innovations to boost demand, but faces ongoing challenges in its key North American markets.

Pfizer posted better-than-expected fourth-quarter results, driven by cost cuts and strong sales of its COVID-19 vaccine, Comirnaty, which brought in $3.38 billion. The company expects to save $4.5 billion by the end of 2025 through cost-cutting measures, while also focusing on its drug pipeline and the integration of cancer drugmaker Seagen.

Enphase Energy forecast first-quarter revenue above market expectations, driven by strong demand and robust performance in the fourth quarter, sending its shares up by 6%. The company also plans to move its battery cell manufacturing out of China to avoid U.S. tariffs.

Chipotle warned that President Trump's proposed tariffs on Mexico could increase its raw material costs by 60 basis points this year, particularly affecting avocado prices. The company also forecast lower-than-expected comparable sales growth and saw a 4% drop in its shares after the announcement.

Cadbury-parent Mondelez forecast a larger-than-expected 10% drop in annual profit due to rising costs, including surging cocoa prices, sending shares down nearly 6%. The company also reported a slight miss on quarterly revenue and earnings, with weaker volumes in Europe offset by growth in North America.

Industrial equipment maker IDEX reported a better-than-expected quarterly profit, driven by a 19.3% rise in sales from its health and science technology segment. The company’s fourth-quarter revenue grew by 9% to $862.9 million, slightly missing analysts' expectations.

Electronic Arts forecast fourth-quarter bookings below expectations, citing slower spending on its soccer franchise and weaker performance of new titles. However, the company announced a $1 billion share repurchase plan, boosting its shares by 3%.

Diageo has withdrawn its medium-term sales forecast due to macroeconomic and geopolitical uncertainty, opting for more frequent short-term updates instead. Despite modest growth in its latest results, the company acknowledged challenges such as inflation and tariffs, impacting regions like Asia-Pacific and Latin America.

Shares of e.l.f. Beauty dropped 7.4% after Nielsen data showed a 2% decline in year-over-year sales, with a 7% drop excluding Amazon. Despite this, analysts note that the brand continues to gain market share, though concerns remain about meeting expectations for the fourth-quarter earnings report.

Estee Lauder's shares dropped 16% after it expanded its restructuring plan to cut up to 7,000 jobs, as weak demand, particularly in Asia, hurt its third-quarter outlook. The company also warned of a decline in organic net sales by 8% to 10% for the quarter, citing challenges in its travel retail business and struggling sales growth in China.

Nissan is reportedly considering calling off its merger talks with Honda due to growing differences, with Nissan's board set to meet soon to decide the next steps. The potential merger, which would create the world's third-largest automaker, has faced complications, particularly over Honda’s proposal for a subsidiary arrangement, leading to rising concerns about Nissan's future

Merck has halted shipments of its Gardasil vaccine to China due to declining demand, revising its sales forecast down to $64.1 billion-$65.6 billion, below analysts' expectations of $67.4 billion. The decision has negatively impacted investor sentiment and highlights the challenges Merck faces in the Chinese market.

Wells Fargo's shares rose 1.3% after the Federal Reserve lifted two decade-old enforcement actions related to its mortgage servicing and lending practices. While the bank remains under growth restrictions from a 2018 enforcement action, the removal of these older sanctions signals progress in its efforts to address regulatory issues.

Shares of Airbus and Leonardo fell slightly following reports that they are exploring a merger of Airbus's space business with Thales Alenia Space. Analysts suggest the merger could reduce excess capacity in the space industry but is unlikely to significantly impact the companies' earnings, with projected savings being modest.

Robinhood halted its new event contracts allowing users to bet on the Super Bowl after receiving a request from the U.S. Commodity Futures Trading Commission (CFTC). The move came just one day after the product's launch, and Robinhood plans to offer a more comprehensive event contracts platform later this year.

Bank of America maintains a Buy rating on Nvidia, expecting a modest Q4 beat and confident outlook for data center sales growth in FY 2026. Analysts highlight Nvidia's strong position in AI, hardware/software co-optimization, and its ability to weather geopolitical concerns, with the stock currently trading at an attractive P/E ratio.

Redburn Atlantic believes Wall Street is underestimating Netflix's advertising potential, forecasting ad revenues to rise from 4% of total sales in 2024 to 20% by 2028. The brokerage maintains a "Buy" rating with a $1,145 price target, expecting $12 billion in ad revenue by 2028, driven by low ad inventory fill rates, expanded partnerships, and rising adoption of the ad-supported tier.

Truist Securities reduced its price target for Chevron to $160, citing weaker-than-expected free cash flow and challenges in its downstream segment. Despite these issues, the firm remains optimistic about Chevron's long-term prospects, particularly from cost efficiencies, the Tengizchevroil project, and its investments in renewable fuels and carbon capture.

JPMorgan downgraded Nio to Neutral from Overweight and lowered its price target to $4.70, citing concerns over earnings performance and a more conservative outlook. The analysts revised down their revenue and earnings estimates for 2025-2026, predicting slower sales growth and a smaller volume contribution from Nio's high-end models and new brands.

Upcoming data and events

Key economic releases today include the ADP Nonfarm Employment Change, Services PMI, ISM Non-Manufacturing PMI, and EIA Crude Oil Inventories, which will be closely watched by investors. Additionally, earnings reports from major companies like Disney, Uber Technologies, and Fiserv are expected to shape market sentiment.

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