Shares in Microsoft (MSFT) surged nearly 7% in pre-market trading on Thursday, after the tech company's third quarter earnings beat expectations.
In the results published after the closing bell on Wednesday, Microsoft reported revenue of $70bn (£52.5bn) in the third quarter, which was ahead of expectations of $68.4bn, according to Bloomberg consensus estimates. Earnings per share of $3.46 also beat estimates of $3.21.
Microsoft's commercial cloud revenue came in at $42.4bn, compared to estimates of $42.4bn and was up from $35.1bn in the third quarter of last year.
Ben Barringer, global technology analyst at Quilter Cheviot, said: "The real standout continues to be Azure, its cloud business, which posted 35% growth with AI services accounting for 16% of that increase. Demand for AI remains strong and persistent, and this is clearly filtering through into new business wins, with overall bookings up 18%.
"Azure remains exceptionally resilient, and the outlook points to continued momentum, with Microsoft guiding for 13–15% revenue growth next quarter and Azure growth of 34–35% — around 2.5% ahead of consensus expectations."
Shares in fellow Magnificent 7 stock Meta (META) climbed more than 5% in pre-market trading on Thursday, after the social media company also posted better-than-expected quarterly results.
Meta posted earnings per share (EPS) of $6.43 on revenue of $42.3bn for the first quarter, besting expectations of EPS of $5.25 on revenue of $41.3bn, according to Bloomberg consensus estimates.
For the second quarter, Meta said it expected revenue to come in at between $42.5bn and $45.5bn, ahead of Wall Street's expectations of $44bn.
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), said: "The positive market reaction in pre-market trading to Microsoft’s and Meta’s numbers represents a turning point for mega cap tech stocks which have endured a poor showing year-to-date.
He said that there had been the "fear that a bleak economic backdrop would lead to companies cutting spending on AI."
In its latest results, Meta raised its full-year capital expenditure estimates to between $64bn to $72bn, up from $60bn to $65bn. The level of spending by major US tech companies, particularly on artificial intelligence (AI), has been a concern for investors in the wake of Chinese startup DeepSeek releasing a lower-cost AI model earlier this year.
"Guidance that it will increase spending in the business is brave given the uncertain economic backdrop but shows that Meta is looking at the long-term prize," said Coatsworth. "If it doesn't strengthen capabilities now or slows down the pace of capex spending, others could eat its lunch."
"Meta has now beaten earnings expectations for nine quarters in a row," he said. "The share price bounce in pre-market trading means it is now close to recovering all the share price losses year-to-date. The rally in both Microsoft and Meta post-results should also provide a tailwind to drive the broader US market, whose recovery from the Liberation Day global sell-off is currently lagging many other parts of the world."
Other US tech stocks also rose on the back of Meta and Microsoft's results, including chipmaker Nvidia (NVDA), which is considered to be an enabler of AI technology.
Speaking to reporters in Washington on Wednesday, Nvidia CEO Jensen Huang discussed China's position in competing with the US on AI advancements, in light of reports of Chinese tech giant Huawei expanding to make its own AI chips.
On the subject of tariffs, Jensen told reporters on Wednesday: "I'm going to count on the fact that the administration has a good plan and from our perspective, we would like to have policies that support and help accelerate the development of artificial intelligence in this new industry."
Another Mag 7 stock in focus on Thursday morning was electric vehicle maker Tesla (TSLA), after the company's chair Robyn Denholm denied a report that its board was looking for a new CEO to replace Elon Musk.
The Wall Street Journal reported on Wednesday that Tesla's board had opened a search for a CEO to succeed Musk.
Early on Thursday, Denholm said in a post from the Tesla's account on Musk's social media platform X that this was "absolutely false".
"The CEO of Tesla is Elon Musk and the Board is highly confident in his ability to continue executing on the exciting growth plan ahead," she said.
Musk has faced growing backlash to his political activities, heading up Trump's Department of Government Efficiency (DOGE), with protests having taken place at Tesla facilities around the world.
In a recent earnings call, Musk said that he was going to spend less time in Washington and more time at Tesla. "Starting early next month, in May, my time allocation to DOGE will drop significantly," he said.
On the UK market, shares in Rolls-Royce (RR.L) were up 2.3% on Thursday morning, after the aerospace and defence company said it had a strong start to the year in a trading update.
The company reiterated its guidance for the year, expecting underlying operating profit of £2.7bn ($3.6bn) to £2.9bn and free cash flow of £2.7bn to £2.9bn in 2025.
Rolls-Royce CEO Tufan Erginbilgic said: "The recently announced global tariff increases have created a degree of uncertainty for the industry. We expect to offset the impact of announced tariffs on our business through the mitigating actions we are taking. We are closely monitoring the potential indirect impact on economic growth and inflation, and will continue to take the necessary actions."
Russ Mould, investment director at AJ Bell (AJB.L), said: "Had the tariff tantrum happened five years ago, Rolls-Royce might have struggled to cope given the business was weak and had lost its way.
"Having been nursed back to full health, it now stands a much better chance of coping with tariff pressures and management has offered such reassurance to the market."
