US tech earnings review: Tesla, Microsoft, Meta & Alphabet

The US earnings season has once again highlighted the growing influence of a handful of mega cap tech companies on global equity markets. By the same token, these results are becoming increasingly relevant to Australian investors. This ranges from a growing number of Aussies holding US stocks directly, industry super funds and passive index investors.

The trend in growing Australian ownership in direct US tech stocks was evident in our previous article analysing Sharesight users top trades for 2025. This trend reflects the perceived lack of structural growth opportunities on the ASX, particularly in the technology sector. In many respects, it’s a case of “if you can’t beat them, join them”.

This quarter’s results reinforced just how concentrated earnings expectations have become. Tesla, Microsoft, Meta and Google all reported their latest results at the time of writing. Collectively, these businesses represent a substantial share of US market capitalisation and continue to influence returns in Aussie portfolios.

Earnings are a timely opportunity to review how each business is positioned. Let’s take a closer look at the earnings results and highlight the unique moats investors should be aware of when assessing these stocks in a diversified portfolio.

Tesla (NASDAQ: TSLA)

• Fair Value Estimate: $400 (3% discount at 5 May 2026)
• Rating: ★★★
• Moat: Narrow

In less than a decade, Tesla transformed from a start up to one of the largest electric vehicle automakers in the world. As one of the first movers, Tesla grew when electric vehicles were widely considered impractical. As their popularity has grown, Tesla is undergoing a significant transformation.

Tesla's first-quarter earnings saw strong growth in operating profits and free cash flow. However, the shares have since traded sideways as the market weighs up management’s capital expenditure guidance of $25 billion. The increased spending is expected to impact the bottom line with Tesla guiding negative free cash flow for the remaining quarters of the year.

The heavy investment is tied to Tesla's plan to transition from selling electric vehicles and energy storage batteries to autonomous vehicles and humanoid robots. We see this as a good investment for Tesla, given the current progress on both initiatives. Tesla’s robotaxi and Google’s Waymo are expected to take 50% share of ride hailing rides in the US and Canada by 2030. Tesla is also focusing on developing humanoid robots for commercial and eventually consumer use.

Tesla is in excellent financial health with a large cash buffer to fund its ambitions. Despite a costly transition, Tesla will likely self-fund the spend for at least the next two years before requiring any debt. At the current price, Tesla is trading within fair value territory, meaning the majority of the upside has already been priced in.

Microsoft (NASDAQ: MSFT)

• Fair Value Estimate: $600 (32% discount at 5 May 2026)
• Rating: ★★★★★
• Moat: Wide

While Microsoft is a household name, fewer people appreciate the scale of the business. Microsoft has three segments: Productivity and Business Processes, Intelligent Cloud and Personal Computing. The true engine room of Microsoft is the intelligent cloud segment, which includes Azure, Open AI, Github and more. Azure is arguably the core of Microsoft going forward, which competes with Amazon AWS as the two public cloud leaders. Productivity and Business Processes includes software such as Microsoft 365 offerings, while personal computing includes Windows, gaming and devices.

Microsoft's results beat expectations, with revenue increasing to $82.9 billion while the operating margin was also better than expected. All three segments beat guidance and Azure continues to impress, growing 39% in the quarter. Azure provides Microsoft with a strong launching point for secular trends in AI and business intelligence. The Productivity & Business Processes and Intelligent Cloud segments are the backbone of Microsoft’s wide moat rating. The wide moat implies confidence that Microsoft can earn returns in excess of its cost of capital over the next 20 years. Microsoft has entrenched itself across a wide array of offerings. This creates significant costs for its customers to switch to a competitor. This customer stickiness is the core pillar that underpins the wide moat rating.

At the current price, Microsoft is trading at a significant discount to fair value and remains one of Morningstar’s top picks in the US coverage.

Meta (NASDAQ: META)

• Fair Value Estimate: $850 (28% discount at 5 May 2026)
• Rating: ★★★★
• Moat: Wide

Like Tesla, Meta is also going through a significant transformation of its business. Formerly known as Facebook, Meta is transforming into an AI driven platform business. It is a clear winner in social media, owning Facebook, Instagram, Whatsapp and Messenger which boast close to four billion monthly active users. The primary growth engine for Meta is advertising and the general shift to digital advertising has seen Meta as the primary beneficiary. Meta has also invested heavily into its advertising algorithms which allows its customers to improve return on their advertising spend.

Meta kicked off fiscal 2026 with strong results, with the firm's top line growing 33% to $56 billion. They also raised their capital expenditure guidance for 2026 to $135 billion. Investors have raised concerns about Meta's ability to generate strong returns on its AI investments. We see the quarterly result as further evidence that Meta is already generating billions from AI investments in the form of ad revenue.

Meta is attractively priced at these levels, trading at a significant discount to fair value. Overall, we see Meta as having all the right ingredients to monetise AI at scale.

Alphabet (NASDAQ: GOOG)

• Fair Value Estimate: $433 (13% discount at 5 May 2026)
• Rating: ★★★★
• Moat: Wide

Alphabet, better known as Google, is a conglomerate of stellar businesses. Alphabet’s segments are split up across Google Search, Youtube, Google Cloud, Android and others. The vast majority of Alphabet’s revenue is generated through advertising across Google Search and YouTube, both core pillars of its wide moat rating. Alphabet has invested heavily in AI partly to safeguard its core product, Google Search. Its AI developments also benefit its advertising business by augmenting its ability to target customers with relevant ads.

Alphabet began 2026 with a very strong set of financial results. The company’s sales grew 22% to $110 billion, with Google Cloud growing sales by 63% to $20 billion. The operating margins for both Google Search and cloud expanded year on year. We estimate Alphabet’s Gemini API sales are now generating around $15 billion in annual revenue, up from $9 billion last quarter.

Alphabet has more recently cemented confidence in the market that they can successfully monetise its custom specialised AI chips (TPUs) as well as drive profitable usage of its LLM, Gemini. At the current price, Alphabet is trading at a slight discount to our fair value.

Wrap Up

This earnings season reinforced just how influential a small group of US mega caps have become in shaping global equity returns and Aussie portfolios. The common earnings theme amongst Tesla, Microsoft, Meta and Alphabet has been the durability of their business models and exposure to long term structural themes such as AI and cloud computing. Valuation remains the key point of differentiation.

For Australian investors with growing exposure to US equities, either direct or indirect, it’s increasingly important to look beyond headline earnings strength and focus on the moats that drive sustained competitive advantages over the long run. This allows investors to understand the mechanisms driving long-term growth.

This article has been prepared by Morningstar Australasia Pty Ltd (AFSL: 240892). The information is general in nature and does not consider the financial situation of any individual. For more information refer to our Financial Services Guide at www.morningstar.com.au/s/fsg.pdf . You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser.

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