Seven Giants ETF (MAGS.US) pulls back 7%: Earnings preview for Microsoft (MSFT.US), Google (GOOGL.US), and Amazon (AMZN.US)

According to Woofun AI, as recent rebound momentum weakens and earnings season approaches, the seven strongest-performing tech stocks in the market have all experienced pullbacks over the past two weeks. The Roundhill Magnificent Seven ETF (MAGS.US) closed this week at $70.07, down nearly 7% from its annual high.

This correction accelerated following Meta (META.US) and Tesla (TSLA.US) earnings reports. Meta (META.US) saw its stock price slump 18% from its yearly high due to a negative quarterly free cash flow; Tesla (TSLA.US) came under pressure from declining revenue in its electric vehicle and energy businesses, although growth in its services and other segments partially offset the decline.

According to data compiled by Woofun AI, Microsoft (MSFT.US) closed last week at $524, slightly below this month's higher point of $550, but still up 50% from its yearly low. Analysts predict Microsoft (MSFT.US) revenue will increase by 17% year-on-year to $90 billion, with earnings per share rising from $4.13 to $4.72.

However, stock price fluctuations depend more on investors’ views regarding AI capital expenditure and returns, especially the performance of Copilot products. Microsoft (MSFT.US) previously disclosed that its planned AI-related spending for 2026 is between $175 billion and $190 billion.

Meanwhile, Alphabet (GOOGL.US) share price has fallen to $317, down a steep 22% from its annual peak of $402. The market expects its revenue to increase by 25% to $127 billion, with earnings per share of $2.97. The performance of its advertising business—the main revenue driver—and the state of free cash flow amid continued AI investment will be key variables for its share price. Alphabet (GOOGL.US) reported negative free cash flow of $5.85 billion in the second quarter, and management has guided for AI spending between $195 billion and $205 billion in 2026.

In addition, BNP Paribas predicts its TPU (Tensor Processing Unit) business will reach $40 billion in revenue by 2027, with further clarity on this segment’s growth potential likely to emerge in this week’s earnings report.

Amazon (AMZN.US) stock has also seen a significant pullback, dropping from $287 in August to the current $248. Analysts estimate its revenue will grow by 12.2% to $202 billion, with AWS remaining the core driver.

However, the deteriorating trend in free cash flow has raised market concerns; Amazon (AMZN.US) reported negative free cash flow in the second quarter, and this negative situation may persist as AI investment increases. Amazon (AMZN.US) expects 2026 AI spending to reach $220 billion, up from the previously reported $200 billion.

Structurally, the massive capital expenditures by these three tech giants on AI infrastructure are reshaping their financial models, with temporary pressure on free cash flow becoming a common feature. Microsoft (MSFT.US), Alphabet (GOOGL.US), and Amazon (AMZN.US) have AI spending outlooks of $175 billion-$190 billion, $195 billion-$205 billion, and $220 billion, respectively, highlighting the industry's intense focus on the computing power race.

This strategy shift from pursuing short-term profits to investing in long-term infrastructure may suppress share price performance in the short run but also lays the foundation for future technological barriers. Notably, investors’ attention on earnings reports has shifted from merely revenue growth to a deeper evaluation of capital efficiency and AI commercialization. Following the recent tech stock valuation reset, the market is putting these capital-intensive models through another stress test; the subsequent trend will depend on whether these giants can prove their AI investments translate into sustainable profit growth.