Magnificent 7 Earnings Kick Off

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It's time for the first set of Magnificent 7 companies to report their earnings - starting with Tesla (TSLA) and Alphabet (GOOG) (GOOGL) after markets close this evening. Investors will look for updates on AI spending, Tesla's robotaxis and humanoid robots, and Google's delayed Gemini 3.5 Pro model.

Word on the Street: Analysts expect Tesla to report revenue of $26.49B, EPS of $0.54, and automotive gross margin excluding credits slightly above 18%. Morgan Stanley expects a solid quarter, but the question remains whether the accelerating AI investment cycle is justified. "As capex more than doubles and free cash flow turns negative, investors are increasingly focused on evidence that Tesla's spending is strengthening its physical AI moat," it said. "While deliveries have improved sentiment toward the auto business, we expect physical AI to remain the primary determinant of share performance." Bank of America expects more details on robotaxi deployment, saying Tesla's ability to scale could ease investor skepticism around its vision-only approach.

Tesla's Earnings Need To Justify The AI Premium Option chain: Options contracts expiring Friday indicate a roughly 6.4% swing in either direction following Tesla's earnings release. By assessing the at-the-money straddle at the $382.50 strike, the combined cost of the near-term call and put options implies a price swing of around $24. This sets up a potential Friday settlement range between $359 and $407. On the call side of the options chain, bullish speculation is heavily concentrated at the $400 psychological level. Should Tesla management assuage margin fears and deliver a compelling update on their AI and robotaxi initiatives, the $400 level represents the primary upside target and near-term resistance. Conversely, the put side of the chain reveals aggressive downside protection.

Tesla's Numbers Will Beat, The Narrative May Not Gemini in focus: For Alphabet, Wall Street expects EPS of $2.91 on $116.98B in revenue, up 21.3% Y/Y. The options market is pricing in an average move of 5.4% in either direction after the results. Investors will watch for any updates on the delayed Gemini 3.5 Pro, which is currently testing with partners. Google is already working on the next generation of models and started its "most ambitious pre-training run yet, for Gemini 4." SA analyst YR Research expects a "very strong" quarter, with positive catalysts including a beat on growth, disclosures of Gemini MAUs, explanations about the 3.5 Pro delay, strong margins and another leg up in backlog. But Deep Value Investing is more cautious, saying, "what keeps me on the sidelines is the market's reaction to what I believe may be a blowout EPS quarter driven by other income rather than by the operating business itself."

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