U.S. technology stocks moved in opposite directions in premarket trading on Thursday as earnings news delivered mixed messages about demand for cloud services and the outlook for software firms amid rising AI adoption.
Market backdrop - Nasdaq 100 Futures were down 1.1% at 29,683 points by 07:00 ET. S&P 500 Futures fell 0.14% to 7,73 points, and Dow Jones Futures dropped 0.07% to 52,664 points. These premarket moves reflected investor caution as company-specific results and guidance landed before the opening bell.
Microsoft bolsters cloud confidence
Microsoft shares jumped about 2.8% in premarket trading after the company posted fiscal first-quarter results that exceeded analyst expectations, driven by continued strength in its cloud business. The company reported earnings of $4.89 per share on revenue of $92.28 billion, versus consensus estimates of $4.72 per share and $90.61 billion in revenue.
Microsoft Cloud revenue rose 31% in constant currency to $63.9 billion, with Azure revenue increasing 48% year-over-year. The company also reported that Azure surpassed $100 billion in revenue during fiscal 2026, a milestone investors flagged while evaluating the balance between significant AI-related investments and the revenue trajectory of cloud services.
Alphabet's miss reverberates
Alphabet shares plunged more than 10% in premarket trading after the Google parent missed expectations for third-quarter earnings. The company reported earnings per share of $2.12, below the analyst consensus of $3.02, while revenue rose 25% to $127.6 billion, a figure that barely exceeded estimates of $127.22 billion.
Management noted accelerating interest in AI-enhanced services such as its AI Mode search feature, but executives and investors highlighted that these AI-driven queries have been monetized more slowly than traditional searches. Advertising revenue from Google’s search business expanded at the slowest rate in five quarters, prompting questions about near-term returns from the company’s sizable AI investments.
Software sector rout on AI fears
Disappointing results from software firms heightened investor concern about how newer AI models might change demand for established software products and the economics of legacy providers. Fortinet plunged about 25% in premarket trading, while ServiceNow dropped 18.1% after reporting its first adjusted earnings-per-share miss in six quarters and providing fourth-quarter revenue guidance of $4.25 billion to $4.26 billion, below analyst expectations of $4.36 billion.
The weakness spread through the software group: Salesforce shares were down 4.3%, Palo Alto Networks fell 6%, CrowdStrike lost 5% and Zscaler declined 5.8%. Market participants responded to the prospect that AI could pare down demand for some traditional software offerings or alter pricing and monetization dynamics.
Semiconductor and M&A headlines
Marvell Technology shares dropped 9.5% in premarket trade after a report that the company was in advanced talks to acquire Lumentum Holdings, a supplier of optical and photonic components used in AI data-center infrastructure. Lumentum shares rose 5.6% on the report.
The potential transaction, which could be announced as early as next week according to the report, raised investor questions about potential financing requirements and the near-term earnings impact for Marvell, given the relative market capitalizations cited in market commentary.
Industrial and consumer names mixed
Caterpillar shares fell 9.7% despite the heavy-equipment maker reporting a sizable year-over-year increase in third-quarter adjusted earnings, which rose to $7.20 per share from $4.95 a year earlier. The company has been closely watched as a bellwether for global industrial activity, yet the stock declined in premarket trading even with the improved earnings print.
In contrast, Chipotle Mexican Grill rose about 7% in the premarket after executives said that recent menu launches and marketing initiatives were beginning to stimulate demand. Management indicated an expectation for comparable sales growth of roughly 3% to 4% by the end of the current quarter, up from 2.1% in the three months through September, providing some reassurance about consumer traffic and sales momentum.
What to watch
- Investor reaction to differing trajectories among large-cap technology firms - gains in cloud revenue versus slower monetization of AI-enabled search queries.
- Sector spillover from software earnings misses as investors reassess the timing and economics of AI adoption for legacy business models.
- M&A-related market responses, particularly when potential deals raise questions around financing and short-term earnings dilution.
The premarket session underscored a market environment where strong cloud results can provide reassurance for some firms even as other technology and software names face renewed scrutiny about how AI will affect revenue growth and profitability in coming quarters.