The tech sector showcased mixed earnings results, with Microsoft, Meta, and Tesla revealing their latest figures. Microsoft exceeded revenue predictions but experienced a 5% share decline post-market. Despite strong overall numbers, growth rates have slowed, with 2025 forecasts showing declines in earnings and revenue growth. Microsoft faced criticism for its AI investments not boosting earnings significantly, as capex reached $37.5bn.

Meta, on the other hand, saw its share price soar by more than 8% after reporting revenues and forecasts above expectations. Plans to increase capex on AI to $135bn were accepted positively due to strong ad revenues supporting the spend. Without the capacity constraints Microsoft faces, Meta aims to reach its ambitious AI goals, resulting in increased investor interest and potential growth.

Tesla enjoyed a more than 3% rise in share price. Although car sales dipped, the company’s energy storage division performed well, and a weak dollar provided a favourable currency impact. Working towards expanding its cyber taxi business and investing in AI, Tesla aims to evolve beyond a pure car company. With a lower capex of $2.39bn, Tesla positions itself as a potential AI player, offering exposure without colossal expenses, and signalling potential stock price recovery.

Based on the Q4 2025 earnings reports we just saw, the market is clearly punishing companies for heavy AI spending that doesn’t immediately boost the bottom line. Microsoft’s stock took a hit because investors are getting impatient, despite strong overall numbers. This suggests traders could consider buying puts or establishing bear call spreads on Microsoft, betting that this disappointment will linger.

The stock’s 5% after-hours drop to the $425 level has pushed 30-day implied volatility up near 35%, making options premium more expensive. With the company signaling data center constraints won’t ease until the second half of 2026, we could see a period of sideways or downward price action. Selling covered calls against existing long positions might be a prudent way to generate income while we wait for the AI investments to pay off.

In sharp contrast, Meta is being rewarded for its AI spending because its core advertising business is booming and covering the costs. The stock surged over 8% in after-hours trading to near $555, showing a strong bullish sentiment. We believe this momentum makes strategies like buying call options or establishing bull put spreads attractive for the coming weeks.

Given the significant price jump, implied volatility is now elevated, making outright call purchases expensive. Traders might instead look at selling cash-secured puts at a strike price they would be comfortable owning the stock at, such as $520. This allows us to collect rich premium from the high volatility while expressing a bullish to neutral view.

Tesla presents a more complex picture, with the market responding positively to its earnings beat and shifting narrative. The modest 3% price increase suggests cautious optimism as we increasingly see it as an AI and energy company, not just a car manufacturer. This pivot, combined with lower capital expenditures compared to its peers, could put a floor under the stock price.

After a rough start to 2026 where the stock was pinned below $240, this earnings report could be a catalyst for a recovery. Given Tesla’s historically high volatility, selling out-of-the-money puts for the February or March 2026 expirations could be an effective way to collect premium. This strategy capitalizes on the idea that the evolving AI story will prevent the stock from making significant new lows.