Why Have Tech Stocks Lost Their Mojo?

The Tech sector’s 2025 Q4 earnings results have been very good. But what accounts for the group’s stock market underperformance in recent days can broadly be connected to two factors. At one level is the resumption of the market’s unease with the ever-rising capex budgets from the Mag 7 group.

This isn’t a new issue and has been with us for some time, but this reemerged as a headwind for the group after bigger-than-expected capex announcements from Amazon AMZN, Meta META, and Alphabet GOOGL on their respective Q4 earnings calls.

The other issue is tied uncertainty around the legacy software business in the coming AI world, with many investors fearing that these software operators may not be as profitable going forward as they have been in the past.

With respect to actual earnings, both results for 2025 Q4 and outlook for the current and coming quarters, the Tech sector remains well positioned. The group has been a key growth driver over the last few years and it continues to play that role in the 2025 Q4 earnings season and is expected to remain a leader in the coming periods as well.

In terms of the Q4 earnings season scorecard, we now have results from 358 S&P 500 members or 71.6% of the index’s total membership. Total earnings for these companies are up +13% from the same period last year on +8.9% higher revenues, with 75.7% beating EPS estimates and 72.1% beating revenue estimates.

The comparison charts below put the Q4 earnings and revenue growth rates in a historical context

The comparison charts below put the Q4 EPS and revenue beats percentages in a historical context

To learn more about the Q4 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report >>>Analyzing the Evolving Earnings Picture: What Should Investors Know?

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This article originally published on Zacks Investment Research (zacks.com).

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