Investors focused on 2 stocks this week:
- Microsoft Corporation (NASDAQ: MSFT)
- Alphabet Inc. (NASDAQ: GOOG)
They announced earnings on Wednesday, October 28, after the bell. But the best earnings trade came from somewhere else…
This is a common occurrence in the market.
When everyone’s watching the most obvious stock, retail traders step on each other, and Wall Street takes the bulk of the move.
It’s almost impossible to find gains.
Eventually, traders zoom out and find a perfect setup they completely missed.
Big-Tech Earnings Reaction
Microsoft did everything right.
Adjusted EPS came in at $4.89 versus $4.73 expected. Revenue grew 19% to $92.28 billion.
Azure, the number traders cared about most, grew 48%. That beat management’s own 44%–45% guidance, and next quarter’s outlook calls for 49%–50%.
Even spending came in light. Capex was $45.2 billion, well below the $50.67 billion estimate.
Faster growth. Less spending. On paper, that’s exactly what AI bulls wanted.
Shares jumped 4% during after-hours trading. Then the gap ran straight into the $550 area, sellers showed up, and MSFT faded back to where it started.
When a beat-and-raise can’t break resistance, the market is telling us something…
MSFT is still up about 9% year-to-date, but $550 is now a proven ceiling.
GOOG’s report was messier.
Cloud crushed it, growing 103% to $30.7 billion against expectations of about 90%.
But adjusted EPS of $2.67 missed the $3.02 estimate, and Search growth slowed to 12% from 17%.
The cash picture got worse, too. Capex hit a record $51.4 billion, and free cash flow was negative $9.1 billion. The CFO also flagged significantly higher capex in 2027.
Heading in, $320 was the line in the sand, with $300 support below it. GOOG blew through both levels. Shares dropped about 12% on Thursday, trading back near the March lows.
The stock is now down about 9% year-to-date.
Two of the biggest names in the market. One sold off on a beat. The other got crushed on a miss.
Momentum is waning for the AI powerhouses.
Burritos Beat Big Tech
While everyone stared at big tech, Chipotle Mexican Grill (NYSE: CMG) reported the same night.
On paper, it wasn’t a blowout.
Adjusted earnings of $0.27 a share came in below the $0.29 that Wall Street expected, and restaurant-level margin fell 120 basis points to 23.3%.
But the top line told a different story. Revenue rose 9.6% to $3.3 billion and slightly topped forecasts. Plus, comparable sales rose 2.1%, the third consecutive quarter of positive transaction growth.
For a stock that had been bleeding for months, that was all it took…
CMG slid from about $38 per share in September to under $28 last week.
Traders were braced for bad news.
Instead, the stock closed the regular session up 2.8% at $28.77 before earnings. Then it jumped another 6.8% in after-hours trading.
By Thursday, it was up about 11.6% over five days, and trading above $31 per share.
That was the best earnings trade in our room this week.
Not a mega-cap tech stock. Burritos.
Now, does it have legs?
A gap like this after a long downtrend can mark a shift in momentum. But I don’t chase extensions.
On Thursday morning, CMG dipped toward $30, and buyers stepped right back in. That’s my line.
A pullback that holds $30 is the patient entry, with the next test near $33 – $34, where the stock stalled in early October.
Lose $30, and the setup is broken.
Obvious stocks can get too crowded. That’s when we scan for strength on less important tickers.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
