US tech stocks' earnings reports start off on a sour note! Netflix plunges 9% after hours, while Tesla drops over 4%.

On Thursday, July 20th, during the early Asia-Pacific session, Nasdaq 100 futures fell by about 0.7%, while S&P 500 futures dropped by 0.3%. After the U.S. stock market closed on Wednesday, Tesla and Netflix announced their second-quarter earnings one after another. Tesla's strong performance in the second quarter came as a surprise to the market, as it rebounded from the slump experienced in the first quarter due to price cuts. Both revenue and profit saw double-digit growth. However, the price cuts continued to impact profitability, with gross margins falling below expectations, dropping below 20%. During the earnings conference call, Tesla's CEO, Elon Musk, stated that sacrificing vehicle profit margins in exchange for increased production makes sense. If the economic environment worsens, Tesla will further reduce prices. Musk expressed "very high confidence" in Tesla's long-term value. He believes that the company's value could reach five times or even ten times its current size. He also recommended holding Tesla as a long-term investment, similar to Warren Buffett's value investing approach, stating that Tesla has long-term investment value and should be bought during market panics. While Musk was speaking, Tesla's stock price extended its post-market decline, falling by over 4%. Due to lower-than-expected second-quarter revenue and third-quarter performance guidance, Netflix's stock price dropped by 9% after hours. So far this year, the company's stock price has risen by 62%. Netflix reported second-quarter revenue of $8.19 billion, slightly lower than analysts' expectations of $8.30 billion. The company expects third-quarter revenue to increase significantly by 7.5% to $8.52 billion compared to the same period last year. However, due to exchange rate fluctuations and lower subscription fees in certain regions, this guidance is still below market expectations of $8.67 billion. Netflix's efforts to combat password sharing and support subscription services with advertisements have shown initial results. The net addition of paid subscribers in the second quarter was 5.89 million, significantly higher than both the first quarter and market expectations of 2.07 million, marking the best second-quarter user growth rate since the start of the pandemic. Additionally, a few hours before the earnings announcement, Netflix announced the cancellation of its lowest-priced ad-free subscription plan at $9.99 per month. Nvidia continued its intraday decline, falling over 1% after hours. Another AI-related stock, C3.AI, fell by approximately 2.5% after hours. Apple fell slightly after hours, down 0.6%. Despite the post-market plunge in Netflix and Tesla's earnings reports, the second-quarter earnings season for US stocks has started off well. According to FactSet, 78% of S&P 500 constituents have exceeded expectations, along with strong bank earnings overall, supporting investors' optimistic predictions of a soft landing for the economy. As of Wednesday's close, both the S&P and Nasdaq rose for the seventh consecutive day in an eight-day trading period, reaching their highest levels since April 4 last year. The Dow rose for the eighth consecutive day, marking the longest winning streak since September 2019 and reaching its highest level since April 20 last year. The Russell small-cap index rose for the eighth day in nine, reaching its highest level in over five months since February 3. Tom De Luca, Senior Researcher at Vanguard Group, said: Investors are loudly and clearly expressing their expectation that the current rebound in the US stock market will continue. Currently, short-term optimism is higher than it has been since December 2021, before the start of the bear market in 2022.