Microsoft shares jumped in premarket trading while Meta tanked as investors gave differing verdicts on the two tech giants' earnings.
Shares of Microsoft were last 8% higher while Meta was down 8.5%.
On Wednesday, Microsoft posted fiscal fourth-quarter revenue that beat analyst estimates and reported 43% growth at its key Azure cloud business, which was also ahead of market expectations.
The company said that it now has over 30 million paid seats for Microsoft 365 Copilot, its AI work assistant, up from more than 20 million as of April, in further signs that parts of its AI investments are paying off.
"Microsoft's strong revenue performance, combined with accelerating Copilot adoption, signals that its $190 billion data‑center buildout is beginning to deliver returns," Tracy Woo, principal analyst at Forrester, said in a note on Wednesday.
Microsoft's stock popped even as the company reiterated its 2026 capital expenditure forecast and signaled a potential spending expansion in its 2027 fiscal year at a time when the market is jittery over the cost of AI.
The stock rose 8% higher in extended trading on Wednesday and is down around 24% this year.
It was a different story for Meta. The social media giant missed investor expectations on earnings and its revenue guidance for the current quarter.
Meta said it expects revenue this quarter of between $61 billion and $64 billion, or $62.5 billion at the middle of the range. Analysts were expecting guidance of $63.15 billion, according to LSEG.
At the same time, Meta's free cash flow plunged 91% year-on-year to $784 million as it continues to spend on AI investments.
Meta's shares slid in extended trading on Wednesday and are down around 16% this year.
Meta CEO Mark Zuckerberg said the company is "getting a lot of offers for compute at a significant premium" over what the company paid for it. This would be a change of direction for Meta if it begins leasing out its excess computing capacity to third parties. However, there were very few details on what this business could look like.
At the same time, Zuckerberg acknowledged that the company will need to keep compute resources for itself to develop new products.
"Right now, the narrative from Mark Zuckerberg is a little light on detail and relying on what could be done in the future," Ben Barringer, head of technology research at Quilter Cheviot, said in a note on Thursday.
"Meta still has a crucial role to play in the AI world, but it is still finding its way somewhat and that is why we see both costs and revenues looking a little volatile."
— CNBC's Jonathan Vanian contributed to this report.
Facts Only
* Microsoft shares were last 8% higher; Meta shares were down 8.5%.
* Microsoft posted fiscal fourth-quarter revenue that beat analyst estimates.
* Microsoft reported 43% growth in its Azure cloud business, which was ahead of market expectations.
* Microsoft has over 30 million paid seats for Microsoft 365 Copilot.
* Meta missed investor expectations on earnings and revenue guidance for the current quarter.
* Meta's expected revenue for the current quarter was between $61 billion and $64 billion, or $62.5 billion at the middle of the range.
* Meta's free cash flow plunged 91% year-on-year to $784 million due to AI investments.
* Meta CEO Mark Zuckerberg mentioned receiving many offers for compute at a premium.
* Analysts expected Meta's revenue guidance of $63.15 billion, according to LSEG.
Executive Summary
Full Take
The divergence between Microsoft and Meta highlights the complex, uneven return landscape of massive AI infrastructure investment. Microsoft's performance demonstrates that significant capital expenditure in data centers can translate into tangible growth metrics, particularly when tied to specific product adoption like Copilot, suggesting a functional feedback loop for hardware and software buildouts. Conversely, Meta’s experience underscores the volatility inherent in investing heavily in speculative areas like generative AI where revenue guidance and free cash flow are under intense scrutiny. The narrative surrounding Meta's compute capacity suggests a potential strategic pivot away from pure internal development toward monetization of excess capacity, yet the accompanying commentary reveals significant uncertainty about the execution roadmap for such a transition. This juxtaposition forces an examination of whether current investment strategies across the tech sector are leading to predictable returns or merely managing perceived volatility. The underlying pattern suggests that while foundational AI investments create opportunities (Microsoft), operationalizing those investments and establishing clear revenue streams remains an ambiguous challenge (Meta).
What specific metrics or structural shifts would be required for Meta's compute strategy to solidify into a sustainable business model? How does the market price in the difference between demonstrable revenue growth and speculative future capacity management across these two AI leaders?
Sentinel — Human
The text reads like professionally sourced financial reporting, skillfully weaving together disparate earnings data with expert commentary on the AI investment landscape.