Microsoft Soars on Azure Growth, Meta Slides Due to High Costs
Meta Platforms' stock plummeted by 10% after its earnings announcement, while Microsoft's shares surged by 8%. The two tech giants have been investing heavily in artificial intelligence (AI) infrastructure. Meta reported a revenue of $60.8 billion, beating analyst expectations but missing on earnings per share due to high costs.
The company took a hit from $2.4 billion in legal charges and $1.18 billion in severance costs, leading to a 14% shortfall in earnings per share. On the other hand, Microsoft exceeded both revenue and earnings estimates, with its cloud business Azure growing by 43% and crossing the $100 billion annual revenue milestone.
The key difference between the two companies' earnings reports lies in their ability to monetize AI spending. While Microsoft's cloud division directly generates revenue from AI infrastructure, Meta lacks a similar proof point. The company's CEO Mark Zuckerberg acknowledged that it receives offers to lease excess compute capacity at a premium, but no cloud business exists to turn these investments into separate revenue streams.
Meta raised its capital expenditure guidance for 2026, while Microsoft held steady on its forecast. The market now demands evidence that AI spending translates into measurable returns, with Microsoft providing the necessary proof through Azure's growth.