Shares of Meta rose 11%, while Microsoft’s stock climbed 4% on Thursday following better-than-expected quarterly earnings that beat both revenue and profit forecasts.
Both companies have been heavily investing in artificial intelligence infrastructure and plan to maintain their high capital expenditures. Meta raised its full-year capital spending estimate to between $66 billion and $72 billion, up from a previous range of $64 billion to $72 billion. Meanwhile, Microsoft expects to spend over $30 billion in capital expenditures and finance leases for its fiscal first quarter, well above analyst estimates of $24.23 billion.
Positive Impact on Chipmakers
Analysts at Citi highlighted that Microsoft and Meta’s increased spending should benefit major chipmakers like Advanced Micro Devices and Broadcom, with Microsoft accounting for around 8% of AMD’s sales and Meta about 2% of Broadcom’s revenue.
Meta CEO Mark Zuckerberg has been aggressively expanding AI talent, investing $14.3 billion into data-labeling startup Scale AI, and launching Meta Superintelligence Labs. Morgan Stanley analysts praised Meta’s core business but expressed some caution regarding the rapid AI spending, noting the risks if the superintelligence efforts don’t meet expectations.
Microsoft’s Continued Momentum
Barclays analysts said Microsoft’s generative AI expansion is ongoing, with strong demand for its data center infrastructure driving momentum. They maintained an overweight rating on Microsoft’s stock, citing the company’s unique position in the software market.
Microsoft reported fiscal fourth-quarter revenue of $76.44 billion, up 18% year over year, with net income increasing to $27.23 billion, or $3.65 per share, from $22.04 billion the prior year. Meta’s second-quarter revenue grew 22% year over year to $47.52 billion, while net income rose 36% to $18.34 billion, or $7.14 per share.
Author’s Opinion
Meta and Microsoft’s large AI investments are promising signs for the future, but the pace of spending carries risks. Balancing aggressive innovation with a sustainable business model is crucial. If these efforts pay off, the rewards could be huge. If not, the costs could weigh heavily on their financial health.
Featured image credit: Search Engine Journal
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