Meta and Microsoft Report Strong Earnings Amid Increased AI Investment
Meta and Microsoft have both announced their latest earnings results, revealing that not only did both companies exceed revenue and profit expectations, but they also further raised their capital expenditure forecasts, demonstrating a strong commitment to investment in the artificial intelligence (AI) sector.
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Meta Reports Q2 Earnings: Strong Advertising Business and Increased AI Investment
Meta recently released its second-quarter earnings report after the U.S. stock market closed, achieving a revenue of $47.5 billion, a 22% year-over-year increase, surpassing market expectations of $44.8 billion. The core advertising business performed impressively, generating $46.56 billion in revenue, also above Wall Street’s estimate of $43.97 billion.
The company estimates third-quarter revenue will range from $47.5 billion to $50.5 billion, with the midpoint exceeding analyst expectations of $46.2 billion, indicating continued growth momentum. This led to a post-market surge in Meta’s stock, rising by 11.8%.
Meta’s Earnings Highlights: Strong Advertising Business, Continued AI Investment
In response to the AI technology race, Meta has once again raised the lower limit of its 2025 capital expenditure to $66 billion, while maintaining the upper limit at $72 billion, emphasizing continued investment in talent, infrastructure, data centers, and energy.
Simultaneously, CEO Mark Zuckerberg is actively promoting the reorganization of the AI division, establishing Meta Superintelligence Labs, and recruiting Scale AI co-founder Wang Tao to lead the initiative, aiming to develop AI technology at human-level capabilities for various products. Zuckerberg emphasized:
“A robust advertising business allows the company to accelerate AI investment, and we have already seen significant revenue from the new generation of generative AI features.”
However, Meta’s hardware division, Reality Labs, continues to drag overall performance down. The division’s revenue for the last quarter was only $370 million, falling short of market expectations, with an operating loss reaching $4.5 billion. Although sales of smart glasses have increased, sales of Quest headsets have declined, and the newly promoted advertising features on WhatsApp have limited short-term contributions to performance.
Microsoft Earnings: Cloud Business and AI Services Drive Revenue Growth
Microsoft also announced its second-quarter earnings on the same day, showcasing strong growth momentum. Last quarter, revenue reached $76.44 billion, an 18% year-over-year increase, marking the fastest growth in over three years, and net profit increased nearly 24% to $27.23 billion.
Notably, the Azure cloud computing business is expected to surpass $75 billion in revenue for the full year of 2025 for the first time, growing 34% year-over-year, with last quarter’s revenue growth of 39%, and projected growth of 37% for the current quarter, well above market expectations.
To address the surge in demand for AI services, Microsoft estimates current quarter capital expenditure will reach $30 billion, setting a historical record for a single quarter, significantly higher than the market expectation of $23.75 billion. The company emphasized that increasing spending will help overcome supply bottlenecks and meet AI and cloud computing demand. The CFO stated: “We will continue to invest to seize the enormous opportunities at hand.”
Microsoft CEO Satya Nadella pointed out that the AI-driven Copilot product has surpassed 100 million monthly active users, boosting sales growth in business software. This series of achievements has led to an over 8% increase in Microsoft’s stock price in after-hours trading.
Intensified Competition in AI Capital Expenditure
The earnings reports from Meta and Microsoft simultaneously reveal that tech giants are investing in AI at an unprecedented scale. Meta has revised its 2025 capital expenditure budget to $66 billion to $72 billion, while Microsoft estimates current quarter spending at $30 billion. Google’s parent company Alphabet also raised its full-year capital expenditure estimate to $85 billion the previous week. The combined capital expenditures of these three giants are expected to reach $330 billion this year, driving the overall market value of AI-related stocks to continue growing.
Forrester analyst Mike Proulx stated: “This AI race is somewhat akin to the historical competitions over personal computers, browsers, search engines, and smartphones, with the key difference being that AI technology itself is accelerating this race.” For companies to emerge victorious, they must possess sufficient capital and technological strength to stand out in the competition.
However, high capital expenditures also bring short-term profit pressures. Although both Meta and Microsoft have seen growth in revenue and profit, losses in hardware divisions and increased infrastructure investments complicate their cost structures. Investors are keenly observing whether this wave of AI investment can sustainably convert into long-term profits, which will require close monitoring of subsequent industry developments.
