It is a story of two totally different megacaps thus far this earnings season in terms of synthetic intelligence.
Meta Platforms surged greater than 10% after exhibiting indicators that AI investments are boosting the underside line, whereas Microsoft shares dropped as the corporate struggled to justify current spending plans to buyers and confirmed a slowdown in its cloud phase.
The cash flowing into AI and new expertise has been a main supply of debate on Wall Avenue as buyers more and more wish to see that firms are reaping rewards from the large spending during the last 12 months.
Meta appeared to achieve approval from buyers to maintain placing cash into AI. The social media big issued sturdy steerage and mentioned it plans to spend between $115 billion and $135 billion on its AI build-out this 12 months.
That is practically double what it spent in 2025.
In previous quarters, buyers have raised issues over the corporate’s formidable spending. Nonetheless, the corporate’s 24% year-over-year income development, fueled primarily by internet advertising, appeared to ease earlier worries about its AI technique.
CEO Mark Zuckerberg urged the corporate is engaged on a variety of latest merchandise this 12 months and mentioned investments would assist his mission for “constructing private tremendous intelligence.”
Meta and Microsoft one-day inventory chart.
However whereas buyers appeared to reward Meta’s spending plans, Microsoft’s inventory plummeted practically 12% and headed for its worst day since March 2020.
The software program maker confirmed slowing development in its Azure cloud phase, which declined to 39% development from 40% development within the firm’s first fiscal quarter. Traders carefully watch the phase as a stand-in for measuring enterprise AI demand.
On the identical time, capital expenditures and finance leases within the quarter jumped 66% to $37.5 billion, surpassing the $34.31 billion anticipated by analysts polled by Seen Alpha, as Microsoft helps demand for its cloud and AI segments.
The corporate additionally mentioned its combating compute capability constraints as demand continues to outweigh provide.
Microsoft finance chief Amy Hood mentioned Azure would have grown 40% if the corporate had funneled all of its new graphics processing unit chips within the first and second quarter into its Azure enterprise.
She additionally mentioned the corporate is balancing having “incoming provide higher meet rising Azure demand” with product innovation and rising first-party AI utilization in companies like GitHub Copilot and M365 Copilot.
The corporate’s demand backlog rose to $625 billion, up 110%, which included a $250 billion cloud settlement with OpenAI in the course of the interval. The ChatGPT maker accounted for 45% of its business remaining efficiency obligations.
Analysts at Evercore ISI mentioned “issues about OpenAI’s skill to fulfill funding commitments” probably contributed to the post-earnings inventory spiral however known as the sentiment “overblown.”
Past Massive Tech
The contrasting AI-fueled strikes bled into the broader expertise sector.
IBM gained a wave of confidence from buyers in its AI technique, with shares popping 8%. The expertise and consulting firm topped expectations and confirmed sturdy software program and infrastructure development because it builds out new automation instruments and AI infrastructure.
Analysts at Goldman Sachs mentioned the software program and infrastructure development, coupled with market share positive aspects in consulting, put the corporate on “monitor to finish its pivot to long-term development.”
In the meantime, IBM’s AI ebook of enterprise greater than doubled to $12.5 billion from $5 billion a 12 months in the past. That development appeared to justify the corporate’s investments.
Analysts at JPMorgan known as IBM a “comparatively defensive identify with more and more favorable publicity to Software program and AI tailwinds.”
But ServiceNow shares dropped 11% as issues that AI is consuming away on the broader software program sector’s enterprise mannequin overshadowed the corporate’s better-than-expected earnings. Its inventory has declined 25% already because the begin of 2026 and 50% during the last 12 months.
The sector has offered off in current months on worries that new AI instruments will deteriorate demand for his or her workflows and licenses and put a dent in long-standing income fashions.
Throughout an earnings name with analysts, ServiceNow CEO Invoice McDermott defended the corporate’s enterprise mannequin and up to date multibillion acquisition spree, which some buyers had flagged as an indication that the corporate is making an attempt to restart development.
“Let’s clear it up with the info,” he mentioned. “Enterprise AI would be the largest driver of return on the multitrillion-dollar supercycle of funding in AI infrastructure.”
