Meta and Microsoft face AI earnings test
Meta, the owner of Facebook, and Microsoft will post second-quarter earnings after US markets close today (Wednesday 30 July) with analysts focused squarely on how both tech titans are monetising their multibillion-dollar artificial intelligence (AI) bets.
Shares in both firms have surged around 20 per cent so far this year, fuelled by investor enthusiasm around AI.
But as spending in AI soars, investors want proof of earnings.
Microsoft: Cloubgd momentum and Copilot in focus
Microsoft is expected to post another robust quarter, with analysts forecasting a 14.6 per cent jump in earnings to $3.38 per share and revenue of $73.86bn.
Cloud platform Azure will be the centre of attention, following a stronger-than-expected showing last quarter.
“This is Microsoft’s ‘shining moment’ with AI set to change the cloud growth trajectory”, said Dan Ives of Wedbush Securities, who recently raised his price target on the stock to $600.
The focus will also be on adoption of Copilot, Microsoft’s AI assistant for Office and now its Edge browser, as a driver of subscription revenue and operational efficiency.
Microsoft has already shaved an estimated $500m in annual costs by integrating AI into customer support, according to reports.
Still, high capital spending on AI infrastructure will pressure margins.
Microsoft chief financial officer Amy Hood previously guided for $80bn in capex for fiscal 2025.
With the new fiscal year now underway, Wall Street will be listening closely for any shift in spending plans.
Meta: Eyes on AI engagement and spending
Meta’s results, meanwhile, will test whether its AI investments are beginning to generate real returns.
Analysts expect earnings of $5.89 per share and revenues of $44.83bn – a 14.7 per cent year-on-year lift.
“Meta’s Q2 results are a key test of whether its AI investments are translating into actual returns”. said Lale Akoner, global market analyst at eToro. “It’s now ‘show me the money’ time.”
Meta’s ad business, which has used AI to improve engagement and ad targeting across Instagram and Reels, is expected to post 15 per cent growth.
But spending on Reality Labs and its new Superintelligence Lab – which has seen Meta offer eye-watering packages to poach AI talent – will come under scrutiny.
“There’s been disappointing progress on its open-source Llama models”, noted Matt Britzman, senior equity analyst at Hargreaves Lansdown.
“Investors will want to know whether there’s likely to be any change to the AI strategy with a new team taking the reins.”
Zuckerberg’s recent comments about building ‘personal superintelligence’ and Meta’s expansion into smart glasses could also raise eyebrows among investors weighing long-term vision against current profitability.
High stakes, high expectations
Both Microsoft and Meta are seen as key players in the AI race, but tonight’s numbers will offer a reality check.
Microsoft is on the cusp of joining Nvidia in the $4tn club, needing just a five per cent gain to cross the threshold.
Meta, meanwhile, has more to prove – but analysts remain broadly bullish.
“The setup favours a modest beat, but guidance will make or break sentiment”, said Akoner. “Meta remains a high-beta way to play AI infrastructure and engagement – still compelling, but with more to prove than peers”.
Amazon and Apple will round out Big Tech earnings season with their own results tomorrow. But all eyes today will be on how Meta and Microsoft are turning AI hype into shareholder value.