A Big Tech blowout.
After strong second quarter earnings reports from Alphabet (GOOG) and Netflix (NFLX), the market was ready to be amazed by Microsoft (MSFT) and Meta (META). What investors got was flat-out noteworthy given the gargantuan size of these beasts.
Meta delivered 22% revenue growth to $47.52 billion as AI investments fuel improved ad monetization. On the earnings call, co-founder and CEO Mark Zuckerberg sounded like an AI overlord, hyping up his recent hiring of Alexandr Wang to build out a superintelligence unit.
No matter that Meta guided to a roughly $30 billion year-over-year increase in capital expenditures this year!
“Meta’s 2Q results reinforced that AI is driving positive impacts on engagement and advertising, which enables Meta to invest more in AI capacity,” KeyBanc analyst Justin Patterson wrote.
Microsoft was no slouch. The company’s Azure business sales accelerated, which has analysts foaming at the mouth. Guidance looked solid too.
Guggenheim analyst John DiFucci noted, “Nights like this make us wonder why we couldn’t get there with Microsoft when it was below $400 [a share], but frankly, we didn’t see this coming, though in fairness to Microsoft management, they said it was.”
Lost in the robust tech reports is Federal Reserve chair Jay Powell sounding more like a hawk than a dove at his presser Wednesday afternoon. And an honorable mention is the 27% surge in Wingstop’s (WING) stock on Wednesday after strong earnings (watch the CEO on Opening Bid above).
Although it’s an embarrassment of riches for investors today in terms of catalysts, it’s Meta that deserves a zoom-in.
Zuckerberg delivered, and then some.
On top of the 22% sales increase, the company signaled the good times will keep on rolling as it plows deeper into artificial intelligence. Perhaps more important than the sales increase is that operating profit margins rose despite mega-spending on AI projects.
Meta’s quarterly scorecard:
Wins: The core advertising model is on fire. AI investments are clearly paying off. Zuckerberg is as engaged as ever.
Losses: Super lofty guidance for 2026 capex spending.
“In addition to bringing tools for advertisers to better reach clients, AI can also be a source of currently unpriced revenue streams at WhatsApp (only a few regions use these messaging apps to engage with customers), including with Agentic AI. Also, with Meta AI (accessible from WhatsApp or via a standalone app in the US, for example), Meta could capture more search related traffic and open new ad opportunities. Were WhatsApp standalone to attract the same ad/services dollars as Facebook or Instagram, and assuming 10% cannibalisation rate, we calculate a $50 billion revenue opportunity in 2030.” -HSBC’s Neil Churchill
