Microsoft & Meta Exceed Expectations Amid Strong AI Growth

A report by eToro’s Market Analyst, Josh Gilbert states that Microsoft's third-quarter fiscal results delivered a strong performance across the board, with earnings that not only impressed Wall Street but also sent a positive ripple through the broader tech sector and the S&P 500.

Azure Powers Ahead, Easing AI Demand Concerns

Leading into the quarter, there was skepticism surrounding demand for artificial intelligence, especially after some pullback in data centre investments. Microsoft swiftly erased those doubts. Azure's revenue surged 35% in constant currency, far surpassing analyst expectations of 30%. This outperformance underscores Microsoft's ability to effectively monetize its AI initiatives. Total revenue climbed 13% to $70.1 billion, with adjusted earnings hitting $3.46 per share.

Capital Spending Eases, but Margins Stay Strong

Capital expenditures dropped to $21.4 billion, down from the previous quarter, for the first time in two years. Yet, the company maintained its full-year capex outlook, signalling no slowdown in investment. More notably, Microsoft expects operating margins to slightly improve year-over-year despite this high spending pace, highlighting the company’s unmatched efficiency in turning growth into profit.

AI Leadership and Strong Fundamentals Keep Microsoft Ahead

This quarter reinforced Microsoft’s position as a leader, not just a participant, in the AI race. With OpenAI integration in full stride and Azure growth accelerating, the company is seeing tangible returns on its AI investments. Backed by an $80 billion cash reserve, Microsoft is well-equipped to continue fuelling future innovation. For long-term investors, these results offer both reassurance and optimism.

Meta Delivers Blowout Quarter Amid Ad Market Concerns

In a quarter marked by uncertainty around advertising due to global trade tensions, Meta delivered a blowout performance. Revenue surged 16% year-over-year to $42.31 billion, beating forecasts of $41.4 billion. A potential U.S. ban on TikTok may have redirected advertiser dollars toward Meta, and its upbeat revenue guidance reflects confidence in continued strength.

AI Investment Pays Off as Margins Expand

Despite ongoing growth in capital expenditures, Meta expanded its operating margin to 41%, up from 38% a year ago. That’s a major relief for investors still wary after 2022’s heavy spending and margin compression. Now, AI-related investments are yielding results, particularly in ad pricing, where AI tools helped drive a 10% increase.

Massive User Base and AI Momentum Position Meta for More Growth

With over 3 billion daily active users across its family of apps, Meta is exceptionally well-positioned to harness the next wave of AI-driven consumer engagement. These numbers confirm that Meta is executing well on its strategy. Its increased capex guidance also signals a strong belief in the returns its AI investments will deliver moving forward.