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While analysts worried about economic slowdowns and tariff impacts, Meta and Microsoft just delivered quarterly results that sent their stocks soaring. Let’s dive into what’s happening with these tech behemoths and why their earnings matter beyond just share prices.
Meta: Advertising machine powers AI ambitions
Meta reported its Q1 2025 results on Wednesday, exceeding expectations on almost every metric:
- Revenue: $42.3 billion, up 16% year-over-year (beating expectations of $41.3-41.4 billion)
- Earnings per share: $6.43 (well above the expected $5.25)
- Net income: $16.7 billion, jumping 35% from last year (crushing consensus estimates of $13.5 billion)
- Advertising revenue: $41.39 billion (above expectations of $40.5 billion)
The market loved these numbers, pushing Meta’s shares up more than 5% after hours. This is particularly impressive considering Meta’s stock had dropped over 7% since the start of 2025, though it’s still up 25% over the past 12 months.
The advertising resilience
Remember all those fears about advertisers cutting spending because of economic uncertainty? Meta seems immune to them. Despite generating about 10% of its revenue from Chinese marketers (who have been reducing spend), Meta’s advertising machine keeps humming along.
CFO Susan Li did acknowledge “some reduced spend in the US from Asia-based ecommerce exporters” and declining revenue from China-based gaming advertisers. But these headwinds weren’t enough to derail the company’s growth.
For the next quarter, Meta expects revenue between $42.5 billion and $45.5 billion—ahead of Wall Street’s expectations of $44 billion. This optimistic outlook suggests the company isn’t seeing signs of a broader advertising slowdown.
Zuckerberg’s expensive AI bet
Mark Zuckerberg has made it clear: He wants Meta to be the “AI leader.” And he’s putting serious money behind this vision.
Meta increased its capital expenditure forecast for 2025 to between $64 billion and $72 billion, up significantly from the previous estimate of $60-65 billion. This increased spending is specifically for “additional data centre investments” to support its AI initiatives.
At the same time, Meta slightly reduced its total expense projections to $113-118 billion (down from $114-119 billion), suggesting the company is shifting resources rather than simply increasing spending across the board.
What’s Meta doing with all this AI investment? Several key initiatives:
- Llama 4: Released in early April, this is Meta’s latest open-source large language model
- Standalone AI assistant app: Launched to compete directly with OpenAI’s ChatGPT
- Llama API: A new developer platform positioning Meta as a cloud provider for AI developers
On the earnings call, Zuckerberg outlined multiple ways to eventually monetize these AI investments—through product recommendations, advertising, premium services for complex tasks, and business AI agents for customer service and sales on platforms like WhatsApp.
But he’s not rushing to cash in yet. Zuckerberg emphasized that Meta will focus on scaling for “at least another year” before aggressively pursuing these revenue streams.
Meanwhile, Meta’s Reality Labs division (responsible for metaverse and AR/VR technologies) continues to be a money pit, posting an operating loss of $4.21 billion for the quarter. Clearly, Zuckerberg is playing the long game with both VR and AI.
Regulatory and political challenges
Meta’s path isn’t without obstacles. The company is battling the Federal Trade Commission (FTC), which alleges Meta holds an illegal monopoly in “personal social networking” and wants to force the company to sell Instagram and WhatsApp.
The Wall Street Journal reported that settlement talks broke down after Zuckerberg offered up to $1 billion while the FTC demanded at least $18 billion.
In Europe, regulators are scrutinizing Meta’s “consent or pay” model, which requires users to either consent to personal data processing or pay a subscription fee. Li warned that European Commission decisions on this matter could cause a “significant impact to our European business and revenue.”
On the political front, Zuckerberg has been actively cultivating a relationship with President Trump, visiting the White House multiple times in 2025. Meta donated $1 million to Trump’s inauguration fund and reportedly reached a $25 million settlement with Trump related to his previous platform ban.
Microsoft: Cloud and AI drive impressive growth
Microsoft’s Q3 fiscal year 2025 results were equally impressive:
- Revenue: $70.1 billion, up 13% year-over-year (above expectations of $68.4 billion)
- Earnings per share: $3.46 (beating estimates of $3.21-3.22)
- Net income: $25.8 billion, up 18% from $21.9 billion a year earlier
Microsoft shares jumped approximately 7-9% in extended trading, potentially adding more than $200 billion to its market value.
Azure’s stellar performance
The star of Microsoft’s earnings was Azure, its cloud computing platform:
- Azure revenue grew 33%, significantly exceeding expectations of around 30%
- AI services contributed 16 percentage points to this growth (up from 13 points last quarter)
Despite this impressive performance, CFO Amy Hood noted that “the real outperformance in Azure this quarter was in our non-AI business,” with the AI side delivering as expected except for bringing capacity online faster than anticipated.
Commercial bookings grew 18%, partly driven by a new Azure contract with OpenAI. This growing relationship with the ChatGPT creator continues to be strategically important for Microsoft.
Looking ahead, Microsoft expects Azure’s growth to accelerate to 34-35% in Q4, well above analyst expectations of 31.5%.
The infrastructure buildout
Microsoft’s capital expenditures reached $16.75 billion in Q3, a massive 53% increase year-over-year. CEO Satya Nadella previously announced plans to spend $80 billion in fiscal year 2025 on constructing data centers for AI workloads.
Interestingly, Microsoft is shifting its spending patterns. The proportion of longer-lived asset expenditures (like data center buildings) fell to about half of the total, with more emphasis on shorter-lived assets like CPUs and GPUs.
As Microsoft’s VP of Investor Relations explained: “You plug in CPUs and GPUs, and then you can start recognizing revenue.” This shift allows Microsoft to monetize investments faster.
Despite these enormous investments, demand for AI services continues to outstrip supply. Hood warned that Microsoft still expects “some AI capacity constraints beyond June” because demand is growing faster than anticipated.
For fiscal year 2026 (beginning in July), Microsoft expects capital expenditures to continue growing, but at lower rates than the current year and with more emphasis on these shorter-lived assets.
Segment performance breakdown
All three of Microsoft’s main business segments performed well:
- Intelligent Cloud (includes Azure): $26.75 billion revenue, up 21% (above consensus of $26.16 billion)
- Productivity and Business Processes (includes Office and LinkedIn): $29.94 billion, up 10% (exceeding estimates of $29.57 billion)
- 15 million people are now using GitHub Copilot, four times more than last year
- LinkedIn’s Talent Solutions continues to face challenges due to “weakness in the hiring market”
- More Personal Computing (includes Windows, search, devices, and gaming): $13.37 billion, up 6% (higher than expected $12.66 billion)
- Windows and device sales increased 3% despite elevated inventory levels due to tariff uncertainty
- Commercial adoption of Windows 11 increased 75% as Windows 10 support ends in October 2025
Evolving OpenAI relationship
During the quarter, Microsoft adjusted its relationship with OpenAI, gaining a right of first refusal when OpenAI seeks new computing capacity, though Microsoft won’t always be obligated to provide it.
This change came as OpenAI announced its Stargate AI infrastructure project with Oracle and SoftBank. The shifting dynamics suggest OpenAI may be seeking to diversify its infrastructure partnerships beyond Microsoft.
Microsoft reported $623 million in “other expense” during the quarter, which includes recognized losses on equity method investments like OpenAI. This figure is down significantly from $2.29 billion in the previous quarter, potentially indicating improved financial performance at OpenAI.
What does this tell us about the tech economy?
Meta and Microsoft’s results reveal several important trends:
1. AI investments are accelerating, not slowing
Despite economic uncertainty, both companies are increasing their AI infrastructure investments. Microsoft plans to spend $80 billion on AI-capable data centers this fiscal year, while Meta is boosting capital expenditures by billions to support its AI initiatives.
This suggests they see AI as critical to future growth, regardless of short-term economic conditions.
2. Core businesses remain extremely strong
While AI gets the headlines, the real story is the continued strength of these companies’ established businesses:
- Meta’s advertising platform keeps delivering impressive growth
- Microsoft’s cloud services, Office products, and even Windows are seeing solid gains
These cash-generating core businesses give Meta and Microsoft the luxury to make massive long-term bets on emerging technologies.
3. Capacity constraints persist despite huge investments
Both companies mentioned AI capacity constraints as limiting factors—suggesting demand for AI services continues to outstrip supply despite billions in infrastructure spending.
This dynamic could create interesting market opportunities for companies that can efficiently provide AI computing power.
4. Tech may be more recession-resistant than expected
The strong performance from these tech giants, despite macroeconomic concerns, suggests the sector might be more insulated from broader economic pressures than previously thought.
Businesses appear to be maintaining or increasing spending on digital advertising, cloud services, and enterprise software even amid uncertainty—perhaps viewing these as essential rather than discretionary expenses.
5. Regulatory challenges are mounting
Both companies face significant regulatory hurdles:
- Meta battles the FTC over monopoly concerns and European regulators over data practices
- The tech sector broadly confronts uncertainty around AI regulation and potential impacts from trade policies
So far, these challenges haven’t significantly hampered financial performance, but they remain important risk factors.
The bottom line
Meta and Microsoft have delivered quarterly results that defy fears of an economic slowdown, particularly in the tech sector. Their willingness to continue pouring billions into AI infrastructure demonstrates confidence in both the technology’s potential and their ability to monetize it eventually.
For investors, consumers, and the broader economy, these results suggest that the AI revolution is still accelerating, with no signs of the major tech players pulling back on their ambitions despite economic uncertainties.
The question now is whether these massive investments will deliver returns that justify their enormous costs—and how long investors will remain patient waiting to find out.
