AI also delivered a first-quarter revenue forecast that exceeded expectations, showing that Meta’s growing revenue could fund data center spending expected to rise as much as 87% to $135 billion this year.“Meta’s headline figures are a very interesting reflection of the market’s attitude towards spending in the AI space,” said John Belton, portfolio manager at Gabelli Funds.
“All else being equal, the market would generally be concerned, but they have strong revenue expectations for the first quarter.”
Microsoft reported growth in its Azure cloud computing business that was only slightly above expectations, and also fell well short of record quarterly spending.
The revelation that OpenAI’s valuable asset accounts for 45% of the backlog was worrying, as some $280 billion could be at risk if the unprofitable startup loses momentum in the AI race. “Microsoft’s close ties with OpenAI support its leadership in enterprise AI, but also pose concentration risks,” said Zavier Wong, market analyst at eToro.
The ChatGPT maker had issued an internal “code red” in December after Google’s Gemini 3 launched to positive reviews and is playing catch-up in AI coding to Anthropic’s Claude Code, which has reached an annual run rate of more than $1 billion.
Shares of Microsoft fell 6.5% in after-hours trading on Wednesday, while Meta’s rose 10%.
After leveraging its first-mover advantage to secure the crown of the world’s most valuable company in 2024, Microsoft is now under increasing pressure from investors to justify rising capital expenditures.
It forecast that Azure growth would remain stable in the January to March period, after a slowdown in the last three months of 2025, which was partly due to AI chip capacity limitations.
“If I had taken the graphics processing units that just came online in Q1 and Q2 and assigned them all to Azure, the KPI (growth) would have been well over 40%,” Microsoft Chief Financial Officer Amy Hood said after the earnings report.
She added that the use of chips for internal development efforts had limited growth.
META BETTING ON THE AGGREGATE EFFECT OF AI
For Meta, the quarter showed the benefits of an aggressive push from the latecomer to the AI race, including a talent war and a pledge to invest hundreds of billions in massive new data centers in pursuit of “superintelligence.”
Sales rose 24% in the fourth quarter and Meta expects growth to accelerate by as much as 33% in the current quarter.
But it’s racking up bills with major cloud providers like Alphabet’s Google, which bodes well for the search giant’s results next week.
Using AI “will improve the quality of the organic experience as well as advertising,” said CEO Mark Zuckerberg.
Zuckerberg has promised that superintelligence, a theoretical milestone achieved when machines outsmart humans, will help bring deeply personalized artificial intelligence to a large social media user base.
“I think this will have a compounding effect,” he added, as Meta predicted a 43% jump in total spending this year to $169 billion.
TESLA WILL DOUBLE THIS YEAR
Growing spending has also been the theme at Elon Musk’s Tesla, which will double spending to more than $20 billion this year as it pivots to AI, humanoid robots and personal vehicles that can drive themselves.
After Tesla announced planned record spending, its shares posted some gains after rising 3.5% on quarterly profit and revenue that beat expectations.
Analysts said the results showed the disconnect between companies’ AI goals and investor demand for payouts.
“The market seems to be wondering whether these massive increases in capital spending will generate sufficient returns,” said Jesse Cohen, senior analyst at Investing.com.
“This reflects a growing gap between tech companies’ AI ambitions and Wall Street’s patience for open-ended investment cycles.”
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