The latest earnings season is highlighting a new reality in tech: investors reward AI spending only when it clearly drives growth. Meta Platforms and Microsoft both slightly beat expectations for the December quarter, but their outlooks on AI led to sharply different market reactions. Meta’s shares jumped roughly 10% after hours, while Microsoft’s fell 6.5%. Investors are no longer impressed by ambition alone; measurable returns are now the key metric.
Meta’s strong performance shows how AI can deliver immediate business results. Its December-quarter revenue rose 24%, fueled by AI-powered ad targeting that boosted engagement and ad performance. The company forecast first-quarter revenue growth of around 30% year on year, far exceeding expectations. Analysts note that Meta’s advertising-focused business allows it to monetize AI gains quickly, and markets rewarded that clarity with a sharp rise in stock price.
Microsoft faces a more complicated challenge in turning AI leadership into broad financial momentum. Its Azure cloud business, the centerpiece of its enterprise AI strategy, grew 39% year on year, slightly above expectations but slower than the prior quarter. Guidance for future growth suggested Azure may struggle to surpass 40% growth, prompting concern from investors who want AI spending to translate into near-term profits.
Capital expenditure also shaped market reactions. Meta expects data-center investments to surge 87% this year, with total expenses rising 43%, yet accelerating revenue reassures investors that costs are manageable. Microsoft, however, spent $37.5 billion on capital expenditures in the October-December quarter, and lingering worries remain that AI investments are outpacing returns. Technical bottlenecks in Azure and internal AI development were cited as limiting growth, but the market remains focused on short-term results.
Microsoft’s deep partnership with OpenAI is a double-edged sword. The relationship underpins its leadership in enterprise AI but also creates concentration risk, while growing competition from Google’s Gemini and Anthropic’s Claude adds pressure. Meta, in contrast, relies on internally developed AI systems to improve ads and user engagement, limiting external dependencies.
Structural differences in the businesses further explain investor reactions. Meta’s consumer-focused model lets AI gains be quickly monetized, whereas Microsoft’s broader portfolio, including enterprise software, cloud services, gaming, and consumer products, makes the impact of AI harder to isolate. Weak Xbox sales, for example, diluted the perceived effect of AI in Azure.
The clear takeaway is that ambition alone is no longer enough. Investors are increasingly demanding that AI spending deliver tangible results in revenue growth, and the contrasting fortunes of Meta and Microsoft show how crucial measurable returns have become.
