Tech Giants Microsoft and Meta Beat Expectations in Latest Earnings

Microsoft and Meta Platforms both reported better-than-expected financial results in their latest earnings releases Wednesday, signaling continued strength in the technology sector despite economic uncertainties. Microsoft’s fiscal third-quarter 2025 revenue reached $70.1 billion, a 13% year-over-year increase that exceeded analyst expectations of $68.44 billion, while Meta delivered first-quarter 2025 revenue of $42.31 billion, up 16% from the same period last year and above the $41.38 billion forecast by analysts.

The strong performance from both companies drove after-hours stock movements, with Microsoft shares rising approximately 9% and Meta’s stock climbing roughly 5% following their respective announcements. “We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,” said Microsoft CEO Satya Nadella, while Meta chief Mark Zuckerberg noted that “our business is also performing very well, and I think we’re well positioned to navigate the macroeconomic uncertainty.”

Cloud and AI Drive Microsoft’s Growth

Microsoft’s Intelligent Cloud segment, which includes its Azure cloud computing platform, generated $26.8 billion in revenue during the quarter, representing a 21% year-over-year increase. Azure itself grew by an impressive 33%, substantially exceeding analyst expectations of approximately 30%, with AI-related services contributing 16 percentage points to that growth according to the company’s earnings report.

“Microsoft now has a $13 billion annualized revenue run rate for artificial intelligence,” reported Constellation Research in their analysis of previous quarters, highlighting the impressive financial impact of the company’s AI investments. This acceleration in Azure’s growth rate compared to previous quarters demonstrates Microsoft’s successful execution in capturing market share in the increasingly competitive cloud computing space, particularly for AI workloads.

Meta’s Ad Revenue and User Growth Excel

Meta reported advertising revenue of $41.39 billion for the quarter, exceeding analyst expectations of $40.5 billion and accounting for approximately 98% of total revenue. This strong performance is particularly notable given recent concerns about potential weaknesses in the digital advertising market, with the company reporting a 10% year-over-year increase in average ad price according to Meta’s earnings presentation.

The company’s user engagement metrics also impressed analysts, with daily active users across its family of apps reaching 3.43 billion, exceeding expectations of 3.39 billion. Meta’s newer platforms showed significant momentum as well, with Threads reaching 350 million monthly users, up from 320 million in January, and Meta AI attracting nearly 1 billion monthly active users, demonstrating the rapid adoption of the company’s artificial intelligence services.

Capital Expenditure Plans Reflect AI Investments

Both companies outlined substantial capital expenditure plans focused on artificial intelligence infrastructure. Microsoft reported capital expenditures of $16.75 billion for the quarter, a nearly 53% increase year-over-year, aligned with CEO Satya Nadella’s previously announced plan to spend approximately $80 billion in fiscal 2025 on AI-optimized data centers.

Similarly, Meta raised its 2025 capital expenditures forecast to between $64 billion and $72 billion, up from its previous projection of $60 billion to $65 billion, citing “an increase in the expected cost of infrastructure hardware” as noted by analysts at Quartz. These substantial investments reflect both companies’ strategic focus on artificial intelligence capabilities and the infrastructure required to support them at scale.

Reality Labs Continues to Impact Meta’s Bottom Line

Meta’s Reality Labs division, which encompasses the company’s metaverse initiatives and virtual/augmented reality hardware, reported an operating loss of $4.21 billion for the quarter. While this represents a significant drain on overall profitability, the loss was actually less than the $4.6 billion that Wall Street analysts had projected, suggesting some improvement in cost management or revenue generation within this segment.

However, Reality Labs revenue came in at $412 million, down 6% from a year ago and below analyst expectations of $492.7 million. “Reality Labs reported sales of $440 million for the quarter and $3.85 billion in losses” in a previous quarter, according to CNBC, indicating the division’s consistent pattern of substantial investment with limited near-term returns, a reflection of CEO Mark Zuckerberg’s long-term vision for immersive computing platforms.

Forward Guidance Boosts Investor Confidence

Both companies provided optimistic guidance for upcoming quarters, further boosting investor sentiment. Microsoft projected revenue between $73.15 billion and $74.25 billion for its fiscal fourth quarter, with the midpoint exceeding analysts’ expectations of $72.26 billion. The company also forecasted Azure growth to continue at 34-35% at constant currency, above Wall Street’s projections of 31.5%.

Meta offered second-quarter revenue guidance in the range of $42.5 billion to $45.5 billion, aligning with analyst expectations of $44.03 billion. The company also adjusted its 2025 total expense forecast downward to a range of $113 billion to $118 billion, from the previous range of $114 billion to $119 billion, suggesting effective cost management despite increased capital expenditures. “Meta’s advertising business remains robust despite concerns from investors about the impact of trade tensions on China-based advertisers,” noted Reuters analysts, highlighting the resilience of the company’s core business model.