Meta and Microsoft Showed Good Profits, But Predict Downside and More Investment in AI

• Meta and Microsoft reported good profits in the Q3 and year-to-date earnings
• They forecast lower profits next quarter and more investment in AI development
• However, Meta and Microsoft shares decreased in after-hours trading, namely 3.18% and 3.71% respectively

Meta posted good revenue in the third quarter, up 19% year-on-year, while Microsoft boasted 16% year-on-year.

However, they expect revenue to decline in the coming quarters, while planning to increase investment in AI. This kind of thing has investors worried, and we also see Meta and Microsoft shares falling in after-hours trading by 3.18% and 3.71% respectively.

More on Figures and Priorities of Meta and Microsoft

Meta in the Q3 grew 19% year-on-year to $40.6B, though Wall Street forecasts of $40.2B, with EPS also beating expectations showing $6.03 per share instead of US$5.19.

Microsoft too has something to show with its 16% growth, and revenue of 65.6 billion instead of the forecast of 64.4 billion, as well as an impressive EPS of $3.30 instead of $3.08.

Much of this is due to the fact that investment in AI is starting to pay off, Meta AI on its WhatsApp, Facebook, and Instagram services Mark Zuckerberg said:

“firm had a good quarter driven by AI progress.”

Things are similar for Microsoft with its AI-powered Azure, as Satya Nadella noted:

“Our AI business is on track to surpass an annual revenue run-rate of $10 billion next quarter, which will make it the fastest-growing business in our history to reach this milestone.”

Therefore, companies continue their intention to invest even more in AI, even while taking into account that net revenues may decline soon, and the full return on investment may be yet to come.

Mark Zuckerberg shared that capital expenditure is expected to grow by $38B to $40B in 2025.

Also, Satya Nadella expects the current quarter to be between $68.1B and $69.1B, below analysts’ expectations of $69.9B, and also Azure AI offering to grow between 31% and 32%, rather than the 33% posted last quarter.

Something like this, of course, has some investors worried, and we’re also seeing company shares experience a drop in after-hours trading.

More specifically, META is down 3.18% from $591.80 to $573, and MFST is down 3.71% from $432.53 to nearly $416.50.

Conclusions

AI is still in an emerging field where it takes a huge amount of investment to create a critical mass of developments.

Many investors expect faster results and ROI is still an issue in AI, but at the same time we are already seeing ROI in the billions of dollars, and CEOs are clearly focused on the longer term.