Microsoft and Meta Spent on the Same Scale and Got Opposite Verdicts

Microsoft and Meta Spent on the Same Scale and Got Opposite Verdicts

Microsoft and Meta both reported after the close last night, both are spending unprecedented sums on AI infrastructure, and the market sent them in opposite directions. Microsoft rose as much as 7 percent after hours. Meta fell, marked anywhere from 5 to 11 percent depending on when you looked. Same capex story, completely different reception.

The pattern was set a week earlier by Alphabet. Revenue up 24 percent to 119.8 billion dollars, Google Cloud up 82 percent, and the stock fell anyway because capex guidance went to 195 to 205 billion for 2026 and free cash flow turned negative for the first time since the 2004 IPO. The Magnificent Seven shed something like 767 billion dollars of market value in a single session on the 23rd. The market had stopped rewarding the spend.

Microsoft gave it a reason to start again. Revenue 90.0 billion dollars, up 18 percent. Operating income 40.6 billion, up 18. Diluted EPS 4.81 dollars, up 32. Azure grew 43 percent against consensus around 40 and passed 100 billion in annual revenue for the first time. Copilot is over 30 million paid seats. Additions to property and equipment were 35.8 billion in the quarter and 115.9 billion for the year, and management guided Q1 capex above 50 billion while putting calendar 2026 and FY27 near 175 billion and promising free cash flow stays positive.

Meta's problem was not the top line. Revenue came in at 60.80 billion dollars, up 28 percent and ahead of the 60.22 billion consensus, with ad revenue up 27 percent on impressions up 14 and price per ad up 12. But diluted EPS was 6.18 dollars, down 13 percent year on year against expectations closer to 7.15. Costs rose 55 percent to 42.0 billion. Free cash flow fell 91 percent. Capex guidance for 2026 got its low end lifted to 130 to 145 billion.

So the distinction the market is now drawing is not spend versus restraint. It is spend with visible conversion versus spend on faith. Microsoft said demand continues to exceed available capacity and that new capacity gets monetised the moment it lands, and it also extended the useful life of its data centre assets from 15 to 25 years starting FY27, which flatters depreciation. Worth noting it carries 329.1 billion dollars of uncommenced data centre lease obligations. Apple and Amazon report tonight into the same test.

Four companies are spending roughly 724 billion dollars this year and something like 950 billion next. Nobody is asking whether that is a lot anymore. They are asking which of them can show you the revenue attached to it, and last night only one of the two could.