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META Platforms Inc.’s better-than-expected sales outlook helped ease Wall Street concerns about plans for unprecedented spending on artificial intelligence this year. 

The social networking giant topped projections for holiday quarter revenue and gave a strong forecast for the current period during its earnings report Wednesday. Improvements in its online advertising business are making it possible for Meta to spend hundreds of billions of dollars over the next few years on AI infrastructure. Meta’s shares jumped more than 11% in extended trading. 

Meta projected record spending for 2026, driven by Chief Executive Officer Mark Zuckerberg’s aggressive campaign to amass the infrastructure, computing power and talent that he deems necessary to win a competitive AI race. Zuckerberg has said his strategy centers on “front-loading” computing capacity in preparation for reaching the company’s goal of superintelligence, a theoretical milestone at which point AI can meet or outperform humans at many tasks.

To get there, Meta is spending aggressively. The company estimated that full-year capital expenditures will be between $115 billion and $135 billion, exceeding the $110.6 billion average analyst estimate, according to data compiled by Bloomberg. If Meta hits the top-end of that range, it will mean a jump of roughly 87% from 2025, a record year in which cap-ex topped $72 billion. 

Speaking on a call with investors, Zuckerberg said to look forward to “a major AI acceleration” that’s been brewing within the tech industry for over a year. After an overhaul of Meta’s AI program in 2025, Zuckerberg said Meta will soon release new models and products, though the Facebook founder’s near-term expectations were uncharacteristically subdued: “I expect our first models will be good, but more importantly, we’ll show the rapid trajectory that we’re on,” he said. He reiterated during the call that Meta’s upcoming models may not wow at launch, but will improve meaningfully over time. 

To finance these expensive projects, Meta is leaning heavily on its advertising business. The owner of Facebook, Instagram and WhatsApp said first-quarter sales will be $53.5 billion to $56.5 billion, beating the $51.3 billion average analyst estimate. Chief Financial Officer Susan Li spent much of her time on the call talking about ways that Meta’s AI investments are helping the company better target ads and give users more personalized content recommendations, which keeps them scrolling. 

Investors have historically been anxious about whether Meta’s businesses will benefit meaningfully from its hefty AI investments. “Meta’s lack of model capabilities vs. frontier large language models leaves uncertainty around monetization of its AI investments compared with hyperscale cloud peers,” Bloomberg Intelligence analyst Mandeep Singh said in a note last week. 

But those concerns were tamed on Wednesday. The social media giant reported fourth-quarter sales of $59.9 billion, beating the $58.4 billion that Wall Street expected on average. It was a sign that while spending is up, the core business supporting those investments is also growing faster than expected. 

Investors were less forgiving of Microsoft Corp., which saw shares tumble after unveiling a similarly ambitious 2026 spending outlook on Wednesday.

AI Investment 

Meta’s AI investment strategy hasn’t always been well received. Back in October, when Li warned investors that 2026 capital expenditures were expected to be “notably larger” than in 2025, some investors got spooked and shares fell by as much as 14%. The concern remains that Meta’s spending may not lead to a meaningful new business line. On the call Wednesday, Zuckerberg was asked on multiple occasions to talk about his vision for an AI business, but kept his answers vague, promising to share more as the year goes on. 

That hot-and-cold reaction from Wall Street has not slowed Zuckerberg. The Meta CEO has committed publicly, including at a high-profile White House dinner, to spend $600 billion in the US by 2028 to support AI technology, infrastructure and workforce expansion. Li, speaking on the Wednesday earnings call, added that Meta will continue to seek external financing for some of its infrastructure projects.

These investments are in service of long-term objectives, Zuckerberg said. “I think we have the most talent dense research effort in the industry and some of the early indicators look positive,” he told investors. “But look, I think that this is a long-term effort.” 

Despite Meta’s strong quarterly results Wednesday, Matt Britzman, an analyst at Hargreaves Lansdown, said the “real headline is the relentless ramp” in capital expenditures. “It wouldn’t be surprising to see the share reaction cool as investors absorb those aggressive investment plans,” he said. 

Though Meta’s advertising business will help it weather some of the AI uncertainties, a separate unit continued its considerable losses. Reality Labs, Meta’s unit focused on virtual reality and AI-enabled hardware, posted $955 million in fourth-quarter sales, and an operating loss of more than $6 billion for the fourth quarter. That brought its total losses to more than $19 billion for 2025. 

Zuckerberg told investors that those losses won’t continue forever. “I expect Reality Labs losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward,” he said.

Earlier this month, Meta cut about 10% of staff across Reality Labs as part of a move to shift resources away from some of the virtual reality products and into more AI-focused ventures, including AI wearables, like the Ray-Ban Meta glasses. –BLOOMBERG

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MICROSOFT Corp.’s spending surged to a record high and cloud sales growth slowed, sending the shares down sharply amid investor concerns that it could take longer than expected for the company’s AI investments to pay off.

Capital expenditures for the fiscal second quarter hit $37.5 billion, up 66% from a year earlier and exceeding analyst estimates for $36.2 billion.

The Azure cloud-computing unit posted a 38% revenue gain during the quarter when adjusting for currency fluctuations, just meeting analysts’ projections. That growth rate slowed — by a percentage point — from the prior quarter. The company expects Azure sales to rise 37% to 38% in the current quarter.

Microsoft shares fell about 7% in extended trading after closing at $481.63 in New York.

“One of the core issues that is weighing on investors is cap ex is growing faster than we expected, and maybe Azure is growing a little bit slower than we expected,” Morgan Stanley analyst Keith Weiss said during an analysts’ call. Investors, he said, were concerned about the return on that spending.

Chief Financial Officer Amy Hood responded by saying that a chunk of cloud capacity is going toward internal teams, which boosts products such as Copilot. Had all of the new capacity gone toward Azure, the growth rates would have been notably higher, she said.

The world’s largest software maker has experienced rapid growth in its cloud computing business, thanks in part to a landmark partnership with leading artificial intelligence startup OpenAI. But despite spending heavily on data centers, Microsoft has struggled to get capacity online quickly enough to meet demand.

Microsoft has been rushing to bake AI tools, including those powered by OpenAI, into its products, betting that chatbots and automation technology will boost sales of the company’s productivity software and cloud services.

During the analyst call, Microsoft Chief Executive Officer Satya Nadella said companies are now paying for 15 million subscriptions to the M365 Copilot, Microsoft’s main AI tool for office workers. Adoption is growing among the company’s enormous base of corporate users, Nadella said.

Total sales increased 17% to $81.3 billion during the quarter, while profit was $5.16 a share, the company said in a statement on Wednesday. The net income figure was boosted by gains from Microsoft’s investment in OpenAI, which lifted per-share earnings by $1.02.

Analysts had expected sales of $80.3 billion and per-share earnings of $3.92. 

The value of commitments from customers that Microsoft expects to materialize as sales in future years more than doubled from a year earlier, primarily the result of a new, $250 billion deal with OpenAI. The startup accounted for 45% of Microsoft’s backlog, which stood at $625 billion at the end of December.

Microsoft is the first of the Big Three cloud services companies to report quarterly financial results this year. Alphabet Inc. is scheduled to release its earnings on Feb. 4, Amazon.com Inc. the following day.

Meanwhile, Meta Platforms Inc. got a more positive investor reception after saying it’s spending more than anticipated to build out its AI business. As part of its quarterly earnings report Wednesday, Meta, the owner of Facebook, said full-year capital expenditures will be $115 billion to $135 billion, exceeding the $110.6 billion average analyst estimate — and the shares jumped about 7% in extended trading. –BLOOMBERG

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