Meta’s AI spending spooks investors while Microsoft and Alphabet post solid results
Investors punished Meta for its exorbitant artificial intelligence spending plans, which outstripped more restrained investment from Alphabet and Microsoft.
Meta raised its capital expenditures for this year to between $70bn and $72bn, up from its previous guidance of $66bn to $72bn.
The company also flagged that additions to its spending plans for 2026 would be “notably larger” than the roughly $30bn it expects to add to capex budgets in 2025.
Mark Zuckerberg defended the decision, telling analysts on a call that it was “the right strategy to aggressively frontload building capacity, so that way we’re prepared for the most optimistic cases”.
Meta shares slid more than 8 per cent in after-hours trading on Wednesday. That equates to a market capitalisation wipeout of about $160bn, which would rank as the stock’s second-biggest on record.
Alphabet, meanwhile, reported better than forecast quarterly net income and revenue, which topped $100bn for the first time. Shares rose more than 6 per cent after the closing bell.
Microsoft also reported revenue and net income that topped Wall Street’s median forecast, but growth in its Azure cloud computing business fell short of the most bullish expectations.
Hopes were high for a stronger result from the unit given the company’s deal this week to supply more computing power to OpenAI. Microsoft’s shares dipped 3.6 per cent.
Pichai says sales of Gemini to business generating ‘billions’ in revenue
Alphabet chief executive Sundar Pichai credited the search giant’s positive quarterly earnings to its “full stack” strategy to artificial intelligence.
Pichai said the approach — which spans from the company making its own AI-specialised chips known as TPUs, using them to fill proprietary data centres and training its own family of large language models called Gemini — was a “big part” of what differentiates Google Cloud from rivals.
“We are the only hyperscaler who’s really building offerings on our own models,” Pichai said on a call with analysts on Wednesday.
“We are seeing substantial demand for our AI infrastructure products. It is one of the key drivers of our growth over the past year?.?.?.?[and] we continue to see very strong demand.”
Pichai said selling Gemini to businesses was “generating billions in quarterly revenues”. He said the consumer app had 650mn monthly users, catching up to ChatGPT with more than 800mn.
Nadella says Microsoft building ‘planet scale’ cloud infrastructure
Satya Nadella said he planned to double Microsoft’s data centre footprint over the next two years.
A 2 gigawatt site in Fairwater, Wisconsin — which Microsoft has claimed will be the world’s most powerful data centre — is due to come online next year, and would represent a step in achieving the chief executive’s goal.
Nadella said the software group was building a “planet-scale” cloud infrastructure.
“We have the most expansive data centre fleet for the AI era and we are adding capacity at an unprecedented rate,” he told analysts during a call.