Meta and Microsoft’s AI businesses announced better-than-expected quarterly earnings, but muted outlooks saw their shares down after hours.
Shares in Meta Platforms and Microsoft declined in after-hours trading on Oct. 30 despite both companies posting strong Q3 earnings, as executives gave lower earnings forecasts and outlined increased spending plans for artificial intelligence (AI).
Meta reported a 19% year-on-year increase in Q3 revenue to $40.6 billion, surpassing Wall Street’s $40.2 billion estimate. Its earnings per share (EPS) reached $6.03, above the $5.19 forecast.
Microsoft’s revenue for the quarter was up 16% from last year to $65.6 billion, exceeding estimates of $64.4 billion, with EPS at $3.30, well above the $3.08 expectation.
The earnings come amid increased AI investments from major U.S. tech companies, including Google, Apple, and Amazon, who are developing new AI models and supporting technologies.
This year, Meta launched “Meta AI” across WhatsApp, Facebook, and Instagram, prompting CEO Mark Zuckerberg to comment that the company “had a good quarter driven by AI progress.”
Microsoft’s results were bolstered by 33% growth in its AI-driven Azure business, which outpaced the projected 29% increase.
CEO Satya Nadella stated, “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.”
However, both stocks dipped following an initial rise, with Meta (META) shares down 3.18% from $591.80 to $573 and Microsoft (MFST) shares down 3.71% from $432.53 to $416.50, according to Google Finance.
Investors appeared cautious, as both companies hinted at continued high spending on AI with only moderate near-term gains.
Zuckerberg noted that AI development would “continue to require serious infrastructure” and indicated that Meta’s investment in the sector would remain “significant,” although the final budget had not been set.
Meta’s CFO Susan Li stated the firm aimed to make Meta AI “as engaging and valuable a consumer experience as possible” and added that “monetization opportunities will exist over time.”
Meta expects capital expenditures between $38 billion and $40 billion for the year, with “significant capital expenditures growth in 2025.”
Meta’s shares also fell after the company missed expectations for daily active users, recording a 5% year-on-year increase to an average of 3.29 billion, just shy of the projected 3.31 billion.
Microsoft’s outlook for the current quarter estimated Azure’s AI growth between 31% and 32%, slightly below the 33% from last quarter.
It also projected revenue between $68.1 billion and $69.1 billion, under analyst estimates of $69.9 billion.