Amid increasing investments in artificial intelligence, Meta Platforms and Microsoft are experiencing contrasting stock market performances. While many investors typically lean towards income and value stocks during uncertain times, long-term investors may find significant buying opportunities in growth stocks, particularly those with strong fundamentals.
Meta and Microsoft, both recognized as part of the “Magnificent Seven” — the largest tech-focused companies in the S&P 500 by market capitalization — have garnered attention for their AI initiatives. Nonetheless, their stock trajectories differ markedly, especially in light of their recent earnings results.
Meta Platforms recently reported impressive fourth-quarter and full-year results for 2025, with a notable surge in advertising revenue. This surpassed concerns related to the company’s escalating AI spending, which included a 40% rise in costs and expenses, outpacing the 24% growth in revenue. The company is heavily investing in capital expenditures to enhance its data infrastructure, refine search algorithms, and expand its AI capabilities, particularly through its Meta AI assistant.
Despite ongoing losses from its Reality Labs division, which focuses on augmented and virtual reality products, the performance of Meta’s more profitable “Family of Apps” has been remarkable. The Family of Apps, comprising platforms like Instagram, Facebook, Messenger, and WhatsApp, generated a staggering $102.5 billion in operating income for 2025. This figure signifies a year-over-year increase of 17.6% and is substantial enough to offset Reality Labs’ notable losses of $19.19 billion.
Meta’s latest earnings report provided reassurance to investors; it indicated that Reality Labs’ operating losses in 2026 are expected to mirror those from the previous year. This marks a shift in strategy, as the company plans to redirect focus from Reality Labs to the newly established Meta Superintelligence Labs, designed to develop consumer-oriented AI products.
Conversely, Microsoft has witnessed a decline in stock price following its own earnings report, which raised concerns regarding its AI expenditure. While initially embraced by investors during the early stages of the AI boom, Microsoft’s substantial spending — which included a 65.9% increase in capital expenditures for its data center infrastructure — has sparked skepticism as earnings growth has not kept pace.
Despite this, Microsoft remains robust financially, boasting significant cash reserves of $89.55 billion alongside a manageable long-term debt of $35.4 billion. Its earnings growth has also shown promise, with revenue up 17% and operating income increasing by 21% in the latest quarter. The company is well-positioned to absorb higher spending without jeopardizing dividends or stock buybacks, having reported a 32% rise in these initiatives year-over-year.
As both companies navigate the intricacies of AI investments, investors’ perspectives vary. While Meta appears to be on solid footing with its advertising revenue and strategic pivots in AI development, Microsoft’s high spending levels and dependence on OpenAI present a counterbalance that requires careful observation.
The current market dynamics present potential buying opportunities for investors looking toward the future. For long-term investors, both Meta and Microsoft offer unique propositions as they adapt and develop within the evolving landscape of artificial intelligence. As the market can be unpredictable, those focusing on solid fundamentals may find reassurance in the offerings from these leading tech giants.
