In a significant quarter for technology giants, Google, Meta, and Microsoft collectively invested nearly $80 billion in artificial intelligence infrastructure, leading to contrasting investor responses regarding their increased spending plans. Alphabet, Google’s parent company, reported a robust financial performance, with shares surging nearly 7% in after-hours trading following an announcement to elevate its capital expenditure for 2025 by $8 billion, reaching a total of $93 billion. The company also celebrated a record quarterly revenue of $100 billion.
Conversely, Meta experienced a sharp decline in its stock, plummeting approximately 9%, potentially erasing $160 billion from its market valuation before the market opened on Thursday. CEO Mark Zuckerberg indicated that the company’s AI investment could exceed $100 billion in the upcoming year. This divergent reaction to their financial and operational strategies highlights the cautious sentiment among investors regarding the timeline for any revenue returns from significant AI investments, as noted by Dec Mullarkey from SLC Management, a substantial asset management firm. He emphasized concerns that the rush to secure market dominance could lead to overextending resources, referencing past instances of technology exuberance that resulted in heavy losses for early investors.
Microsoft, which recently crossed a $4 trillion valuation mark following its restructuring agreement with OpenAI, also saw its stock decrease by 4%. Despite surpassing profit expectations and achieving a remarkable 39% revenue increase in its Azure cloud computing unit, the company reported capital expenditures of $35 billion for the quarter, marking a 74% year-over-year increase and exceeding forecasts by $5 billion. Microsoft executives predict expenses could climb to nearly $140 billion next year, as CEO Satya Nadella highlighted plans to create “planet scale” cloud infrastructure, including a commitment to double the company’s data center footprint over the next two years.
Both Google and Microsoft, which provide cloud computing services to businesses, appeared to navigate investor concerns more effectively than Meta. Google’s CEO Sundar Pichai reported substantial growth in its Gemini App, its primary consumer AI product, now boasting 650 million monthly users—up from 450 million in July and nearing ChatGPT’s user base of 800 million. Pichai noted robust revenue generation from enterprise AI products within its cloud unit and a significant backlog of $155 billion in computing service orders.
The tech landscape’s competitive dynamics were further underscored by Google’s 15% rise in core search advertising revenue, which alleviated some fears that ChatGPT might be capturing market share from traditional search methods. Angelo Zino, an analyst at CFRA Research, asserted that Google’s performance showcases its successful integration of AI across advertising platforms and effective management of spending amidst expanding AI infrastructure.
In contrast, Zuckerberg found himself defending Meta’s substantial spending on infrastructure aimed at developing artificial superintelligence. He expressed confidence in the strategy to rapidly build capacity, asserting that excess data center resources could be adapted to improve Meta’s core advertising operations, which currently face computational constraints. A quarterly revenue increase of 26% to $51.2 billion did little to assuage investor worries, as they scrutinized the lack of development of formidable large language models compared to competitors.
Meta’s anticipated capital expenditures could reach $72 billion by year-end, with projected increases in spending that exceed earlier estimates for 2026. The company attracted top engineers to its specialized “TBD” lab with lucrative compensation packages, a move that has prompted concerns regarding an anticipated rise in research and development costs, which now account for 30% of revenue—the highest proportion in over two years. This increase led to a narrowing of its operating margin by 3 percentage points to 40%.
Gene Munster from Deepwater Asset Management articulated these worries, indicating that expenses are poised to outpace revenue growth significantly in the forthcoming year. Meta also disclosed a one-off charge of $15 billion linked to changes in tax laws instituted during Donald Trump’s presidency, causing net income to diminish by 83% to $2.7 billion.
Looking ahead, Meta’s AI endeavors are unlikely to yield substantial revenue either this year or in 2026, as Zuckerberg stated that the new superintelligence team is concentrating on innovative efforts poised for rapid deployment across Facebook, WhatsApp, and Instagram—a potential financial strategy anchored in advertising, commerce, or subscription models. However, uncertainties remain about whether this ambitious push toward advanced AI aligns with Meta’s foundational business, as various analysts suggest that Google and Microsoft possess more diversified technological strengths in the current landscape.
