Meta rises 10%, Microsoft sinks 10% after earnings. Here’s why

When it comes to AI, it’s a tale of two different major successes so far this earnings season.

Meta Platforms It rose more than 10% after showing signs that AI investments were boosting profitability. Microsoft Shares fell as the company struggled to justify its recent spending plans to investors and cited a slowdown in its cloud segment.

Money flowing into artificial intelligence and new technology has become a major source of debate on Wall Street; Investors increasingly want to see companies reap rewards from last year’s big spending.

Meta appeared to be gaining approval from investors to continue putting money into AI. The social media giant issued strong guidance and said it plans to spend between $115 billion and $135 billion on building artificial intelligence this year.

That’s nearly double what it spends in 2025.

In recent quarters, investors have expressed concerns about the company’s ambitious spending. But the company’s 24% annual revenue growth, driven primarily by online advertising, appeared to ease previous concerns about its AI strategy.

CEO Mark Zuckerberg suggested that the company was working on a number of new products this year and said the investments would support its mission of “creating personal superintelligence.”

The social media giant added more than $176 billion to its market value.

But while investors appeared to be rewarding Meta’s spending plans, Microsoft’s shares fell 10%, losing more than $357 billion in market value. Shares had their worst day since March 2020.

The software maker showed slowing growth in its Azure cloud segment; This growth fell to 39% from 40% growth in the company’s first fiscal quarter. Investors are watching this segment closely to gauge enterprise AI demand.

At the same time, capital expenditures and leases rose 66% to $37.5 billion in the quarter, topping the $34.31 billion expected by analysts surveyed by Visible Alpha, as Microsoft bolstered demand for its cloud and AI segments.

The company also said it is struggling with computing capacity constraints as demand continues to exceed supply.

Microsoft finance chief Amy Hood said Azure would grow 40% if the company pushed all of its new graphics processing unit chips into its Azure business in the first and second quarters.

He also said the company is balancing product innovation and increased use of first-party AI in services like GitHub Copilot and M365 Copilot, with “inbound supply better meeting growing Azure demand.”

The company’s backlog increased by 110% to $625 billion; This includes the $250 billion cloud deal with OpenAI during the period. The ChatGPT generator accounted for 45% of the remaining business performance liabilities.

Analysts at Evercore ISI said “concerns about OpenAI’s ability to meet funding commitments” likely contributed to the post-earnings stock spiral, but said sentiment was “overblown.”

Beyond Big Tech

Contrasting movements powered by AI are reflected in the broader technology sector.

IBM’s There was a wave of confidence in the AI ​​strategy from investors, with shares rising 5%. The technology and consulting company exceeded expectations and demonstrated strong software and infrastructure growth as it built new automation tools and AI infrastructure.

Analysts at Goldman Sachs said growth in software and infrastructure, combined with market share gains in consulting, puts the company “on track to complete its return to long-term growth.”

Meanwhile, IBM’s AI book of business more than doubled to $12.5 billion. 5 billion dollars a year ago. This growth appeared to justify the company’s investments.

Analysts at JPMorgan called IBM “a relatively defensive name with increasingly positive exposure to Software and AI headwinds.”

Yet ServiceNow Shares fell 10% as concerns that AI was eating into the broader software industry’s business model overshadowed the company’s better-than-expected earnings. Its stock is down 25% since the beginning of 2026 and 50% from last year.

The industry has sold off in recent months due to concerns that new AI tools will worsen demand for workflows and licenses, damaging long-standing revenue models.

During an earnings call with analysts, ServiceNow CEO Bill McDermott defended the company’s business model and its recent multibillion-dollar acquisition spree, which some investors have flagged as a sign that the company is trying to restart growth.

“Let’s clear this up with facts,” he said. “Enterprise AI will be the largest driver of revenue from the multitrillion-dollar superinvestment in AI infrastructure.”

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