Earnings reports show how Big Tech is quietly seeing a digital ad boom

As tech giants ramp up their already breathtaking spending on AI, related digital advertising businesses have also gained momentum.

This week’s quarterly earnings reports Meta, Amazon, Alphabet And Microsoft all of them generated healthy revenue on the advertising front.

Rising online ad sales eased concerns earlier this year that economic turmoil fueled by President Donald Trump’s trade policies would negatively impact advertising budgets.

“I think the digital ad market is strong,” said Jasmine Enberg, co-founder of creative economy media company Scalable. “I think this economic instability and volatility is priced in for a lot of people at this point; it just seems to be kind of the status quo.”

Meta outperformed its competitors this quarter by delivering the fastest growth in ad-related sales.

The company’s total third-quarter revenue, 98% of which came from online advertising, rose 26% year over year to $51.24 billion; This was the company’s highest sales since the first quarter of 2024.

Revenue from Amazon’s online ad unit rose 24% year over year to $17.7 billion; This represents a faster growth rate than the company’s AWS cloud computing unit, where sales increased by 20%.

Commenting on Amazon’s earnings, CEO Andy Jassy emphasized that the company continues to expand its advertising-specific demand-side platform to more third-party apps and sites.

“When you look at some of the partnerships we’ve had, the Roku partnership gives us the largest connected TV footprint in the United States,” Jassy said. “And if you add in what we’ve done recently to provide our DSP customers with the opportunity to integrate with ad inventory across Netflix, Spotify, and SiriusXM, it’s very powerful.”

Alphabet’s overall ad sales in the third quarter reached $74.18 billion, up 13% from $65.85 billion a year earlier. YouTube’s third-quarter online ad sales rose 15% to $10.26 billion.

Microsoft’s search and news advertising unit generated $3.7 billion in revenue in the company’s first fiscal quarter, up 14% from $3.2 billion in the previous year.

Jeremy Goldman, Emarketer’s senior director of content, said that even if there was some decline in advertising budgets due to economic uncertainty, companies may have shifted some of that spending from traditional businesses such as newspapers to digital advertising platforms.

“I think what happened was more of a no-brainer,” Goldman said. “Putting your money into social media, your money into retail media, and your money into search ad spend.”

It wasn’t just the mega-majors that saw significant growth in online advertising this week.

Reddit on Thursday reported a 68% jump in third-quarter sales, above analyst estimates. Global daily active uniques rose 19% year-over-year to 116 million, beating estimates of 114 million, the company said.

explode And on Pinterest They are scheduled to report the results next week.

Great progress in artificial intelligence

The tech giants have all made clear that they see no broader economic concern that would warrant a reduction in AI spending, and have instead lifted their guidance on capital spending despite bubble concerns.

Alphabet, Meta, Amazon, and Microsoft collectively expect capital spending to exceed $380 billion this year; That’s still a tiny fraction of the $1 trillion in data center and cloud computing deals OpenAI recently announced with partners like Nvidia, Oracle, and Broadcom.

But while investors applauded Amazon and Google, they were less excited about Microsoft and especially Meta.

Shares of Facebook’s parent company tumbled 11 percent on Thursday after the company said it would raise the lower end of its capex target to between $70 billion and $72 billion from the previous range of $66 billion to $72 billion.

Oppenheimer analysts downgraded Meta stock from buy to the equivalent of hold because they said it was less clear how the social media company would benefit from investments in artificial intelligence compared to major tech rivals that also operate cloud computing services.

“Significant investment in Superintelligence despite unknown revenue opportunity reflects 2021/2022 Metaverse spending,” Oppenheimer analysts wrote, comparing the company’s large AI spending related to Superintelligence Labs to its money-losing Reality Labs division, which produces virtual reality and augmented reality technologies.

Susan Li, Meta’s chief financial officer, said during a meeting on Wednesday. follow up earnings call Echoing similar comments from CEO Mark Zuckerberg, it’s important for the company to invest in AI-related data center and third-party cloud computing services or risk being left behind.

“The company’s top priority is to invest our resources to position ourselves as a leader in the field of artificial intelligence,” Li said. “This means we may see some financial pressures in the coming period, which could see our operating profits fluctuate.”

Enberg said Meta continues to point out how AI investments are improving its online advertising business, but has a harder time showing how those expenses will benefit the company in the future.

“I think part of it is that we hear the story every quarter of being able to integrate AI into the advertising business and use that as a growth engine,” Enberg said. “What’s going to happen next is harder to articulate and much less concrete for investors and other people who follow the space.”

Still, Meta is experiencing some growth from new products, such as the Meta AI app, which includes the Vibes AI-powered short video service, Goldman said.

The company could also expand subscriptions further and potentially even offer enterprise AI services to sell to companies, which is “an area they’ve never played in,” he said.

For now, Meta’s digital advertising unit remains its core business, and as in previous quarters, it is unclear how the economy will affect advertising budgets.

As the holiday season approaches, all eyes will be on whether ongoing economic concerns or tariff-induced price increases will cause consumers to cut back on spending, which will impact corporate marketing campaigns.

“The next test will be when we get to the Black Friday numbers,” Goldman said. “Will these be below expectations?”

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