Big Tech results show investor demand for payoffs from heavy AI spending

Big Tech earnings so far this week have sent a clear warning: investors are willing to overlook soaring spending on artificial intelligence if it fuels strong growth, but are quick to punish companies that fall short.

The contrast was clear in Thursday's stock market reaction ​to earnings from Microsoft and Meta, highlighting how dramatically the stakes have changed since the launch of ChatGPT started the AI boom more ‌than three years ago.

Shares of the Instagram parent surged more than 9 percent on strong sales, while those of Microsoft slumped 10 percent after its cloud business failed to impress.

After riding its first-mover advantage with OpenAI to become the world's most valuable firm in 2024, Microsoft is now under growing investor pressure to justify its soaring capital outlay.

Microsoft reported revenue growth in its Azure cloud-computing business that was only slightly above expectations.

In contrast, AI bolstered ad targeting at Meta, boosting revenue by 24 percent in the December quarter and aiding a rosy first-quarter forecast. The results show that the ‌Facebook owner's gains from AI were helping fund its capital spending, which is expected to jump as much as 87 percent to $135 billion ​this year.

"Meta's headline numbers are a really interesting reflection of the market's attitude toward spending in the AI space," said John Belton, portfolio manager at Gabelli Funds.

"All else equal, the market would typically be concerned, but they have a big revenue guide for the first quarter."

MICROSOFT MIGHT HAVE AN OPENAI PROBLEM

Microsoft also faced pressure after a ‍disclosure that OpenAI, its prized holding, accounts for 45 percent of its cloud backlog. Investors are worried that some $280 billion could be at risk as the unprofitable startup loses momentum in the AI race.

The ChatGPT creator had issued an internal "code-red" in December after Google's Gemini 3 launched to positive reviews and is playing catch-up in AI coding to Anthropic's Claude Code, which has hit an annualized run rate ⁠of more than $1 billion.

"Microsoft's deep ties to OpenAI underpin its leadership in enterprise AI, but they also introduce concentration risk," said Zavier Wong, market analyst at eToro.

Microsoft predicted ‍Azure growth to stay stable in the period from January to March at 37 percent to 38 percent, after slowing in the last three months of 2025, partially due to AI chip capacity constraints.

"If ‌I had ‌taken the graphics processing units that just came online in the first quarter and second quarter, and allocated them all to Azure, the KPI (growth) would have been over 40  percent," Microsoft finance chief Amy Hood said on a post-earnings call.

She added that the use of chips for internal development efforts had limited the growth.

This line chart, titled "Big Tech’s Great Divergence," tracks the stock performance of four major technology companies against the S&P 500 from October 2025 through January 2026.

This line chart, titled "Big Tech’s Great Divergence," tracks the stock performance of four major technology companies against the S&P 500 from October 2025 through January 2026.

META BETS ON AI'S COMPOUNDING EFFECT

For Meta, the revenue growth underscored that its AI pivot was paying off and helping the company catch up to early leaders.

Its revenue rose 24 percent in the fourth quarter and ⁠Meta forecast growth to accelerate as much ⁠as 33 percent in the current quarter.

The ​company is racking up bills at large cloud providers, such as Alphabet's Google, which bodes well for the search giant's results next week. Alphabet shares rose 1.6 percent.

Using AI "will both improve the quality of the organic experience and of advertising," CEO Mark Zuckerberg said.

"I think that will have a compounding effect," he added, as Meta predicted a jump of 43 percent in total expenses this ‍year to $169 billion.

TESLA SET TO DOUBLE OUTLAY THIS YEAR

Growing spending was also the theme at Elon Musk's Tesla, which will double outlay this year to more than $20 billion as it pivots to AI, humanoid robots and personal vehicles that can drive themselves.

The company also reported quarterly profit and revenue that were above expectations, pushing its shares up 2.9 percent.

Analysts said the results left some mismatch between corporate AI goals ​and investors' demand for payoffs.

"The market appears to be questioning whether these massive capital expenditure hikes will ‍generate sufficient returns," said Jesse Cohen, senior analyst at Investing.com.

"This reflects a growing divide between tech companies' AI ambitions and Wall Street's patience for open-ended investment cycles."