Meta and Microsoft reported quarterly results after the close on Wednesday, July 29, both covering the quarter ended June 30. On paper, two quarters of double-digit growth. In after-hours trading, though, two opposite fates: Microsoft (MSFT) rose about 9%, powered by strong Azure growth and capital spending the market judged to be under control, while Meta shares gave up ground, with drops that touched -10% in the after-market, penalized by a collapse in free cash flow and revenue guidance seen as weak.

The thread running through the evening — and the real issue for investors in the coming months — is a single one: spending on artificial intelligence. The market has stopped rewarding rhetoric about AI investment and has started demanding proof of its returns.

Microsoft: Azure accelerates and the spending convinces

The Redmond giant closed its fiscal fourth quarter with numbers above expectations across the board. Revenue came in at $90.0 billion, up 18% (17% at constant currency); operating income rose to $40.6 billion (+18%); and net income reached $35.8 billion, up 31% on a GAAP basis. Diluted earnings per share landed at $4.81 (+32% GAAP) and $4.74 on an adjusted basis, against a consensus stuck at around $4.24.

The heart of the quarter, though, is the cloud. The Intelligent Cloud segment, which includes Azure, generated $39.31 billion in revenue, up 32% and above the $38.16 billion consensus. Azure growth accelerated to 43%, from 40% the previous quarter and above analyst estimates. It is a key figure, because Azure’s acceleration is precisely the metric on which investors gauge Microsoft’s ability to monetize the AI race.

Reinforcing the picture are two elements that signal future demand already under contract: the remaining performance obligation — commercial orders booked but not yet recognized as revenue — rose 84%, to $678 billion, more than double annual sales.

On the product side, CEO Satya Nadella claimed two milestones: over the year, Azure revenue topped $100 billion for the first time, and Microsoft 365 Copilot reached more than 30 million paid seats.

Decisive for the stock’s reaction was the message on spending. Capital expenditure for the quarter rose to roughly $41 billion (+70% year over year), while the narrower measure analysts track came in at $35.8 billion, just below the $36.14 billion expected. Above all, Chief Financial Officer Amy Hood confirmed that capex guidance for calendar-year 2026 remains unchanged, at around $190 billion. Spending will stay elevated in fiscal 2027 as well, with a first quarter above $50 billion including the effects of lease reclassification. The point is that investors read the spending as high but «disciplined» and anchored to demonstrable demand.

Meta: record revenue, but free cash flow evaporates

Meta also beat revenue estimates, but the rest of the ledger frightened the market. Second-quarter revenue was $60.8 billion, up 28% year over year, above consensus. Diluted earnings per share, however, came in at $6.18, below the $7.22 expected, breaking a streak of six consecutive quarterly beats.

Net income fell to $15.848 billion (-13.6%), and the operating margin compressed to 31%, from 43% a year earlier. The cause? On one hand, a surge in costs, with total expenses up 55%, to $42.03 billion, including $2.40 billion in legal charges and $1.18 billion in costs tied to the May staff cuts. On the other, the effect of AI spending on cash: capital expenditure hit $31.08 billion and, against operating cash flow of $31.86 billion, left just $784 million of free cash flow, versus $8.55 billion a year earlier.

The advertising business remains healthy — ad revenue grew 27%, to $59.36 billion, with daily active users across the Family of Apps at 3.60 billion and the average price per ad up 12% — but Family of Apps operating income still fell to $23.4 billion from $25.0 billion previously. The core is growing in revenue but yielding less.

Completing the negative picture was the guidance. For the current quarter, Meta expects revenue of $61 billion to $64 billion (midpoint $62.5 billion), below the $63.15 billion analysts anticipated. And, above all, the spending: the company raised the floor of its 2026 capex range to $130–145 billion (from a prior $125–145 billion), a signal of greater commitment to spending, not of a cutback.

The capex knot: same bet, two different stories

Both companies are investing unprecedented sums to secure computing capacity. The difference that moved the stocks is not how much they spend, but how convincing the story is on the return from that spending.

Microsoft can point to a metric that is accelerating (Azure at 43%), a symbolic milestone ($100 billion in Azure revenue), a backlog that is doubling, and a spending forecast that has been confirmed: the outlay looks like a consequence of demand already visible on the balance sheet. Meta, by contrast, shows spending that is nearly doubling and draining the cash pile, while non-advertising revenue tied to AI is not yet visible at meaningful scale.

CEO Mark Zuckerberg reiterated the long-term vision — putting «superintelligence» directly in people’s hands — and hinted at the opening of a cloud business, but for now investors are left with the promise, not the revenue. As one analyst summed it up, the financial community is beginning to question the real return on all this capex.

What it means for Meta and Microsoft stock in the coming months

For Microsoft, the quarter eases — at least temporarily — the tension that had weighed on the stock in the first part of the year, with shares having lost more than 20% over six months. As long as Azure holds a pace around 40% and spending stays anchored to guidance, the market seems willing to fund the infrastructure build-out. The risk to monitor remains the sustainability of cash against a capex bill that, in fiscal 2027, will rise further. The issue is only deferred.

For Meta, the picture is more delicate. The stock now trades at compressed multiples (about 16.9 times expected 2026 earnings after the drop, against a three-year average around 23 times), and this feeds the bullish thesis of those who see the correction as excessive. But that same argument recalls that the company has been promising returns on its AI spending since at least April 2026, and the legal exposure behind the $2.4 billion charge has no publicly disclosed cap. In the coming quarters, the market will ask Zuckerberg for what has been missing so far — numbers, not vision. Any sign of AI monetization beyond advertising, starting with the hinted-at cloud business, will become the stock’s real catalyst.

This article is for informational purposes only and does not constitute a solicitation to invest or personalized financial advice.

Editor’s note

This article was originally published in Italian on money.it by Flavia Provenzani on July 30, 2026 as «Meta e Microsoft, trimestrali a confronto. Perché la spesa per l’AI premia una e punisce l’altra». It has been translated and adapted for an international audience by the Money.it International desk.