The first of the big tech earnings are out, and they are a mixed bag. Microsoft, Meta and Tesla all reported earnings this evening. Microsoft and Meta beat revenue forecasts, while Tesla’s revenues fell short of forecasts, but its earnings per share was stronger than analysts had expected. The post-market share price reaction has seen Microsoft lose 5%, Tesla gain more than 2% and Meta’s share price has rallied by more than 8% in after-market trading.
Microsoft fails to impress
So, why have traders soured on Microsoft’s earnings? On the surface, Microsoft has a perfect score card for last quarter. Revenues beat forecasts and came in at $81.27bn, net income was 21% higher than analyst estimates at $35.37bn, while earnings per share was $4.14, expectations were for $3.92.
Microsoft AI spend not boosting earnings power
However, the earnings growth rate for Microsoft has slowed, for 2025 it was 16%, this Is down from 20% in 2024. The revenue growth rate for 2025 overall was 15%, which is down a notch from the 16% rate in 2024. Overall, investors are disappointed that Microsoft’s capex spend and early foray into AI with ChatGPT is not significantly boosting earnings growth. Of course, investments in new technology take time to grow to fruition, but investors are clearly losing patience.
The big problem for Microsoft is its costs and spending on AI. It reported that capex for the last quarter was $37.5bn, exceeding analyst forecasts for $36.2bn. This news triggered a sharp drop in Microsoft shares in after-market trading.
AI not boosting Microsoft’s bottom line by enough
There was some good news in this report. The Azure cloud computing unit posted a 38% gain in revenue, which met analyst estimates, and the company said that its investment in OpenAI boosted net income and earnings per share to the tune of $1.02. Microsoft’s investments in OpenAI had an impact on last quarter’s earnings, yet this did not stem the slide in its share price. Investors are a hard bunch to please in this environment, and a quarter of the EPS gain coming from Microsoft’s main AI bet is not enough for investors who want more signs of AI monetization.
It is also worth noting that Microsoft remains capacity constrained in its data centres, and this may not ease until the second half of this year. Investors may be punishing the stock as it expects lacklustre results in the coming months, until this issue is resolved.
Meta’s share price set to soar
In contrast, Meta’s share price surged after its earnings report and topped 10% at one stage in post-market trading, although it pulled back before the close. Q4 revenue and Q1 forecasts topped expectations. Interestingly, Meta also announced that it would continue to spend a fortune on AI investments, which blew past analyst estimates, and capex spending may rise to $135bn this year.
Advertising revenues pay for Meta’s AI ambitions
Some may wonder why Microsoft’s share price came under pressure on the back of higher-than-expected capex spend, yet Meta’s share price is rising even though costs are expected to be substantially above analyst estimates? This may seem like a double standard, but there is method to the madness. Meta can justify spending so much on AI because of its robust advertising business, which is boosting revenue forecasts. Q1 sales are forecast to come in between $53.5bn and $56.5bnm higher than the $51.3bn expected by analysts.
Meta also does not suffer from the capacity constraints that are plaguing Microsoft. CEO Mark Zuckerburg said that the company front-loaded computing capacity to reach the company’s AI goals. These goals are slightly disconcerting: to create ‘super intelligence’ where computers can outperform nearly all human tasks.
For now, investors are not questioning the ethics of this aim, and Meta’s share price is set to surge on Thursday. A big win for Meta’s share price could see the company play catch up with its Magnificent 7 peers. Meta is the only member of the Magnificent 7 to have a P/E ratio below the average of the S&P 500. Positive results, where higher capex spending is balanced by stronger ad revenues, increases the attractiveness of owning Meta even more.
Tesla foray into AI could boost the share price
Tesla’s share price also received a boost from its earnings report, and it rose more than 3% in post-market trading. Q4 profits beat expectations, even with lower car sales, as Tesla’s energy storage business continues to be its fastest growing segment.
Tesla gets a boost from a weak dollar
Tesla reported revenues of $24.9bn, and a higher-than-expected EPS of $0.50, vs. $0.44 expected. Net income was also stronger at $1.76bn. The company said that revenues were boosted by a positive currency impact of $300mn. Considering the dollar remains weak, the FX impact is in focus, as a weak dollar is good for companies like Tesla that earn revenues around the world.
Although Tesla’s car segment is a weak performer, the company is expanding its cyber taxi business to more US cities. This is good news, since cyber taxis are expected to be a major revenue generator for the firm in the future. Signs of robust expansion could help to drive the share price, which has had a rough start to the year and is lower by more than 5%.
Tesla is also expanding its AI ambitions, but it is doing so by investing in Elon Musk’s xAI start up, which developed Grok. As Tesla evolves, it is ultimately moving away from being a pure car company and towards becoming an AI conglomerate.
Although free cash flow fell last quarter compared to Q3, Tesla’s capex spend is also significantly lower than other members of the Magnificent 7, at only $2.39bn for Q4. Now that Tesla has a stake in X’s AI start up, investors may start to see the company as a way to get exposure to AI without the huge costs involved. Of course, Musk could tap up Tesla for further investments, but there are other routes for him to fund his AI ambitions.
Thus, although Tesla’s car business is under pressure, the stock price is due a period of recovery after these results.