BIG TECH EARNINGS
🚀 Meta and Microsoft Soar Over 5% on Strong Earnings

🤖 It’s Big Tech earnings season with Meta and Microsoft reporting earnings last night and Amazon and Apple reporting today, so I’m going to write two editions of the Weekly Buzz this week (one today and one Sunday) to make sure we can cover it all!

💡 First, let’s talk about the common themes so far from the earnings.

😮‍💨 A Sign of Relief for the AI Industry

⭐️ The most important metric for AI right now is Big Tech’s CapEx, aka the amount of money they’re spending on AI equipment (i.e. Nvidia GPUs).

💰 All the tech giants have been spending BUCKETS of cash on AI (on track for $300B this year), and the big question was, can they keep this up? And can they prove that these massive investments are delivering a defensible return? (especially with DeepSeek spooking investors and calling into question how much of this spend was necessary…)

🚨 A lot of headlines earlier in the week cast doubt, with Bloomberg hinting at a ‘Potential AI Pullback’, and the former JP Morgan Chief Strategist also issuing a warning:

🤑 But, at least for now, these worries seemed overblown as both Meta and Microsoft delivered exceptional earnings reports, with a few positive signals for the AI industry at large:

• Meta ($META) increased its annual capex projection from a range of $60-65B to $64-72B, backing it up with strong revenue growth and comments that the company was having a difficult time meeting the demand for its AI compute internally (meaning it needs to spend more)

• Microsoft ($MSFT) also reported quarterly CapEx of $16.7B - about 3% higher than Wall Street’s estimates, with its AI-heavy Azure cloud business growing 33% this quarter (up from 31% last quarter)

📈 It’s worth noting that Alphabet (which I covered last Sunday) kept its CapEx constant, but Meta and Microsoft’s earnings reports have eased investor concerns over AI spending and caused a bump in AI stocks across the board. So far this week:

• Meta is up 5.5%

• Microsoft is up 9.8%

• Nvidia is up 4.4%

• SMH, the VanEck Semiconductor ETF, is up 1.7%

👀 Eyes will certainly be on Amazon today to see what they report, but investors are certainly a lot more optimistic now then at the start of the week.

🤿 Now with the broader themes covered, I’m sure the over 10,000 of you who hold Microsoft and Meta are curious about the specifics from each earnings as well, so let’s take a deeper dive.

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BIG TECH EARNINGS
📈 Microsoft Jumps 10%, It’s Biggest Post-Earnings Gain in a Decade

⭐️ All right, first let’s tackle Microsoft. Yesterday was a BIG win for Microsoft shareholders (myself included) with the stock up 9.8% as of market open this morning.

🤞 If that holds until market close, it will mark the biggest post-earnings increase since a +10.1% jump 10 years ago in 2015.

📊 Key Results:

• 🤑 Revenue: $70.07B, 13% higher than last year and 7% higher than analysts projected

• 💸 Earnings per Share: $3.46, 18% higher than last year and 3% higher than analysts projected

• ☁️ Intelligent Cloud Revenues: $26.8B, Azure Cloud grew 33% (up from the +31% last quarter), with over half of the growth attributed to AI

• 💰 Capex: $16.75B, 53% higher than last year

Microsoft’s CFO Amy Hood also forecasted revenue for next quarter will be $73.15B - $74.25B, higher than analysts had predicted, easing worries about the impact of Trump’s tariffs. Amy also estimates Azure growth to accelerate to 34% next quarter.

🎯 Other Takeaways:

👷 Tariffs May Impact Data Centre Construction: Microsoft is spending $80B on new data centres this year requiring heafy imports from overseas so costs may increase substantially depending on tariffs.

🤖 Growth in GitHub Copilot: Microsoft’s popular AI tool for developers has grown to over 15 million users - 4x higher than last year. Microsoft has been leveraging these AI features to drive upgrades to more expensive tiers of its software.

💬 Key Quote:

Signalling the soaring demand for AI Cloud computing:

🔥 Meta Also Soars 5% After Beating Profit Expectations by 22%

📊 Key Results:

• 🤑 Revenue: $42.31B, 16% higher than last year and 2% higher than analysts projected

• 💸 Earnings per Share: $6.43, 35% higher than last year and 22% higher than analysts projected

• 🥽 Reality Labs Operating Loss: -$4.2B, 9% less than the expected loss of -$4.6B

• 📲 Daily Active Users: 3.43B, 2% higher than last year and 1% higher than analysts projected

• 💰 Capex: $16.75B, 53% higher than last year

🎯 Other Takeaways:

👷 Tariffs May Increase Infrastructure Costs: Similar to Microsoft, Meta also warned that some of the increase in capex is due to increased cost of hardware expected from tariffs, although it didn’t specify how much was driven by this vs new equipment.

🇪🇺 Tensions in the EU: Meta had to cut Instagram and Facebook subscription fees by 40% to comply with regulatory demands after tough regulations have made it difficult for Meta in the region.

🤖 Meta AI Hits 1B Users: Meta’s digital assistant has now nearly 1 billion monthly users, up from 700 million in January, with most users accessing it through Whatsapp (although Meta also just annouced it will be launching a stand-alone app to rival ChatGPT).

💸 Cost Efficiency Driving Profits: Meta has ‘lowered the range of its 2025 total expenses’, despite an 11% increase in headcount year over year.

🇨🇳 Reduced Ad Spend from Asia: Meta has seen “reduced spend in the US from Asia-based e-commerce exporters” with ad spend from the Asia-Pacific region coming in 2% under target. Asia-Pacific currently makes up 20% of ad revenue.

💡 Overall Thoughts

🔥 Overall, these were some incredible earnings reports from Meta and Microsoft, and as a shareholder with 6.3% of my portfolio in Microsoft and 5.2% in Meta (including both my direct holdings and my exposure from $ZSP), I’m very pleased!

⚠️ And while these jumps were very nice for my portfolio, I do think it also shows how precarious the AI market is right now. As I’ve said before, a lot of tech is ‘priced for perfection’ and if capex (or AI-based cloud revenue) does start to slow, it would likely be a big blow to the market that is heavily reliant on the rapid AI growth continuing!

💡 Personally, with 25% of my portfolio in Tech, I consider myself a bit overexposed, and plan to start diversifying a bit more both across sectors and geographies moving forward (👀 PS, if you want to see your own sector and geographic breakdowns, you can do so on Blossom PRO #shamelessplug)

😎 Anyway, that’s my two cents! I hope you enjoyed this special edition of the Buzz and stay tuned for my breakdown of Apple and Amazon on Sunday!

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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