Wall Street had wildly divergent opinions on Microsoft (MSFT) and Meta's (META) earnings results Thursday, with Microsoft stock rocketing more than 15% higher and Meta sinking more than 9%.
Microsoft posted better-than-anticipated Q4 earnings per share and revenue alongside accelerating Azure growth of 43%. On top of that, Azure revenue topped $100 billion for the first time, and the company expects sales to further increase 45% in Q1. Microsoft 365 Copilot seats also rose above 30 million.
And with Microsoft CFO Amy Hood noting that the company sees growth further accelerating in the first half of its fiscal 2027, investors clearly like what they heard.
It was a kind of victory lap for the Windows developer, which has faced criticism over its AI spending and questions about when it will all begin to pay off. Prior to Thursday's announcement, Microsoft's stock was off more than 20% over the last year.
It didn't hurt that Microsoft said it is working to control spending. Hood said the company is extending the useful life of its data centers and office buildings from 15 years to 25 years, which she explained will move future data center leases from finance leases to operating leases, which aren't included in capital expenditures.
Meta, on the flip side, didn't quite live up to expectations. Earnings per share came up short, though the company attributed that to legal and severance charges, and free cash flow fell off a cliff, collapsing to $784 million from $8.5 billion last year as the social media giant continues its AI buildout.
That, coupled with Meta's decision not to provide 2027 capital expense guidance, left investors wanting more.
Wall Street was also looking for more clarity on Meta's plans for renting out AI capacity. CEO Mark Zuckerberg has teased the idea in prior earnings calls, during the company's shareholder day, and in an interview with Bloomberg, but didn't provide any concrete answers on whether and when it would begin renting out its chips during Thursday's call.
Zuckerberg did say the company has received offers for compute "at a significant premium over what [Meta] paid for it," but that wasn't enough to satisfy investors' demands.
For now, Meta is in the proverbial dog house, while Microsoft is winning Wall Street's praise. Though with the recent volatility in the AI trade, it's anyone's guess as to how long that lasts. Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X at @DanielHowley.
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