Microsoft and Meta Earnings Preview: AI-Driven Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 hours ago
0mins
Should l Buy MSFT?
Source: NASDAQ.COM
- Microsoft's Strong Earnings: In its second quarter of fiscal 2026, Microsoft reported non-GAAP earnings per share of $4.14, a 24% year-over-year increase that exceeded analyst expectations, highlighting the robust appeal of its cloud computing business despite intense AI competition.
- Meta's Impressive Revenue Growth: Meta's revenue surged nearly 24% year-over-year to nearly $60 billion in its most recent quarter, indicating the effectiveness of its strategy to leverage AI for optimizing content and advertising algorithms, which enhances user engagement and ad impressions.
- Significant Capital Expenditure Increase: Both companies are signaling a substantial rise in capital expenditures for 2026, with Meta projecting between $115 billion and $135 billion, which may pressure free cash flow, although CEO Zuckerberg remains optimistic about long-term returns.
- Intensifying Market Competition: Microsoft faces competition from giants like Alphabet and Amazon in software sales, while Meta capitalizes on its network effect with 3.6 billion daily active users, using AI to enhance profitability on its social media platforms, showcasing differing investment appeals.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 422.790
Low
500.00
Averages
631.36
High
678.00
Current: 422.790
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Upcoming Earnings Report: Microsoft is set to release its fiscal 2026 Q3 earnings on April 29, with investors eager for updates on AI products like Copilot and the Azure cloud platform to assess market performance and growth potential.
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- Surge in Capital Expenditure: In 2026, leading hyperscalers are expected to collectively invest approximately $600 to $650 billion, primarily directed towards AI infrastructure, which will enhance market share and profitability for these companies.
- Integration of Quantum Services: Companies like Microsoft, Alphabet, IBM, and Amazon are embedding quantum capabilities into their platforms, launching a 'quantum-as-a-service' model that accelerates enterprise experimentation and generates incremental revenue, showcasing their first-mover advantage in the quantum market.
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- Earnings Improvement: The expected earnings per share of $0.95 indicates a 17.3% growth from the previous year, highlighting the company's success in customer retention and enterprise expansion, which is likely to drive future profitability.
- Expanding Customer Base: By the end of 2025, ServiceNow served over 8,800 global customers, with more than 85% being Fortune 500 companies, demonstrating widespread adoption of its cloud platform among large enterprises and enhancing its competitive edge.
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- Strong iPhone Sales: In the latest quarter, Apple's iPhone revenue surged 23% year-over-year to $85.3 billion, primarily driven by robust sales of the iPhone 17 models, indicating strong consumer demand for new products.
- Lagging AI Strategy: Despite Apple's relatively conservative investment in AI, relying on Google's Gemini to enhance Siri features, the market's demand for AI-integrated hardware is growing, and Ternus must accelerate the application of AI technologies.
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See More
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- CEO Transition and AI Challenges: Apple announced Tim Cook's departure on September 1, with John Ternus stepping in to address the company's AI strategy gap, as investors anticipate a clear plan to compete with rivals in the AI space.
- Strong iPhone Sales: Despite lagging in AI, Apple's latest quarter saw iPhone revenue surge 23% year-over-year to $85.3 billion, driven by strong demand for the iPhone 17, yet Ternus must ensure this growth translates into success in AI.
- AI Hardware Development Focus: Ternus's appointment may signal Apple's commitment to integrating AI with hardware, with potential upcoming products like smart glasses and a foldable phone to meet market demand for AI-enabled devices.
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See More
