Meta, Microsoft, and Tesla crush earnings, but at what cost
Three stalwart members of the Magnificent 7 reported earnings last night, and while it was beats all around, the market reaction showed that capital expenditure on the AI race is still certainly on investors’ minds. First, the numbers:
Microsoft beat on earnings and revenue with $81.3 billion in revenue for the quarter, topping analysts’ expectations of $80.31 billion.
Meta saw sales come in at a record high of $59.9 billion, well above the $58.4 billion Wall Street had expected.
Tesla’s revenue was $24.9 billion, compared with Wall Street’s call of $24.7 billion, a solid performance after Tesla posted disappointing delivery numbers earlier this month.
But what does it all mean? Well, let’s look under the hood here.
Over at Microsoft, capital expenditure for the quarter was $37.5 billion, up 66% year on year and ahead of analysts’ consensus forecast of $36.6 billion.
Meta’s capex outlook for 2026 is $115 billion to $135 billion, exceeding the $110.6 billion estimate from analysts. Full-year estimated expenses of $162 billion to $169 billion are also much more than the consensus call for $151 billion.
Tesla’s capital expenditures will increase substantially this year, exceeding $20B, well above analysts’ expectations of $11B, as the company invests in new factories and AI infrastructure. Tesla also revealed it’s invested $2 billion in xAI.
For the first time, Tesla released the number of Full Self-Driving subscriptions, saying it had 1.1 million active subs, up from 0.8 million in the same quarter last year. That’s just above 12% of cumulative Tesla deliveries, similar to what Tesla disclosed last year.
The Takeaway
Hyperscalers have been boosting their capital spending as they pour money into the data centers required to fuel their AI ambitions.
Meta’s capex had been growing faster than its revenue, something that has been raising investor scrutiny more than it has for the tech giant’s peers, which have cloud business revenue to more directly offset their spending on AI. But this time, it was Microsoft’s ballooning capex that worried investors, while Meta’s record revenue washed away investors’ fears — for now.