Introduction
The Seven Majors, including Microsoft, Alphabet, and Meta Platforms, have begun reporting their quarterly results. Analysts are closely watching these tech giants as AI-driven growth continues to fuel revenue but also increases capital expenditures, raising concerns about the tech sector’s sustainability.
Microsoft’s Strong Performance
Microsoft reported $77.7 billion in revenue, an 18% increase surpassing market expectations. The growth was attributed to a $34.9 billion capital expenditure during the third quarter, exceeding market estimates.
However, Microsoft’s stock fell 3% after closing due to CFO Amy Hood’s statement about rising capital expenditure growth.
The AI infrastructure spending, driven by demand for Azure which grew 40% annually, was seen as a sign of confidence but also risk by analysts. Microsoft’s Intelligent Cloud unit, which includes Azure, reported $30.9 billion in revenue, a 28% increase from the previous year.
Cloud computing remains Microsoft’s primary growth driver, with the company significantly benefiting from AI’s rise. Moreover, renewing its agreement with OpenAI (creator of ChatGPT) solidifies Microsoft’s position as the second most valuable market player, just behind Nvidia.
Alphabet Exceeds Expectations
Alphabet surpassed market expectations thanks to a rebound in its advertising business and expansion of Google Cloud, which saw a 34% increase in revenue at $15.16 billion.
Alphabet Inc., Google’s parent company, reported total revenue of $102.35 billion, driven by strong demand for AI-based infrastructure and services.
For the first time in its history, Alphabet exceeded $100 billion in revenue. The advertising business, Alphabet’s cornerstone, grew 12.6% to $74.18 billion, dispelling fears of a slowing digital market.
Despite this, Alphabet raised its capital expenditure projections again, now between $91,000 and $93,000 million for the year—almost double the $52.5 billion planned for 2024.
This investment aims to maintain Google’s leadership in generative AI and strengthen competition against Microsoft and Amazon, which dominate the cloud market.
Alphabet’s stock rose 6% in extended trading after the results were announced, reflecting market confidence in its business model.
Meta Platforms Falls Short
Meta Platforms’ third-quarter results were affected by an extraordinary tax charge of $16 billion due to the U.S. President Donald Trump’s “Great and Beautiful Law.”
The impact led to profits of $2.71 billion, though without the tax charge, earnings would have reached $18.64 billion.
Meta’s stock fell 7% in after-hours trading following the report. Nonetheless, Meta reported $51.24 billion in revenue for the third quarter of the year, a 26% increase compared to the same period in 2024.
CEO Mark Zuckerberg stated that Meta requires more computing power for its AI initiatives, leading to higher spending on data center and cloud-related services.
Facebook’s owner reaffirmed its AI expansion strategy, with capital expenditure projected between $70,000 and $72,000 million this year and an increase planned for 2026.
Key Questions and Answers
- Q: How did Microsoft perform in its latest report? A: Microsoft reported $77.7 billion in revenue, an 18% increase, surpassing market expectations.
- Q: What drove Microsoft’s growth? A: The growth was attributed to a $34.9 billion capital expenditure during the third quarter, exceeding market estimates.
- Q: How did Alphabet fare in its quarterly report? A: Alphabet surpassed market expectations with total revenue of $102.35 billion, driven by strong demand for AI-based infrastructure and services.
- Q: What concerns do the reports raise about the tech sector? A: The reports highlight rising capital expenditures in AI-driven growth, raising concerns about the tech sector’s sustainability.
- Q: How did Meta Platforms perform in its third quarter? A: Meta’s revenue increased 26% to $51.24 billion, but profits were affected by an extraordinary tax charge.
