Meta Stumbles on Rising AI Costs Despite Revenue Growth; Microsoft Rallies

Meta Platforms shares tumbled as much as 10% in after-hours trading following a second-quarter earnings report that highlighted the soaring costs of its artificial intelligence ambitions. While the company reported revenue of $60.8 billion—a 28% year-over-year increase—and net income of $15.8 billion, investor focus was squarely on the company's rising capital expenditures. Meta raised its AI spending floor for 2026 by $5 billion, signaling that the build-out of its data centers and GPU clusters is accelerating rather than tapering off.

CEO Mark Zuckerberg’s lack of specific detail on how the social media giant plans to monetize its enterprise AI tools and high-cost infrastructure appeared to rattle the market. The reaction stood in stark contrast to Microsoft, which saw its stock rise 8% after boosting its own capital spending plans. Analysts noted that Microsoft has been more successful in convincing investors that its spending is directly tied to customer demand for its cloud and AI services, whereas Meta’s spending is seen as a longer-term, more speculative play.

The divergence in performance between the "Big Tech" spenders highlights a shifting sentiment where revenue growth is no longer sufficient; investors now demand clarity on the path to profitability for AI investments. Meta’s results underscored the risks of "runaway spending," particularly as the company warned of potential margin impacts from increased legal costs and regulatory scrutiny. For many institutional investors, the "show me the money" phase of the AI cycle has officially begun for the software and social media giants.