Microsoft surges 8% as Meta tumbles 10% after sharply contrasting AI earnings

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Microsoft (NASDAQ: MSFT) climbed 8% after Wednesday’s closing bell, while Meta Platforms (NASDAQ: META) sank 10%.

Microsoft reported adjusted earnings of $4.74 per share in the fiscal fourth quarter ended June 30, 2026, exceeding LSEG’s $4.24 expectation. Sales totaled $90.01 billion, exceeding the $87.62 billion projection.

Meanwhile, Meta earned $6.18 per share, less than the expected $7.22, despite revenue of $60.80 billion, which above the $60.17 billion projection.

Microsoft increases cloud revenues and maintains AI expenditure consistent till 2026

Microsoft’s total quarterly revenue rose 18% from a year earlier to roughly $90.0 billion. On a constant-currency basis, growth was 17%. Operating profit increased 18% to $40.6 billion.

Microsoft’s GAAP net income rose 31% to $35.77 billion from $27.23 billion the year before. The adjusted net income increased 22% from $28.81 billion to $35.29 billion. GAAP diluted earnings increased from $3.65 to $4.81, a 32% increase from 2025, while adjusted diluted earnings increased by 23% to $4.74, up from $3.86.

The company removed the effect of its OpenAI investment from its adjusted figures. That adjustment cut the latest quarter’s net income by $480 million and reduced earnings by $0.07 per share. Last year, the OpenAI effect added $1.58 billion to net income and $0.21 per share. The annual OpenAI net swing was $2.06 billion, while earnings swung $0.28 per share.

Several one-time items added $0.27 per share compared with Microsoft’s April 29 guidance. A $3.2 billion gain from its Anthropic investment and lower voluntary retirement costs helped. Severance bills and Xbox write-downs reduced part of that gain. Microsoft said sales, operating profit, and earnings topped its forecasts without those items.

“We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results,” Chairman and CEO Satya Nadella said. Satya also said that annual Azure sales surpassed $100 billion for the first time, and Microsoft 365 Copilot reached 30 million paid seats.

“We delivered a strong quarter to close out the fiscal year, highlighted by Microsoft Cloud revenue of $59.3 billion, up 27% year-over-year,” Chief Financial Officer Amy Hood said.

Meta raises spending as legal costs and layoffs cut profit and free cash flow

Meta’s second-quarter sales increased 28%, from $47.52 billion to $60.80 billion. If currency fluctuations had not occurred, revenue would have increased by 27 percent. In June, its app network had an average of 3.60 billion daily users, representing a 3% increase. Ad impressions jumped 14%, while average ad prices increased 12%.

According to the earnings report, Meta’s costs surged by 55% to $42.03 billion, up from $27.08 billion last year. That number included $2.40 billion in legal fees and $1.18 billion in severance pay related to the May 2026 employment reduction.

Operating income fell 8% to $18.78 billion from $20.44 billion. The operating margin dropped to 31% from 43%. Tax expense rose 32% to $2.91 billion, while the effective tax rate increased to 16% from 11%. Net income declined 14% to $15.85 billion from $18.34 billion. Diluted earnings fell 13% to $6.18 from $7.10.

“AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities,” founder and CEO Mark Zuckerberg said. Mark added, “The results are already showing, and I’m optimistic about the potential ahead.”

Capital spending, including finance-lease principal payments, amounted to $31.08 billion. Meta distributed $1.35 billion in dividends and associated payments. It had $90.26 billion in cash, marketable securities, and equivalents at the end of June, compared to $83.66 billion in long-term debt. Operating cash flow was $31.86 billion, while free cash flow totaled $784 million.

Meta expects third-quarter revenue between $61 billion and $64 billion, with currency creating a 1% drag on yearly growth. Full-year expenses are now set at $165 billion to $169 billion after the legal charge raised the lower end.

Management still expects 2026 operating income to beat 2025. Capital spending is forecast at $130 billion to $145 billion, tighter than the previous $125 billion to $145 billion range. The expected tax rate for the rest of 2026 rose to 15% to 17% from 13% to 16%.

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