Meta and Microsoft's AI spending: a tale of two earnings reports

Meta's connection to investors: The AI spending will proceed until returns improve.

Investors' response: No thanks.

AI walk was the large attraction during Meta's Q2 net report. And the transportation wasn't convincing capable to extremity an after-hours selloff.

Meta was happy to in installments AI pinch helping its advertizing business (its breadstuff and butter) emergence 27%. And it wasn't conscionable axenic growth. Ad impressions grew 14%, while the mean value per advertisement climbed 12%.

There's conscionable 1 catch. Meta is still spending an unthinkable magnitude — $31.1 billion, astir double what it spent past twelvemonth — connected its AI bets. That's eating up a important information of its free rate flow, which went from $8.55 BILLION to $784 MILLION. One expert said the AI strategy is for illustration "throwing spaghetti astatine the wall."

Investors were unimpressed, pinch Meta's banal falling astir 10% astatine 1 constituent aft the bell.

Compare that to different tech elephantine that reported yesterday: Microsoft. It logged wins successful Azure and Microsoft 365 Copilot, which Microsoft CFO Amy Hood touted successful her quarterly memo to employees viewed by BI's Ashley Stewart. Perhaps much importantly, its AI fund forecast didn't budge.

Investors noticed. Microsoft's banal jumped almost 8% successful after-hours trading.

The quality betwixt the 2 is clear: AI spending is good … arsenic agelong arsenic location is simply a nonstop and measurable return.

CEO Mark Zuckerberg made the lawsuit for why Meta's AI bets mightiness request much time.

A batch of the astir contiguous usage cases for AI are for developers. Just look astatine the roar successful vibe coding. "Building for consumers is simply a small spot different," Zuckerberg said during Wednesday's net call, but it's besides a "massive marketplace opportunity."

And who amended to service that marketplace than the king of each societal networks? Between Facebook, Instagram, WhatsApp, and Threads, Meta has billions of users crossed its platforms. Zuckerberg said Meta's making a large stake connected AI agents.

That each tracks pinch 1 mini exception: A batch of Americans are really tense astir AI.

Meta has tried to easiness those fears pinch a large AI PR push, including a Zuckerberg op-ed and immoderate interviews pinch reporters. (The petition to speak to BI Today must person sewage caught successful my spam inbox. I'm happy to chat, Mark. Sounds for illustration you person a really cool gym.)

BI's Peter Kafka has an thought astir really Meta could amended person group to get connected committee pinch AI. (Hint: It's green.)

Whatever the scheme is, Meta had amended fig thing retired fast. Investors are moving retired of patience.