Earnings report reveals how Big Tech companies are quietly watching the digital advertising boom

As the tech giants ramp up their already breathtaking spending on artificial intelligence, their respective digital advertising businesses are also gaining momentum.

This week’s quarterly earnings report is meta, Amazon, alphabet and microsoft Both showed healthy returns on the advertising side.

The increase in online ad sales eased concerns earlier this year that economic turmoil amplified by President Donald Trump’s trade policies would hurt ad budgets.

“I think the digital advertising market is strong,” said Jasmine Enberg, co-founder of creator economy media company Scalable. “I think the instability and instability of this economy is priced in for a lot of people to some degree at this point. In some ways, the status quo is the status quo.”

Meta had the fastest advertising revenue growth in the quarter, outpacing its competitors.

Online advertising accounted for 98% of the company’s total revenue in the third quarter, up 26% year over year to $51.24 billion, its highest revenue since the first quarter of 2024.

Revenue from Amazon’s online advertising division rose 24% year over year to $17.7 billion, a faster growth rate than the 20% increase in revenue from the company’s AWS cloud computing division.

During Amazon’s earnings call, CEO Andy Jassy emphasized that the company continues to expand its advertising-focused demand-side platform to more third-party apps and sites.

“If you look at some of the partnerships we’ve had, the Roku partnership gives us the largest connected TV footprint in the U.S.,” Jassy said. “And when you layer that with what we recently did to give our DSP customers the opportunity to integrate with ad inventory from Netflix, Spotify, and SiriusXM, this is powerful.”

Alphabet’s overall advertising revenue for the third quarter was $74.18 billion, up 13% from $65.85 billion in the year-ago period. YouTube’s online ad sales rose 15% to $10.26 billion in the third quarter.

Microsoft’s search and news advertising division generated $3.7 billion in revenue in the company’s fiscal first quarter, up 14% from $3.2 billion in the year-ago period.

Jeremy Goldman, senior director of content at eMarketer, said that even if advertising budgets were reduced somewhat due to economic uncertainty, companies likely shifted some of that spending from traditional businesses such as newspapers to digital advertising platforms.

“I think it’s rather a given what’s going to happen,” Goldman said. “You put money into social, you put money into retail media, you put money into search ad spend.”

Megacaps weren’t the only ones to see big increases in online advertising this week.

Reddit reported Thursday that third-quarter sales rose 68%, well above analyst expectations. According to the company, the number of daily active uniques worldwide increased 19% year-on-year to 116 million, exceeding the expected 114 million.

snap and pinterest We plan to report the results next week.

Great success with AI

All of the big tech companies said they saw no broader economic concerns that would justify cutting AI spending, and instead raised guidance for capital spending despite bubble concerns.

Together, Alphabet, Meta, Amazon, and Microsoft expect capex spending to exceed $380 billion this year, just a fraction of OpenAI’s recently announced $1 trillion worth of data center and cloud computing deals with partners such as Nvidia, Oracle, and Broadcom.

But while investors were rooting for Amazon and Google, they were less excited about Microsoft and especially Meta.

Shares of Facebook’s parent company plunged 11% on Thursday after the company announced it would raise the lower end of its capital spending guidance to $70 billion to $72 billion from the previous range of $66 billion to $72 billion.

Analysts at Oppenheimer downgraded Meta’s stock rating from buy to hold. That’s because it’s unclear how social media companies will benefit from AI investments compared to big tech rivals that operate cloud computing services, he said.

“Despite unknown revenue opportunities, the company’s significant investment in Superintelligence mirrors Metaverse spending in 2021/2022,” Oppenheimer analysts wrote, contrasting the company’s large AI spending related to Superintelligence Labs with its loss-making Reality Labs division, which produces virtual reality and augmented reality technology.

In a follow-up earnings call Wednesday, Meta’s finance chief Susan Lee said it was important for the company to invest in AI-related data centers and third-party cloud computing services, or it risks falling behind, echoing similar comments from CEO Mark Zuckerberg.

“Our top priority is to invest resources to establish our position as a leader in AI,” Lee said. “This means there may be some financial pressure for some time to come, with the potential for higher operating profits during that time.”

While Meta has continued to point out how its investments in AI are improving its online advertising business, Enberg said it has become more difficult to show how that spending will benefit the company in the future.

“I think part of the reason for that is that we’re hearing every quarter that you can integrate AI into your ad business and use that as a growth engine,” Enberg said. “What happens next is even harder to articulate and far less concrete for investors and people following the space.”

Still, Meta has seen some growth with new products such as the Meta AI app, which includes a short video service powered by Vibes AI, Goldman said.

The company could also expand into subscriptions or offer enterprise AI services to sell to businesses, but this is “an area the company is not really into at all,” he said.

For now, Meta’s digital advertising division remains its core business, and as in previous quarters, it’s unclear how the economy will impact advertising budgets.

As the holiday season approaches, all eyes are on whether lingering economic concerns and tariff-related price hikes could lead to consumers cutting back on spending and impacting companies’ marketing campaigns.

“The next test will be when we get the Black Friday numbers,” Goldman said. “Will it be less than expected?”

Attention: Looking at the earnings of tech companies tells you that these are the companies you want to own.