When it comes to artificial intelligence, it’s been a story of two different mega-cap stocks so far this earnings season.
meta platform While it soared more than 10% as investments in AI showed signs of boosting returns. microsoft Shares fell as the company struggled to justify recent spending plans to investors and showed a slowdown in its cloud division.
The influx of money into AI and new technologies has become a hot topic of debate on Wall Street, as investors increasingly want to see companies reaping the benefits of last year’s huge spending.
Meta appears to have approval from investors to continue pouring money into AI. The social media giant issued strong guidance, saying it plans to spend $115 billion to $135 billion on building AI this year.
This is almost double the amount spent in 2025.
Over the past few quarters, investors have expressed concern about the company’s spending ambitions. However, the company’s revenue grew 24% year over year, driven primarily by online advertising, and previous concerns about its AI strategy appear to have eased.
CEO Mark Zuckerberg hinted that the company is working on a variety of new products this year and said the investment will support his mission to “build a personal superintelligence.”
Meta and Microsoft daily stock price chart.
But investors appear to have rewarded Meta’s spending plans, with Microsoft’s stock plummeting nearly 12%, its worst day since March 2020.
The software maker showed slowing growth in its Azure cloud division, falling to 39% from 40% growth in the first fiscal quarter. Investors are eyeing this space as a proxy for gauging demand for enterprise AI.
At the same time, capital spending and finance leases rose 66% to $37.5 billion in the quarter, beating the $34.31 billion expected by analysts surveyed by Visible Alpha, as Microsoft supports demand in the cloud and AI sectors.
The company also said it is struggling with computing power constraints as demand continues to outstrip supply.
Amy Hood, Microsoft’s head of finance, said if the company had poured all of its new graphics processing unit chips in the first and second quarters into its Azure business, Azure would have grown 40%.
The company also said it is balancing “supply to adequately meet growing Azure demand” with product innovation and increased use of first-party AI in services such as GitHub Copilot and M365 Copilot.
The company’s demand balance increased 110% to $625 billion. This includes a $250 billion cloud agreement with OpenAI during this period. ChatGPT manufacturers accounted for 45% of the remaining commercial performance obligations.
Analysts at Evercore ISI said “concerns about OpenAI’s ability to meet its funding commitments” likely played a role in the post-earnings share price rally, but called that sentiment “overdone.”
Beyond Big Tech
Contrasting movements leveraging AI have permeated the broader technology field.
IBM gained a wave of investor confidence in its AI strategy, sending its stock price soaring 8%. The technology and consulting company exceeded expectations and showed strong growth in software and infrastructure as it builds new automation tools and AI infrastructure.
Analysts at Goldman Sachs said the company is “fully on track for long-term growth” with growth in software and infrastructure and increasing market share in consulting.
Meanwhile, IBM’s AI business book more than doubled to $12.5 billion from $5 billion a year ago. This growth seemed to justify the company’s investment.
JPMorgan analysts called IBM a “relatively defensive company that is increasingly favorably exposed to software and AI tailwinds.”
still ServiceNow Concerns that AI is eroding the broader software sector’s business model weighed on the company’s better-than-expected earnings, sending the stock down 11%. The company’s stock price has already fallen 25% since the beginning of 2026, and 50% since last year.
The sector has been sold off in recent months on concerns that new AI tools will worsen demand for workflows and licenses, hurting long-standing revenue models.
During an earnings call with analysts, ServiceNow CEO Bill McDermott defended the company’s business model and recent multibillion-dollar acquisition spree, which some investors said were signs the company was returning to growth.
“Let’s get the facts straight,” he said. “Enterprise AI will be the biggest revenue driver in the multi-trillion dollar investment supercycle in AI infrastructure.”
WATCH: Meta soars on profit growth, first quarter outlook positive
