Microsoft shares surged by as much as 10% in pre-market trading on Thursday after the company forecast stronger-than-expected revenue driven by artificial intelligence investments — even as questions mount about the social and economic consequences of the tech giant's $175 billion capital spending spree. The company expects revenue of between $89.85 billion and $90.95 billion in the July-September quarter, representing growth of 16% to 17%, with Azure cloud revenue forecast to grow by approximately 45% in constant currency.
Record Profits, Record Spending
Microsoft said revenue rose 18% year-on-year to $90 billion in the April-June period, beating analysts' forecast of $87.6 billion. Net profit climbed 31% to a record $35.8 billion, helped by a $3.2 billion unrealised gain on Microsoft's investment in the AI company Anthropic. Diluted earnings per share reached $4.81, above analysts' forecast of $4.24. For the full fiscal year ended in June, Microsoft reported $331.8 billion in revenue. Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, CEO Satya Nadella said yesterday.
Microsoft Cloud revenue was $59.3 billion, up 27% year-on-year, and Azure and other cloud services revenue increased by 43%. The company said demand for Azure continued to exceed available capacity, even after it brought additional computing infrastructure online during the quarter. Chief financial officer Amy Hood said the company's capital expenditure plans for the 2026 calendar year remain unchanged at approximately $175 billion — a figure that reflects an accounting change but no shift in actual spending expectations. Hood had earlier said Microsoft expects to invest $190 billion in capital expenditures in 2026.
Bryan Hayes, an investment strategist at Zacks Investment Research, said that "for the first time in three quarters, the market appears willing to grant that the spending is buying something real." Danielle Criste, Microsoft's director of investor relations, said, "We remain very confident in the long-term return on these investments, given these strong demand signals, the increasing product usage we've seen and the efficiencies that we're driving across the platform." Michael J. Wolf, founder and CEO of Activate Consulting, said the concurrent Azure and Copilot growth indicates that Microsoft is "winning on both fronts," supplying cloud infrastructure for enterprise AI while monetising AI tools embedded in products workers use every day.
Meta's Profits Fall Amid Legal Costs and Job Cuts
Meta Platforms said yesterday its second-quarter profit declined even as revenue beat Wall Street's expectations, as legal expenses and severance costs weighed on its results. The Facebook and Instagram parent company earned $15.85 billion in the April-June period, down 14% from $18.34 billion in the same period a year earlier. Revenue grew 28% to $60.8 billion from $47.52 billion. Meta earned $6.18 per share, below the $7.19 expected by analysts surveyed by FactSet, while analysts had forecast revenue of $60.22 billion.
Total costs and expenses jumped 55% to $42.03 billion, including $2.4 billion in charges related to legal proceedings and $1.18 billion in severance expenses connected with Meta's May workforce reduction. Its operating margin narrowed to 31% from 43% a year earlier. CEO Mark Zuckerberg said in a statement, "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities. The results are already showing, and I'm optimistic about the potential ahead."
Why This Matters:
Microsoft's record profits and soaring share price demonstrate that Big Tech's enormous AI investments are generating real returns — but they also highlight the concentration of economic power in a handful of companies willing to spend hundreds of billions on infrastructure most competitors can't afford. The $175 billion capital expenditure plan dwarfs the GDP of many European nations and raises questions about market dominance, energy consumption, and whether the benefits of AI will be shared broadly or captured by shareholders and executives. Meta's simultaneous workforce reduction and legal costs — totalling $3.58 billion in a single quarter — underscore the human cost of this transformation: workers laid off even as profits remain in the tens of billions. For European policymakers, the results reinforce the urgency of digital sovereignty, antitrust enforcement, and ensuring that AI development serves public interest alongside private profit.",
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