all Street had mixed reactions to tech giants’ AI earnings.

Microsoft and Meta went head to head on Wednesday reporting earnings after market close. While Meta was lauded for its AI-powered ad revenue, Microsoft’s gains were not as well received, despite beating analysts estimates.

Meta beat top and bottom line expectations and revealed that its AI-related capital expenditures will land anywhere between $115 billion and $135 billion, double what it spent last year.

• Even as the company’s spending spree continues, it may not be enough: Meta’s CFO Susan Li said that the company is “capacity constrained,” lacking the power it needs to develop further models and support its core ad business.
• “As we plan for the future, we will continue to invest very significantly in infrastructure to train leading models and deliver personal super intelligence to billions of people and businesses around the world,” CEO Mark Zuckerberg said during the earnings call.
• Investors, however, were not scared by these massive expenses, seemingly lulled into comfort by Meta’s AI-enhanced ad revenue, reporting a 24% year-over-year increase. The company’s shares popped in after-hours trading on Wednesday.

Meta is benefiting from the “immediate and accretive monetization” of AI in both its ad strategies and new product monetization, Scott Bickley, advisory fellow at Info-Tech Research Group, told The Deep View. Though it’s yet to be seen whether or not its goal of personal superintelligence will “end up in the same dustbin” as the metaverse, Bickley said, its immediate gains have staved off investor ire as it stands.

“The Street seems to like what it is seeing as the massive capex spend is being somewhat offset with turbo-charged growth, productivity, and profitability,” Bickley said.

Microsoft, meanwhile, wasn’t so lucky. Though Microsoft beat both top and bottom line consensus, investors were left unimpressed as its cloud growth plateaued, sending shares tumbling in after hours trading. The company reported 15 million paid seats for its Microsoft 365 Copilot software, a fraction of the company’s total 450 million users.

Though Microsoft may see its ever-expanding line of Copilot products as “full steam ahead,” Bickley noted that investors might be growing impatient with the relatively slow pace of adoption.

“My take is that organic growth in traditional products may be softer than the numbers indicate and is being bolstered by the numerous price increases being heaped upon the customer base,” Bickley added.