Microsoft saw its shares tumble 6% on Thursday after its artificial intelligence (AI) investments failed to significantly boost cloud revenue. Meanwhile, Meta’s stock rose 4% as CEO Mark Zuckerberg reassured investors of strong growth potential, calling 2024 a “really big year.”
Both tech giants defended their heavy AI spending following concerns sparked by Chinese AI startup DeepSeek’s recent advancements in low-cost AI models. However, while Meta continues to show strong ad revenue growth—justifying its AI investments, according to Evercore analyst Mark Mahaney—Microsoft’s Azure cloud platform has struggled.
Microsoft missed market estimates for Azure’s quarterly revenue growth and provided a third-quarter forecast below expectations. The company had previously promised a second-half rebound, but analysts now express skepticism.
“The second-half re-acceleration story for Azure is not playing out,” said Barclays analyst Raimo Lenschow, adding that Microsoft prioritized AI workloads over core Azure functions, delaying the expected growth recovery.
For Meta, a stronger-than-expected 21% revenue increase eased investor concerns about Zuckerberg’s aggressive AI spending plans, which could reach $65 billion this year. Analysts remain bullish, with Barton Crockett of Rosenblatt stating that “Meta might have more benefits to show from AI than anyone.”
At least 15 brokerages raised their price targets on Meta, which saw a 65% stock gain in 2023, the largest among Big Tech firms. The stock’s rally was set to add over $80 billion to its market value.
Conversely, Microsoft was on track to lose about $182 billion in market capitalization. J.P. Morgan analyst Mark Murphy noted that Microsoft “did not recommit to its Azure second-half outlook the same way it did 90 days ago,” weakening confidence in the company’s cloud growth trajectory.