According to Cointelegraph, shares of Meta Platforms Inc. and Microsoft Corp. declined in after-hours trading on October 30, despite both companies reporting strong third-quarter earnings. Executives from both firms reduced their earnings outlook and forecasted increased spending on artificial intelligence (AI), which contributed to the drop in share prices.
Meta reported a 19% year-on-year increase in Q3 revenues, reaching $40.59 billion, surpassing Wall Street estimates of $40.21 billion. The company's earnings per share (EPS) were $6.03, exceeding the expected $5.19. Microsoft also posted impressive results, with revenues up 16% from the previous year to $65.59 billion, beating estimates of $64.41 billion. Microsoft's EPS came in at $3.30, above the anticipated $3.08.
Both companies, along with other major tech players like Google, Apple, and Amazon, have heavily invested in AI, launching new models and hardware to support the technology. Meta introduced Meta AI across its WhatsApp, Facebook, and Instagram platforms, which contributed to a strong quarter, according to CEO Mark Zuckerberg. Microsoft's earnings were bolstered by a 33% year-on-year growth in its AI-powered Azure business, surpassing expectations of 29% growth. CEO Satya Nadella highlighted that their AI business is on track to achieve an annual revenue run-rate of $10 billion next quarter, marking it as the fastest-growing business in the company's history.
Despite the positive earnings reports, Meta's shares fell 3.18% from $591.80 to $573, while Microsoft's shares dropped 3.71% from $432.53 to $416.50, according to Google Finance data. The decline in share prices was attributed to concerns over the companies' future spending on AI, with both signaling significant investments ahead with limited near-term results. Zuckerberg mentioned that Meta's AI investments would require substantial infrastructure and that the company had not yet finalized its budget. Financial chief Susan Li emphasized the focus on making Meta AI an engaging and valuable consumer experience, with monetization opportunities expected over time. Meta projected its full-year capital expenditures to be between $38 billion and $40 billion, with significant growth anticipated in 2025.
Microsoft's outlook for the current quarter indicated that its core AI offering, Azure, is expected to grow between 31% and 32%, slightly down from the 33% growth posted last quarter. The company also projected revenues for the current quarter to be between $68.1 billion and $69.1 billion, below analyst expectations of $69.89 billion.
