Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Microsoft shares jumped 9% after hours as results eased fears on both sides of its AI dilemma: soaring cloud investment and disruption to its software empire. Cloud growth delivered a strong beat, echoing Alphabet’s momentum, while solid guidance and a steady capex outlook gave investors confidence that demand is keeping pace with spending. The overlooked highlight was a significant jump in paid Copilot subscriptions, with the product evolving rapidly into a powerful suite deeply embedded across Microsoft’s Office tools. That creates a valuable flywheel, strengthening the software offering while building a credible defence against AI disruption.
Meta shares extended their losses after management pushed back on renting compute to third parties on the earnings call, but markets may have this backwards. Meta is deliberately turning down easy cash to direct every ounce of capacity towards projects it believes can deliver far greater returns. Investors are refusing to give management the benefit of the doubt, understandable given the failed Metaverse push, but that may also be where the opportunity lies. Despite some wasteful spend in years gone by, Meta still has a fantastic record of turning invested capital into compounding profits – something the current valuation assigns no value to, and where we see the biggest opportunity for a re-rating.”
The author holds shares in Microsoft and Meta.
Notes to Editors
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