Microsoft soars, Meta sinks: AI spending is splitting Big Tech in two

Key points

• Microsoft shares rose 9% in premarket trading on 31 July 2025 after quarterly results beat analyst forecasts.
• Azure, Microsoft's cloud computing service, grew 43% year-on-year, ahead of expectations.
• Microsoft 365 Copilot, the company's AI work assistant, now has more than 30 million paying users, up from 20 million in April 2025.
• Meta shares fell 9% after the company missed earnings expectations and forecast lower revenue than analysts anticipated.
• Meta's free cash flow dropped 91% year-on-year to $784 million as AI spending surged.

Two of the biggest names in tech reported earnings on the same day. Investors rewarded one and punished the other. The split tells you a lot about where confidence in AI spending currently sits.

What did Microsoft actually show investors?

Microsoft delivered hard numbers that backed up its AI promises. Azure, the company's cloud platform where businesses rent computing power over the internet, grew 43% compared to the same period last year. That beat what analysts on Wall Street had pencilled in.

The figure that caught most attention, though, was Copilot. Microsoft 365 Copilot is the AI assistant built into the Office suite, the software most office workers use for emails, spreadsheets and documents. It now has 30 million paying subscribers, up from 20 million just three months ago.

That kind of growth matters because Microsoft has spent roughly $190 billion building the data centres, the large warehouse-sized buildings packed with computers, needed to run AI services. Analysts wanted proof that spending was translating into actual revenue. Wednesday's results gave them some.

"Microsoft's strong revenue performance, combined with accelerating Copilot adoption, signals that its $190 billion data-centre buildout is beginning to deliver returns," Tracy Woo, principal analyst at research firm Forrester, wrote in a note.

The stock had already fallen about 24% this year, so Thursday's 9% jump was welcome relief for shareholders.

Why did Meta have such a bad night?

Meta missed. The company behind Facebook, Instagram and WhatsApp fell short of what investors expected on both profit and the all-important revenue forecast for the coming quarter.

Meta guided for revenue of $61 billion to $64 billion this quarter. Analysts had expected $63.15 billion as a midpoint, according to financial data firm LSEG. Missing a revenue forecast might sound technical, but it tells investors that the business is growing more slowly than hoped.

The cash flow number was brutal. Free cash flow, the money a company has left after paying its bills and investing in its operations, collapsed 91% year-on-year to just $784 million. AI spending is the main culprit.

CEO Mark Zuckerberg did offer one intriguing idea: Meta has been approached by companies willing to pay a premium to use its spare computing capacity. In plain terms, Meta could rent out its extra AI hardware the way a landlord rents out spare rooms. But Zuckerberg gave almost no detail on how that would work, and he acknowledged the company still needs most of that capacity for its own products.

"Right now, the narrative from Mark Zuckerberg is a little light on detail," said Ben Barringer, head of technology research at investment firm Quilter Cheviot, in a note published Thursday. "Meta still has a crucial role to play in the AI world, but it is still finding its way."

Meta shares are now down around 16% for the year. CNBC Tech first reported the extended-hours trading moves.

What does this mean for ordinary people?

If you use Microsoft Office at work, the AI assistant being baked into it is clearly gaining traction, so expect it to become harder to ignore. If you use Facebook or Instagram, Meta's AI push is costing the company so much that it has less financial cushion than it did a year ago. That pressure does not disappear quietly.