Meta and Microsoft: AI’s spending champs won’t be tapping the brakes

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Subscribe to enjoy similar stories. Microsoft and Meta Platforms might appear to have little in common. But both are betting large sums on artificial intelligence, and neither is yet inclined to slow down.

The storied corporate software giant and the parent company of Facebook and Instagram reported results late Wednesday for the September-ended quarter. Both showed decently strong revenue growth and even better operating profit improvements for the quarter—each exceeding Wall Street’s targets for the period. Yet both stocks slipped around 3% in after-hours trading, following their reports and respective conference calls.

Both issued revenue projections for the December quarter that were only in line with to slightly below analysts’ targets. And both said the blowout capital spending that has been fueling their race into AI services will continue in the current quarter, with Meta giving strong signals that next year will bring even more. Alphabet’s Google and Amazon.com are running in the same race.

But the recent pattern of spending at Microsoft and Meta stands out more, relative to their historic patterns. The $53 billion that Microsoft has spent already in this calendar year represents about 28% of the company’s revenue for that time—far above the 12% of revenue Microsoft has averaged on capex for the years 2014-23. Meta said it plans to spend between $38 billion and $40 billion on capex this year, which would represent about 24% of Wall Street’s projected revenue for the year.

The company has spent on average about 19% of its revenue on capex over the past 10 years. Providing generative AI services doesn’t come cheap, given the computing power involved. Nor do cutting-edge data centers go up quickly—especially as