Meta and Microsoft reported significant increases in AI-related expenses. Meta's operating costs grew by 55% to $42 billion, leading to a 14% drop in net income, missing S&P Capital IQ projections. In contrast, Microsoft reported a 31% increase in net income, reaching $35.8 billion, driven by a 70% rise in capital expenditures to $41 billion to meet demand for cloud and AI services. Meta expects capital expenditures for 2026 to be between $130 billion to $145 billion, raising its low-end estimate by $5 billion after layoffs. Microsoft revealed that two-thirds of its capital expenditures focus on short-lived assets; both companies face increased scrutiny from investors due to rising costs.

7 hours ago - Business

Meta and Microsoft report ballooning AI expenses

Nathan Bomey
email (opens in new window)
sms (opens in new window)
facebook (opens in new window)

twitter (opens in new window)

linkedin (opens in new window)

bluesky (opens in new window)

Add Axios on Google

Add Axios as your preferred source to

see more of our stories on Google.

Add Axios on Google

Illustration of an AI sparkle encased in a glass box

Illustration: Sarah Grillo/Axios

Microsoft and Meta reported ballooning AI costs on Wednesday, but Microsoft still managed to increase its profits, while Meta posted a sharp earnings decline.

Meta shares slumped 6.2% in after-hours trading, while Microsoft rose 2.4%.

Why it matters: AI hyperscalers are rushing to bolster computing power to accelerate their tech ambitions, but it's getting extremely expensive and causing some investors to get nervous.

Zoom in: Meta— which owns Facebook, Instagram and WhatsApp — recorded a 55% increase in expenses, to $42 billion, while revenue grew at a slower pace of 28%.

Consequently, the company's net income fell 14%, to $15.8 billion.
That fell short of S&P Capital IQ projections of $18.8 billion.

Microsoft— whose $100 billion Azure cloud business is at the center of the AI bonanza — said its capital expenditures soared 70%, to $41 billion, "to support customer demand for our cloud and AI offerings."

But the company still recorded a 31% increase in net income, to $35.8 billion, topping S&P Capital IQ expectations of $31.5 billion.

Meta said its 2026 capital expenditures are now expected to total $130 billion to $145 billion, raising the low end by $5 billion, but maintaining the projected upper end.

Bank of America analyst Justin Post had expected the company might lower the upper end of its capex outlook by $1 billion to $2 billion after announcing 8,000 layoffs.
Meta now has 75,472 employees as of June 30, down 1% from a year earlier, but that figure does not yet reflect the cuts.

The intrigue: Microsoft acknowledged in an earnings presentation that about two-thirds of its capex is for "short-lived assets, primarily CPUs and GPUs," which will eventually need to be replaced as the company modernizes its systems.

email (opens in new window)
sms (opens in new window)
facebook (opens in new window)

twitter (opens in new window)

linkedin (opens in new window)

bluesky (opens in new window)

Add Axios on Google

What to read next

Read Original at Axios →