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Meta and Microsoft report strong earnings but shares decline

Meta and Microsoft report strong earnings but shares decline

GrafaGrafa2024/10/31 10:00
By:Isaac Francis

Meta Platforms Inc. and Microsoft Corp. both reported better-than-expected earnings for the third quarter, driven largely by their investments in artificial intelligence. 

However, the companies' shares fell in after-hours trading due to cautious outlooks and anticipated increases in AI spending. 

On October 30, Meta announced a 19% year-over-year revenue increase, reaching $40.59 billion, surpassing Wall Street estimates of $40.21 billion. 

The company’s earnings per share (EPS) were reported at $6.03, exceeding expectations of $5.19. 

Similarly, Microsoft reported a 16% revenue increase to $65.59 billion, beating estimates of $64.41 billion, with an EPS of $3.30 compared to the expected $3.08. 

Both companies are part of a larger trend among major tech firms, including Google, Apple, and Amazon, which have heavily invested in AI technologies this year. 

Meta has integrated AI across its platforms such as WhatsApp, Facebook, and Instagram, with CEO Mark Zuckerberg stating that the company “had a good quarter driven by AI progress.” 

Microsoft's growth was particularly notable in its Azure cloud services, which saw a 33% year-over-year increase attributed to AI capabilities. 

CEO Satya Nadella highlighted that their AI business is on track to exceed an annual revenue run-rate of $10 billion next quarter, marking it as the fastest-growing segment in Microsoft's history.

Despite these positive results, shares for both companies declined after initially rising post-announcement. 

Meta's stock fell 3.18% from $591.80 to $573, while Microsoft dropped 3.71% from $432.53 to $416.50.

Traders reacted negatively to the companies' forecasts indicating increased spending on AI with uncertain near-term returns.

Zuckerberg noted that Meta's AI investments would require “serious infrastructure” and substantial ongoing funding without a finalised budget yet.

Additionally, Meta missed expectations for daily active users, which rose only 5% year-over-year to an average of 3.29 billion, below the anticipated 3.31 billion.

Microsoft projected its Azure growth for the current quarter to be between 31% and 32%, slightly down from the previous quarter’s performance, and forecasted revenues between $68.1 billion and $69.1 billion—below analyst expectations of $69.89 billion.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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