Microsoft Calms AI Fears, Meta Eats Dust: Market ReactsMicrosoft CorporationNASDAQ:MSFTTradingView"Cloud sales, cloud sales, cloud sales" is the new "Developers, developers, developers." More than 50 years ago, economist Milton Friedman said that the one responsibility of business is to use its resources and engage in activities "designed to increase its profits." Wall Street gave these words a fresh airing this week. Microsoft MSFT and Meta META both reported another quarter of eye-watering AI spending, with billions flowing into chips, data centers and computing infrastructure. Yet investors rewarded one company and punished the other. Microsoft shares MSFT jumped 10% after earnings, while Meta stock META slid roughly 7.5%, putting more than $100 billion of market value on the chopping block before Thursday's opening bell. Guess which one turned a profit? ☁️ Microsoft Shows the Money Satya Nadella and co delivered what investors wanted to see: Microsoft’s profits keeping pace with spending. The software giant forecast Azure revenue growth of 45% for the coming quarter, easing concerns that AI investment might be getting ahead of demand. Azure, Microsoft's cloud platform and the centerpiece of its AI strategy, continues attracting businesses eager to rent computing power rather than build their own infrastructure. The company also revealed it signed more than $130 billion in new data-center leases during the quarter and remains on track to roughly double its computing capacity over the next two years. Those ambitions aren't cheap. Capital expenditures, or capex — money spent on long-term assets such as servers and data centers — rose 70% to $41 billion. Yet Microsoft still grew net income 31% to $35.8 billion, helped in part by a $3.2 billion gain on its investment in AI startup Anthropic. Earnings per share landed at $4.81, topping expectations of $4.24 and climbing from $3.65 a year earlier. 📱 Meta's Bill Arrived First Zuck and co are pursuing a similarly ambitious AI strategy, but investors focused on a different set of numbers. The Facebook and Instagram parent increased expenses by 55% to $42 billion, while revenue rose a slower 28%. That imbalance squeezed profitability, with net income falling 14% to $15.8 billion. The social media giant reported earnings per share of $6.18, missing Wall Street's estimate of $7.19 and falling from $7.14 a year ago. Meta boss Zuckerberg defended the spending, outlining a future where personalized AI assistants work alongside users around the clock across Facebook, Instagram and WhatsApp. It's a compelling vision, but markets have a habit of asking one uncomfortable question: How long until it pays for itself? Meta also raised the lower end of its 2026 capital expenditure guidance by $5 billion to between $130 billion and $145 billion, reinforcing just how expensive the AI race has become. 🤖 Investors Want More Than Big Dreams The hyperscalers — technology giants building massive AI infrastructure — are all chasing the same prize: enough computing power to train and serve increasingly sophisticated AI models. That race has become one of the defining investment themes of the decade, but it's also testing investors' patience. Building data centers, buying advanced chips and securing electricity require extraordinary amounts of capital. Eventually, shareholders want to see those billions translate into juicier margins and faster earnings growth. This quarter, Microsoft convinced Wall Street that its spending is already producing results. Meta made a not-so-persuasive case for tomorrow. Earnings season continues with Amazon AMZN and Apple AAPL reporting after the close today. Off to you: How do you see these two compete? Both stocks are down on the year with Microsoft being the bigger loser, down 17%, against Meta’s more modest 10% drop.