Meta Slips and Microsoft Soars on AI Earnings
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Meta slides and Microsoft rallies as investors look for answers on how hyperscalers are turning AI spending into AI revenue. Plus, we'll look at the extreme weather fueling Europe's wildfires and the aging planes being used to fight them.
The problem is the scale, the number of fires, the intensity of fires. All of that has just exceeded the capacity of firefighting infrastructure.
And as the U.S. strikes back on Iran, the Pentagon proposes spending big on resupplying Patriot missiles. It's Thursday, July 30th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. Investors are picking through earnings from Meta and Microsoft this morning and having their say on very different signals about how the companies plan to start making money from their AI buildouts. Meta shares are down off hours as its AI spending plans and dwindling free cash flow overshadowed record second quarter revenue. At the same time, Microsoft saw its shares jump after reporting strong cloud growth and big gains in paying AI subscribers.
Well, here to recap how sentiment is shifting around those hyperscalers as we await results from two more later today is equity markets reporter Joe Stoner. Joe, let's talk about these companies in turn, starting with Meta, which is racing to catch up to its rivals in AI. And to do that is spending big on everything from snapping up chips to buying data centers to hiring more folks. And it seems like a real preoccupation for investors in all of this has been, what does this mean? Four exactly. Does the company have a plan to convert these investments into revenue? What are you seeing? Are markets satisfied with the answers they got from Mark Zuckerberg and others?
I think the feeling is they're not quite satisfied just yet. A word I heard from an analyst at Quilter this morning was vague. Listening to Mark Zuckerberg on his earnings call, another analyst at XTB flagged to me that in their reality labs division, that's where they have kind of wearable AI, they lost $4.4 billion in the last quarter. It's not clear how that's going to turn into a profit.
Yeah, let's actually let listeners hear how Zuckerberg himself described these competing impulses around AI. On one hand, maybe wanting to monetize investments now, or on the other, sit on these chips, sit on the compute, find a purpose for them down the line. Here he was.
It's always a portfolio, right? It's not like you don't want to only do long-term things and not kind of prove the markets out that exist in the near term. But I also think it would be foolish to basically just sell all of the compute and take a short-term profit.
Joe, MetaStock soared almost 9% a month ago on reports that it might get into the business of selling off its excess AI computing power. And yet, is the sense now that that's just not lucrative enough of a return on all of this investment?
Yes, there was a bit of a backslash. amusement among analysts when those reports came out because on the one hand meta isn't a chip reseller it shouldn't be doing that as its main form of business so as it kind of thinks through what it's going to do and whether it's going to sell this computation there's a bit of encouragement and deutsche bank analysts have said that meta is lagging behind its competitors so it's If it thinks that it can make more money in the long term by keeping its computation in-house, that's a good sign.
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