Why Big Tech Hyperscalers META and MSFT Matter This Earnings Season

The spotlight is firmly on major technology hyperscalers this earnings season, with Meta Platforms and Microsoft preparing to report results that could reshape investor sentiment toward the sector. These two giants—Meta, a dominant social media and advertising company, and Microsoft, a cloud computing and enterprise software powerhouse—have both underperformed the broader S&P 500 by meaningful margins over the past three months, raising questions about their momentum heading into their respective earnings announcements.

What makes these two stand out among hyperscalers is their central role in the AI infrastructure buildout. Both companies have dramatically expanded capital spending throughout 2024 and 2025, betting heavily that massive investments in computing infrastructure and artificial intelligence capabilities will pay off. Yet this aggressive investment strategy has drawn intense scrutiny from the market, creating a disconnect between fundamental growth prospects and actual stock performance.

The AI Investment Challenge Facing Hyperscalers

The elephant in the room for these hyperscalers is simple: capital expenditures have surged dramatically. Meta and Microsoft have both significantly ramped up spending to fuel AI research, development, and deployment. When viewed on financial statements, these massive outlays appear as expenses, which has weighed on near-term profit margins—a reality that hasn’t escaped investors’ notice.

This spending spike represents a strategic bet by both hyperscalers that AI will drive substantial future revenue growth and competitive advantage. For Meta, the wager centers on using AI to improve advertising relevance and targeting. For Microsoft, the investment primarily fuels Azure’s expansion as a leading cloud computing platform capable of supporting AI workloads at scale. However, the market has remained cautious about whether these investments will generate returns commensurate with their scale.

The tension between heavy near-term investment and the search for evidence of ROI has dominated conversations among market participants, and it’s expected to dominate the earnings calls as well. Investors want reassurance that hyperscalers like Meta and Microsoft are deploying capital wisely, not simply burning cash to keep up with competitors.

Analyst Sentiment Remains Stable Despite Market Headwinds

Despite the stock price weakness, there’s a silver lining in the forecast revisions: they’ve remained remarkably stable. Neither Meta nor Microsoft has seen analysts slash their earnings or revenue expectations in recent months—a positive signal that the investment community still believes in the long-term story, even if near-term results have disappointed.

Meta’s earnings are expected to grow 1.6% year-over-year, while revenue is projected to expand by a more robust 20.7%. Microsoft presents an even stronger picture, with earnings forecast to climb 20% and revenues anticipated to rise 15%. These growth rates, while solid, haven’t prompted analysts to significantly raise their forecasts, suggesting expectations are already well-incorporated into current consensus views.

Notably, Microsoft carries a Zacks Rank #2 (Buy) rating, reflecting positive revisions for future periods that underpin a strong overall earnings outlook. The absence of negative revisions heading into these earnings—which would typically signal caution—is itself a meaningful takeaway. In contrast, a scenario marked by declining expectations would warrant heightened vigilance from investors.

Key Performance Indicators Investors Are Watching

For Meta, advertising revenue is the critical metric to monitor. Advertising accounts for the vast majority of the company’s revenue, and AI-driven improvements to ad targeting have significantly boosted performance recently. The consensus estimate for Meta’s advertising revenue stands at $56.8 billion, representing a 21% year-over-year jump. Historical data shows that Meta regularly exceeds consensus on this metric, with the magnitude of beats growing over time. The company’s ability to sustain this ~21% growth rate is crucial—it’s the hurdle investors are watching most closely.

For Microsoft, the focus shifts to cloud revenue, particularly Intelligent Cloud results. This segment encompasses Azure, the infrastructure backbone that powers enterprise applications and, increasingly, AI computing workloads. Azure’s expansion has been the primary driver of Microsoft’s capital spending surge, and management views this buildout as essential to capturing the AI opportunity. Microsoft’s Intelligent Cloud revenue is expected to hit $32.4 billion, reflecting impressive 27% year-over-year growth. The company has demonstrated momentum on this metric, delivering three consecutive beats relative to consensus forecasts. Any further upside surprise would likely energize investors and validate Microsoft’s aggressive infrastructure investments.

The Hyperscaler Outlook: What’s Next for Tech Giants?

As these two hyperscalers prepare to report, several factors will dominate investor attention. Capital expenditure guidance will be scrutinized—how much do Meta and Microsoft plan to spend, and what returns do management teams project? Equally important are the forward narratives around AI monetization and competitive positioning within cloud computing.

It’s also worth noting that Microsoft shares have significantly lagged both Meta and the S&P 500 over the past two years, making this earnings report particularly consequential. If Microsoft delivers strong cloud metrics consistent with its historical track record, the stock could narrow this performance gap. Combined with its favorable Zacks Rank #2 (Buy) designation, positive momentum in cloud revenue could serve as a meaningful tailwind.

For both hyperscalers, this earnings season represents an inflection point. Markets have grown weary of hearing about AI spending without concrete evidence of returns. These reports offer management teams the opportunity to convince investors that the massive capital outlays are strategic, necessary, and ultimately profitable—the narrative that separates visionary investment from wasteful spending.