Microsoft delivered beats across all key segments in its third quarter fiscal earnings, a result that will not only lift shares but also the broader tech sector and the S&P 500.

Coming into these earnings, investors had question marks over AI demand after backing away from some data centre projects. Microsoft, though, has quickly quashed those concerns, delivering a massive 35% sales growth in constant currency from Azure, well above expectations of 30% and showing how well they’re monetising AI. Total revenue in the fiscal third quarter jumped 13% to USD$70.1 billion, while adjusted profit was USD$3.46 a share.

Capex in the quarter jumped to USD$21.4 billion, lower than last quarter – the first time drop quarter on quarter in two years – but capex for the full-year remains unchanged. Importantly, Microsoft expects operating margins to lift slightly year-over-year despite its massive spending, which shows why Microsoft is a money-making machine.

For investors, this is exactly the type of result you want to see, solid fundamentals with plenty of long-term promise. This result once again shows that Microsoft’s not just riding the AI wave; it’s driving it. OpenAI is firing on all cylinders, Azure growth is powering ahead, and this will only drive top-line growth over the year ahead, showing that its AI investments are already bearing fruit. And with a cash pile of $USD80 billion, it has all the tools to keep investing in what’s next.

Meta

This was a strong report from Meta in the face of a trade war that left question marks over advertising demand. But Meta crushed those concerns with a 16% revenue leap to USD$42.31 billion, topping forecasts of USD$41.4 billion. A looming TikTok ban in the U.S. likely steered advertisers to Meta’s platforms, and its raised revenue guidance signals confidence in sustained ad momentum.

Despite capex continuing to grow, operating margins jumped to 41%, up from 38% last year. That’s a big relief for investors scarred by 2022’s huge spending, but shrinking margins and revenue. This time, Meta’s AI investments are paying dividends, and its outlay on AI is clearly warranted, helping to drive an ad-pricing gain of 10% through its AI tools.

With over 3 billion daily active users across its apps, Meta is in a golden position to monetise consumer AI adoption. These numbers show that it’s hitting the nail on the head right now, and its increased capex guidance for the year ahead shows its confidence in its AI efforts.