The market's reaction after recent earnings felt almost personal: Microsoft shares slipped sharply despite an Azure beat, while Meta's stock popped after executives finally put a number on how much they'll spend on AI infrastructure. Investors are asking the obvious question — which of these two AI heavyweights is the smarter buy for the next decade?
A tale of two responses
Microsoft's quarter delivered what many companies would call a victory: Azure growth came in stronger than guidance (management had guided ~37% and ended up posting about 39%). Yet the stock sold off — roughly in the neighborhood of a double-digit move — as some traders pivoted to profit-taking and a close look at margins and near-term revenue cadence.
Meta, by contrast, has been noisier on the headline front: after a period of investor anxiety around how much it would spend on data centers and AI, management disclosed a jaw-dropping capex plan for 2026 in the range of $115 billion to $135 billion, up from roughly $72 billion the prior year. That number scared and then reassured markets — scared because of scale, reassured because Meta said it still expects operating income to improve versus 2025 despite the buildout. The stock has been volatile, but the long‑term story is intact: massive user reach and an ad business being retooled with generative AI features.
The math that matters
Valuation is where some traders get comfortable. On forward price/earnings, Meta sits in the low‑to‑mid 20s (around 22x in some estimates), while Microsoft is in the mid‑20s (roughly 24–26x forward). Meta's ad revenue has been growing faster recently — its last reported quarter showed double‑digit revenue growth that suggests AI features are starting to lift engagement and monetization. Microsoft is larger and more diversified; its cloud business already converts AI demand into recurring revenue via Azure and enterprise contracts.
Both companies are spending aggressively on compute and data centers, but with different profiles: Meta is pouring capital into a massive in‑house infrastructure build aimed at long-term independence and scale, while Microsoft is layering AI services on top of Azure and building its own models and tools for customers — including in‑house image and multimodal models like MAI variants that expand what Azure can sell to enterprises. For context on how hyperscalers are thinking about data centers at scale, projects from other cloud players show the lengths companies will go to chase capacity and latency gains Project Suncatcher.
How AI turns into dollars
AI isn't a single product; it's a set of capabilities that can be embedded across advertising, cloud services, business applications, and hardware. Meta's immediate monetization runway is ad product improvements across Facebook, Instagram and WhatsApp — features that can increase price per ad or win back advertiser dollars. The company also has consumer hardware and AR ambitions that may become meaningful over time (a reminder in the product lane: Meta continues to iterate on its wearable/AR ecosystem, visible in recent updates to its Ray‑Ban partnership) Ray‑Ban Meta Glasses. If you like immersive hardware, Meta's ecosystem is where it could pay off — you can even pick up a Meta Quest headset if you want to experiment with the platform Meta Quest.
Microsoft's AI revenue engine runs through Azure and enterprise software: customers pay for compute, models, hosting, and AI‑aware versions of familiar apps. That makes Microsoft a natural beneficiary of broad enterprise AI spending. And because Azure is already a core IT service for many companies, the AI lift tends to be additive rather than speculative.
Risk profiles and the investor decision
Pick your risk: Meta is arguably the higher‑beta play — cheaper on forward earnings, faster recent growth, but committing obscene amounts to capex that may take years to fully monetize. Microsoft is steadier, with a rare valuation trough for a cloud leader; its post‑earnings pullback looks to some like a buying window because the company is already showing revenue impact from its AI investments.
Several analysts who looked across the numbers ended up siding with Microsoft precisely because the company is already converting AI investments into predictable revenue growth and the current price offers a less common entry point. Others point out that Meta's cheaper multiple and stronger near‑term revenue expansion make it just as tempting — especially for investors willing to accept more volatility for the potential of higher upside.
If you can't pick one, owning both captures different vectors of the AI wave: Meta for ad‑driven monetization and consumer ecosystems; Microsoft for cloud‑centric enterprise AI and broad platform exposure. For patient investors, a balanced position across the two — sized to your risk tolerance — is a reasonable way to participate.
Investing in these companies isn't a short‑term trade; it's a bet on who dominates the next layer of software and infrastructure. That outcome depends on execution, pricing power, and whether customers prefer vertically integrated platforms or modular cloud services. Either way, we're in the era where data centers, chips, and models decide winners — and both of these giants have already staked enormous claims on that future. For a deeper look into Microsoft’s AI model efforts, see coverage of Microsoft’s MAI-Image-1.