Investors are increasingly scrutinizing the returns on artificial intelligence (AI) investments, moving beyond mere expenditure to demand concrete profitability.
Meta Platforms' stock experienced a significant upswing, propelled by an acceleration in revenue growth directly linked to substantial AI investments. The social media titan reported a 50% increase in capital expenditures during the fourth quarter of 2025, with projections indicating a rise of over 90% for the current year. This aggressive spending, primarily on data center infrastructure, surpassed Wall Street's forecasts. Crucially, Meta's core advertising business demonstrated robust performance, with a 24% increase in ad revenue in the fourth quarter, driven by an 18% surge in impressions and a 6% rise in average prices. The company anticipates an even faster revenue growth rate of up to 33.5% in the current quarter, marking its fastest pace since 2021. Analysts largely concurred that Meta's revenue growth effectively mitigated concerns about its rising expenses, affirming the efficacy of its AI strategy.
Conversely, Microsoft's shares experienced a decline as investors expressed dissatisfaction with the growth trajectory of its AI-related segments. Despite its Azure cloud computing platform exceeding official estimates with a 38% growth in constant currency, it fell short of more ambitious Wall Street expectations. Similarly, the Microsoft 365 revenue growth remained stagnant in the mid-teens, failing to meet hopes for a significant boost from the rollout of AI Copilot. The company's substantial 66% year-over-year increase in capital expenditures became a point of contention for investors, who were looking for clearer evidence of AI translating into accelerated growth. While Microsoft expects a sequential decline in capital expenditures in the current quarter due to normal cloud infrastructure build-outs, its spending for the full fiscal year is still projected to surpass the previous year's growth.
The contrasting fortunes of Meta and Microsoft underscore a pivotal moment in the tech industry: the market is now demanding demonstrable returns on AI investments, not just the promise of future innovation. Companies that successfully translate their AI expenditures into tangible revenue and profit growth will be rewarded, while those that fail to do so may face investor skepticism. This trend will likely continue to shape investment strategies and drive innovation in the AI sector, emphasizing the critical importance of strategic implementation and clear performance indicators for AI initiatives.
