Microsoft Beats Earnings Expectations While Meta's Profits Disappoint
By Markets & Investing DeskUpdated Nov 10, 2026
Key takeaways
- Microsoft earned $4.81 per share versus a $4.24 estimate, and still beat at $4.54 without one-time items.
- Azure grew 43% after 40% the prior quarter, and Microsoft's commercial cloud backlog hit a record $678 billion.
- Meta missed on profit at $6.18 per share versus $7.19, after $2.40 billion in legal charges and $1.18 billion in layoff costs.
- Meta's free cash flow fell to $784 million from $8.55 billion a year earlier, while Microsoft's stayed positive at $19.6 billion.
Microsoft and Meta Platforms reported quarterly results on the same Wednesday afternoon, and investors reacted in opposite directions. Microsoft beat analysts’ estimates for both revenue and earnings per share, helped by faster growth at its Azure cloud platform. Shares rose about 2% in extended trading. Meta posted record quarterly revenue, but its profit fell well short of expectations because costs rose faster than sales, and the Meta stock price dropped nearly 9% after hours.
Both companies are spending heavily on artificial intelligence infrastructure. What separated the reactions was how each quarter’s income statement absorbed that spending. Microsoft showed revenue acceleration alongside its rising capital expenditures. Meta showed record sales, plus legal charges, layoff costs, a higher floor on its spending forecast and free cash flow that nearly disappeared.
Both reports came out after the regular market close, so the first price reaction happened in after-hours trading. Executives then expanded on the results during conference calls with analysts. Microsoft’s call was scheduled for 5:30 p.m. ET.
Microsoft’s Fiscal Fourth Quarter: Beat on Both Lines
Microsoft’s fiscal year ends June 30, so its April to June quarter is its fiscal fourth quarter. This is the same period Meta and most other large tech companies report as calendar Q2.
| Metric | Reported | Analyst estimate | Year-over-year change |
|---|---|---|---|
| Earnings per share | $4.81 | $4.24 | +32% |
| Revenue | $90 billion | $87.7 billion | +18% |
Part of the earnings beat came from items outside normal operations. Microsoft said two factors together added 27 cents per share: a $3.2 billion gain on its investment in Anthropic, the frontier AI lab, and lower-than-expected costs tied to a voluntary retirement program. Without that 27 cents, earnings would have been about $4.54 per share, which still clears the $4.24 consensus. The company also said it topped revenue estimates on that adjusted basis. The beat therefore does not depend on the investment gain.
Azure Growth Accelerated
Investors watch cloud revenue as a rough proxy for demand for AI computing. Microsoft’s cloud revenue grew 27% from a year earlier. Azure, the platform customers use to build and run AI models and other applications, was the main driver with 43% growth. Azure grew 40% in the prior quarter, so the business is speeding up while already very large.
Microsoft’s commercial cloud backlog rose 8% from the previous quarter to a record $678 billion. Backlog counts contracted revenue that has not yet been recognized. A rising backlog means customers have committed to future spending, which gives investors a view of demand beyond the quarter just reported.
Capital Spending Rose 70%
Microsoft spent $41 billion on property and equipment in the quarter, up 70% from a year earlier. Three months earlier, executives had guided for “over $40 billion,” so the figure matched expectations rather than surprising the market.
For many investors, the most important number was not in the press release. Microsoft gives its capital expenditure guidance for the coming quarter on the analyst call. That forecast shows how much more the company plans to spend on data centers, chips and networking equipment before the extra capacity shows up in revenue.
Free Cash Flow Fell but Stayed Positive
Free cash flow is operating cash flow minus capital expenditures, the cash left after a company pays to maintain and expand its asset base. Microsoft generated $19.6 billion of free cash flow in the quarter, 23% less than a year earlier. The decline reflects how quickly spending is growing. Still, Microsoft is one of the few hyperscalers whose free cash flow has stayed positive during the data center buildout.
Meta’s Second Quarter: Record Sales, Lower-Than-Expected Profit
Meta’s headline numbers pulled in two directions.
| Metric | Reported | Analyst estimate | Note |
|---|---|---|---|
| Revenue | $60.80 billion (record) | Below reported figure (Visible Alpha consensus) | +28% year over year |
| Earnings per share | $6.18 | $7.19 | Miss of about $1.01 |
Revenue growth of 28% at a company of Meta’s size is strong, and it came in above consensus. The miss was entirely in profit. Meta disclosed $2.40 billion of charges related to legal proceedings and $1.18 billion of expenses tied to recent layoffs, on top of continued heavy spending on AI infrastructure.
Free cash flow showed the squeeze most clearly. Meta generated $784 million of free cash flow in the quarter, compared with $8.55 billion a year earlier. Even on record revenue, almost all the cash the business produced went back into spending.
Spending Forecast: The Low End Moved Up
Meta now expects full-year capital expenditures of $130 billion to $145 billion, up from its earlier range of $125 billion to $145 billion. The top of the range stayed the same. Raising the bottom by $5 billion narrows the range and removes the lower-spending outcomes.
The company said charges related to its legal proceedings affected the updated figure, but most of the money will still go to AI infrastructure. CEO Mark Zuckerberg said AI is already accelerating Meta’s core business, supporting its next generation of products and creating new enterprise opportunities.
For the current quarter, Meta forecast revenue of $61 billion to $64 billion. The $62.5 billion midpoint is slightly below the analyst consensus. That leaves Meta with a softer-than-expected sales outlook alongside a higher spending floor and a profit miss.
Legal and Regulatory Exposure
Meta said it faces several active lawsuits and warned that adverse outcomes could hurt future results. The company pointed to ongoing scrutiny of youth-related issues in several markets, and it has a number of youth-related trials scheduled in the U.S. this year. It said these cases may ultimately result in a material loss. This risk is already showing up in the numbers through the quarter’s $2.40 billion in legal charges and the revised spending forecast.
Why Microsoft Rose While Meta Fell
Both companies are raising AI spending. The market treated that spending differently depending on what came with it.
At Microsoft, faster Azure growth, a record backlog and positive free cash flow give investors evidence that the spending is producing revenue. Capex matched guidance, and the earnings beat held up after removing the one-time items. The after-hours gain came before the capex guidance on the call, so that guidance was still a test for the shares.
At Meta, revenue beat expectations, but expenses grew fast enough to push earnings per share about 14% below consensus. The spending range moved up, free cash flow fell close to zero, and revenue guidance came in a bit light. Higher spending without matching profit growth is the combination investors had been worried about across Big Tech.
The pattern matched a recent example. Alphabet beat expectations the week before, but its shares fell the next day after it raised its full-year capex forecast, which overshadowed otherwise strong results. Investors appear more willing to reward heavy spending when the same report shows growth that justifies it.
How the Moves Compared With Options Pricing
Before the reports, options markets priced in a move of up to about 6% in either direction for Microsoft shares and about 7% for Meta by the end of the week. An expected move is usually estimated from the price of an at-the-money straddle (a call and a put at the same strike) that expires shortly after the event. The straddle’s cost as a percentage of the share price approximates how far traders think the stock could move in either direction.
Microsoft’s early after-hours gain of about 2% was within its implied range. Meta’s drop of nearly 9% went beyond what options had priced. An expected move is not a ceiling, and a reaction larger than implied means the results surprised the market more than traders had prepared for. The mechanics are covered in more detail in how much Microsoft stock was expected to move after earnings.
Free Cash Flow Across the Hyperscalers
Free cash flow is where the cost of the AI buildout shows most clearly, because it subtracts capital spending directly. Recent reports from the largest infrastructure spenders:
- Microsoft: $19.6 billion in the latest quarter, down 23% but still positive.
- Meta: $784 million, down from $8.55 billion a year earlier.
- Alphabet: negative free cash flow for the quarter, the first time in its history.
- Amazon: trailing 12-month free cash flow fell 95% to $1.2 billion as of the first quarter.
- Oracle: burned through nearly $24 billion over its 2026 fiscal year.
By this measure, Microsoft is in the strongest position of the group. It is spending at a similar scale while its existing businesses still produce more cash than it invests. That gap is one reason the market judged its capex increase differently from Meta’s.
Where These Reports Fit in Big Tech Earnings Season
Both stocks went into the reports as laggards. Through the close on report day, Microsoft was down 19% for the year and Meta was down 11%. Among the Magnificent 7, only Tesla had done worse, losing about a third of its value. The group as a whole, measured by the Roundhill Magnificent 7 ETF (MAGS), was down about 5%, while the S&P 500 was up about 7%. Apple was the group’s top performer.
The reports came out on the same day the Federal Reserve held interest rates steady. Higher rates tend to weigh on tech valuations, and in the weeks before the meeting some investors had come to fear a hike. The decision helped the Nasdaq Composite hold small gains in late trading while the Dow and S&P 500 slipped.
The rest of the Magnificent 7 calendar:
- Alphabet reported the week before and beat expectations, but the stock fell after it raised its capex forecast.
- Tesla reported profit below expectations and revenue above them.
- Apple and Amazon were scheduled to report after the close the following day.
- SpaceX, which is related to Tesla through Elon Musk, was due to release its first quarterly results as a public company the following week (see SpaceX’s first earnings report).
- Nvidia closes out the group’s second-quarter season in late August (Nvidia’s Q2 2026 results).
What Analysts Flagged Before the Reports
Ahead of the week’s reports, Trajan Wealth chief investment officer David Busch named the main issue for each of the four companies reporting:
- Microsoft: Azure growth and Copilot monetization measured against the pace of data center spending.
- Meta: the return on its AI and infrastructure buildout, advertising trends and any update on reportedly selling excess computing capacity.
- Apple: whether iPhone momentum and AI features can offset a market that has favored cloud growth over hardware.
- Amazon: AWS as the profit engine, plus the effect of Prime Day moving into the second-quarter results.
On Microsoft’s question, the reported Azure acceleration answers the growth side. The spending side depends on the capex guidance from the call. On Meta’s question, the quarter showed that strong ad-driven revenue did not keep profit from falling short once costs were included.
