Microsoft and Meta both poured billions into AI this quarter, but only one turned that spending into paying customers. Reporting earnings minutes apart on July 29, Microsoft’s stock jumped 9.8% while Meta’s fell 10% — a split driven by Microsoft’s ability to show external demand for its AI infrastructure and Meta’s reliance on still‑theoretical plans.

Their earnings reports both featured rising revenue. But Microsoft outperformed Meta on earnings, free cash flow, outlook and — most importantly – the business model behind their AI spending.

Microsoft has a rapidly growing AI cloud business; whereas Meta aspires to create one and operates a virtual reality business that posted “$4.6 billion in second-quarter operating losses while bringing in $431 million in sales,” according to CNBC.

Analysts estimate Microsoft stock has more upside — 42% based on the consensus 12-month price target compared with Meta’s 35%. Wednesday’s reports suggest Microsoft has the edge due to its rapidly growing Azure business, which grew 43% and is forecast to expand faster.

Meta has plans for an AI cloud business and declined to offer 2027 capital expenditure guidance — which could spook investors.

Microsoft’s Results Show Real AI Demand

Microsoft outperformed Meta in the latest quarter.

The software giant grew revenue, beat earnings expectations and forecast........

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