Meta, Microsoft, and the Slipstream Into the World’s Biggest ROI
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It’s become almost cliché to say we’re in the middle of an AI Boom. But after the earnings mic-drop that Meta (META) and Microsoft (MSFT) have delivered, it might be time to upgrade that terminology…
This week, two of the world’s biggest tech titans gave investors a thunderous wake-up call: AI’s fires are burning even brighter.
And if you thought AI stocks were already hot, buckle up – because the next 12 to 24 months could be an inferno of growth, innovation, and outsized investment returns.
This has surpassed a mere ‘boom.’ We’ve arrived at ‘supernova.’
Let’s break down those earnings – and why it confirms the AI trade still has plenty of profits to deliver.
Meta Earnings: How AI Supercharged Revenue, Engagement, and Margins
In our opinion, Meta’s second-quarter earnings report was a pure flex.
This was a “we told you so” moment from Mark Zuckerberg to every investor who doubted the company’s pivot toward AI.
- Revenue rose 22%, the company’s best growth rate in over a year.
- Ad revenue grew 21%, also an acceleration and the best in a year.
- Operating margins expanded by 500 basis points.
- Earnings per share (EPS) jumped nearly 40%.
Those are blockbuster numbers by any historical standard; but they’re especially impressive for a company already valued at $1.3 trillion. And driving all this explosive growth? You guessed it: AI.
Meta has quietly become one of the most powerful AI companies on Earth. Its AI-powered recommendation engine is now responsible for filling the majority of content on Facebook and Instagram, which has led to meaningfully better engagement. Time spent on Facebook grew 5% in the quarter. Instagram saw even better numbers, with engagement up 6%.
The company’s AI tools are also supercharging ad performance, capitalizing on all that monetizable attention. Facebook ad conversion rates rose 3%. Instagram’s rose 5%. That’s enormous in the world of digital advertising. AI-generated ad creation is gaining traction fast, with Zuckerberg noting that a “meaningful percent” of Q2 revenue came from ads made using Meta’s generative AI tools.
Meta’s $100B AI Pivot
Meanwhile, Meta AI itself – its consumer-facing chatbot – has surpassed 1 billion monthly active users. And Ray-Ban Meta smart glasses are flying off the shelves, with sales tripling over the year. Demand continues to outpace supply.
And the cherry on top? Meta is turning this growth into profits without growing headcount. That’s the AI efficiency dividend at work.
Operating margins are expanding. Profits are exploding. And they’re not letting up.
Meta raised the low end of its 2025 capex guidance and introduced an eye-popping forecast for 2026: over $100 billion in capex. Wall Street’s estimate was just $80 billion. That’s a 25% beat.
Four years ago, in 2021, capex was under $20 billion. That reflects a 5x jump in five years.
In other words, Meta is all-in on AI, and it’s paying off. Yet, the stock still trades at just 23x forward earnings.
Given these numbers, we think that’s a bargain.
Azure, Copilot, and the AI Stack: Microsoft’s Growth Formula
Microsoft reported a monster quarter of its own – arguably even more AI-fueled than Meta’s.
- Revenue jumped 17%, the company’s fastest growth in over a year.
- Azure cloud revenues surged 39%, the best growth since mid-2022.
- Operating margins rose 200 basis points.
- EPS soared 24%.
Every metric screamed “acceleration.” And again, AI was the common denominator.
While it once was just dipping its toes into the AI pool, Microsoft is now doing cannonballs. Its AI data platform, Microsoft Fabric, grew revenues by 55% and is now the fastest-growing database product in Microsoft history. GitHub Copilot Enterprise users grew 75% in one quarter. Microsoft Copilot now boasts over 100 million monthly users. In fact, more than 800 million people globally now use a Microsoft AI product every month.
Even the company’s healthcare AI platform, Dragon Copilot, is on fire, with 13 million physician-patient encounters in Q2 – a 7x increase year-over-year.
Like Meta, Microsoft achieved all this while keeping headcount flat. It added no new people to the payroll but still grew revenue by double digits. Talk about AI-powered operating leverage…
And the spending story is just as bullish. Microsoft offered guidance for $30 billion in capex next quarter, also about 25% higher than what Wall Street was expecting.
Meta and Microsoft’s AI Capex Could Be a Windfall for Suppliers
Now, here’s the signal we think you really want to pay attention to:
Meta and Microsoft – two of the largest AI builders on the planet – just told us they’re spending 25% more on AI infrastructure than Wall Street was anticipating.
Meta is on pace to spend $100-plus billion in 2026. Microsoft is projecting $30 billion in AI capex next quarter alone.
We don’t think these are one-off spikes. More likely, they are part of a sustained arms race to build the AI stack of the future.
That means an absolute torrent of money is about to flow into AI infrastructure: data centers, chips, cooling systems, power grids, optics, networking hardware, and more.
That means that if you’re holding the picks-and-shovels plays – names like Nvidia (NVDA), Broadcom (AVGO), Arista Networks (ANET), Vertiv (VRT), Super Micro (SMCI), or even specialized power providers like Eaton (ETN) and nVent (NVT) – you’re positioned directly in the slipstream of the world’s biggest spending spree.
Why AI Stocks May Still Be Early in the Profit Curve
Wall Street tends to call tops prematurely. And the AI trade has gotten so hot, so fast that skeptics around the world are screaming, “bubble!”
But in reality, the fundamentals are catching up – and surpassing – the seemingly outsized hype.
Meta and Microsoft aren’t trading on promises. They’re delivering real revenue and profit growth and margin expansion right now thanks to AI. And they’re doing it at an unprecedented scale.
The two just gave us a clear signal that:
- AI adoption is going mainstream with consumers and enterprises.
- AI is already delivering stronger-than-expected ROI already.
- AI infrastructure spending is climbing much faster than forecasted.
- And AI-powered revenue and profit growth is showing up in a big way.
Even more importantly, they’re not done.
Get Ready for a Supernova of AI Profits
Both companies are aggressively reinvesting in the next wave of AI infrastructure and applications.
Meta aims to build AGI. Microsoft is flooding the enterprise world with highly capable agentic AI.
Folks, this is just the beginning… meaning it’s time to lean in.
The next 12 to 24 months will be defined by relentless innovation, explosive spending, and the proliferation of AI across every layer of the economy.
Investors who stay long – and especially those who get positioned in the companies providing the picks and shovels – stand to benefit the most.
We don’t think these titans’ message could get more explicit: AI is no longer the future. It’s the now. And the smart money is going all-in.
But if the AI boom is the infrastructure play of the decade, humanoid robotics may be the next layer of exponential upside.
And one company appears uniquely positioned to lead it: Tesla (TSLA). Its Optimus robot is now more than a science project. It’s a functional machine – one with real-world applications that could generate billions in revenue.
Yet, while Tesla may steal the headlines, the fattest margins – and the most explosive stock gains – could flow to the companies quietly building the parts powering these bots.
