Good morning. During earnings calls this week, the CFOs of big tech companies, Meta and Microsoft, delivered a similar message: the AI race requires unprecedented capital spending, but that spending is disciplined, demand-driven, and ultimately margin-accretive rather than reckless.
The companies urged investors to look past headline numbers and focus instead on utilization, long-term economics, and visible revenue traction.
Meta: Spending big, signaling profit
Meta CFO Susan Li emphasized the trade-off between a significant increase in infrastructure investment and profitability. Despite a “meaningful step-up” in spending, the company expects 2026 operating income in absolute dollars to exceed 2025 levels, even as operating margins may come under pressure, Li said on the company’s Q4 2025 earnings call. She linked the higher investment to Meta’s long-term superintelligence roadmap and to an expansion of data-center capacity required to support core AI workloads across advertising, ranking, and product development.
The company now guides 2026 capital expenditures, including finance leases, of roughly $115–$135 billion, placing it among the largest single-year capex spenders in the AI and hyperscaler universe. In 2025, Meta’s capex was $72 billion. Li described the increase as an extension of Meta’s core business strategy: using AI to improve ad targeting, creative tools, and advertiser performance, then scaling infrastructure behind use cases with demonstrated monetization. By pairing AI-driven capex guidance with assurances on operating income, Meta is signaling that spending is accelerating but remains disciplined rather than open-ended.
Meta’s confidence rests primarily on the strength of its advertising business, not standalone AI services. The company guided revenue above Wall Street expectations and pointed to continued advertiser momentum into early 2026. In Q4, Meta delivered $59.89 billion in revenue, beating estimates, and generated more than $200 billion in annual revenue, highlighting the cash-generating ad engine supporting the infrastructure ramp.
Microsoft: Investing in AI for the long term
Microsoft is reporting unusually high capital spending tied to AI and data‑center build-outs. Its latest quarterly capex, about $37.5 billion in Q2 FY26, is large by historical standards and relative to typical tech sector capex, up from $34.9 billion in the preceding quarter.
Microsoft CFO Amy Hood framed the investment strategy on Wednesday’s earnings call as focused on meeting sustained demand and optimizing capacity over the useful life of assets rather than emphasizing quarter-to-quarter margin optics. Much of the spending was on short-lived assets like GPUs and CPUs to support AI workloads, and while this can weigh on near-term cloud margins, Hood pointed to strong cloud demand: Microsoft Cloud exceeded $50 billion in quarterly revenue, and Azure grew about 39 % year-over-year, supporting continued strategic investment. Microsoft posted $81. 3 billion in revenue for the quarter, up 17% year-over-year and ahead of analyst expectations. But as Fortune‘s Alexei Oreskovic writes, investors were picky about Azure cloud business growing at a slightly slower pace than in previous quarters (despite the fact that it still grew a healthy 39%).
Taken together, Meta and Microsoft are signaling that while AI-driven capex is accelerating, disciplined investment and a focus on monetization should support sustainable growth and profitability. Tech CFOs are tasked with conveying that strategy clearly to investors, bridging the gap between bold spending and long-term returns.
Thanks for reading. Have a good weekend. Take care.
Sheryl Estrada [email protected]
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