Meta and Microsoft both blew their data center budgets last quarter. Wall Street is only mad at one of them.

In a striking display of contrasting investor reactions, Meta and Microsoft faced very different outcomes following their recent quarterly earnings announcements. Both tech giants reported capital expenditures exceeding expectations, but the market's response was telling. Microsoft's shares plummeted over 6% in after-hours trading, while Meta's stock surged by as much as 9%. The surge in spending by major tech companies over the past two years has been largely fueled by investments in expansive AI data centers. However, Wall Street is growing increasingly skeptical about when these investments will yield returns, leading to varied responses from analysts. Meta disclosed a capital expenditure of $22.1 billion for the fourth quarter and a staggering $72.2 billion for the entire year, a significant increase from the previous year's $39.2 billion. The company anticipates this figure will rise even further, estimating capital expenditures will range between $115 billion and $135 billion in 2026, primarily to enhance its Meta SuperIntelligence Labs initiative aimed at accelerating AI model development. CFO Susan Li assured investors that the company would continue prioritizing investments to leverage these opportunities. In contrast, Microsoft reported capital expenditures of $37.5 billion for the quarter, marking a 66% increase year-over-year. The majority of this expenditure was allocated to CPUs and GPUs, essential components for running AI workloads. Microsoft justified this spending by citing the rapidly increasing demand for its cloud and AI services. The company generated $81.3 billion in revenue for the quarter, a 17% rise from the previous year. Despite exceeding revenue expectations, analysts scrutinized Microsoft more rigorously than Meta regarding its rising capital expenditures. One concern highlighted by Morgan Stanley's Keith Weiss was the return on investment related to Microsoft's growing capex. Additionally, Microsoft's substantial reliance on a single client, OpenAI, which accounts for 45% of its remaining performance obligations, raised eyebrows among investors. Microsoft's significant investment of $135 billion in OpenAI, alongside more than $13 billion since 2019, has not come without its challenges. As some of OpenAI's partners, like Oracle and Nvidia, accumulate massive debts for their data center projects, concerns about a potential AI bubble are becoming more pronounced. During Meta's earnings call, Li emphasized that the company's robust cash reserves, courtesy of its lucrative advertising business, would support its ambitious AI spending plans for the upcoming year. She expressed confidence in Meta's ability to sustain its infrastructure investments through a strong net cash balance into 2026.