Microsoft closed Wednesday's ugly session at $390.54, then traded up 8.13% to $422.30 after hours, July 29, once its fiscal fourth-quarter numbers landed. Meta closed the same day at $585.61 and dropped roughly 8% after hours within the hour. Both companies reported into the worst tape of the year, with the Dow down 2.19% Wednesday in its worst session since April 2025 after a 9-3 Fed hold we break down fully in our Fed dissent coverage. AI capex is the capital spending that companies like Microsoft and Meta pour into data centers, chips, power, and networking to train and run artificial intelligence models, and both are spending historic amounts on it. Only one of them got paid for it last night.
The gap between those two reactions is the clearest read yet on what the market now demands from AI spending, and it sets the bar for tonight's Amazon report.
What Microsoft Reported for Its April-June Quarter
Microsoft's fiscal fourth quarter of FY2026 covers April through June 2026, so this was the June-quarter report despite the Q4 label. Revenue came in at $90.01 billion against an $87.62 billion consensus, up 18% year over year, and non-GAAP earnings landed at $4.74 per share versus $4.24 expected, with GAAP EPS at $4.81, per the company's fiscal fourth-quarter release. Every major segment beat.
Azure did the heavy lifting, and its numbers need careful labeling because three different growth figures are circulating from the same report. Azure grew 43% in the fiscal fourth quarter itself. Across the full fiscal year it grew 41% and crossed $100 billion in annual revenue for the first time. And for the current September quarter, Microsoft guided to roughly 45% growth in constant currency, well above the roughly 41.4% analysts had modeled. Three years into the AI buildout, the growth rate is accelerating rather than decaying.
The forward book is the stat traders will be quoting for months. Commercial remaining performance obligations, the contracted revenue Microsoft has signed but not yet delivered, reached $678 billion, up 84% year over year, and still grew 25% with the OpenAI commitment stripped out. Copilot passed 30 million paid Microsoft 365 seats and GitHub crossed 50 million users, the adoption layer that eventually justifies the data-center layer.
The $41 Billion Capex Answer Everyone Was Waiting For
The most-watched line of the quarter was not revenue. Microsoft spent $41 billion on capex in the June quarter, exactly on the "more than $40 billion" plan management had guided to. Heading into the print, that guide was the live controversy, and our piece on Microsoft reporting hours after the Fed decision flagged the risk that a spending overshoot on a hawkish tape would get sold hard. The number matched the plan instead, and the market read discipline. On-plan spending does something subtle for the multiple. It converts the scariest line in the income statement into evidence that management can forecast its own buildout, which is exactly the credibility a company needs before asking investors to underwrite an even larger bill.
The spending is still climbing, with a label that matters. CFO Amy Hood said capital expenditures will run over $50 billion in the current quarter, and that is a quarterly figure for fiscal Q1 FY2027, covering July through September 2026, not a full-year total. Microsoft gave no annual capex number for the new fiscal year. Hood also guided September-quarter revenue to $89.85-90.95 billion, ahead of expectations.
Satya Nadella described the approach as "pushing the frontier on the cost-outcome curve," which is CEO language for a specific claim. The dollars going into data centers are tied to demand the company can already invoice. Buyers took the claim at face value because the backlog and the Azure acceleration back it up.
What Actually Went Wrong at Meta
Meta's quarter was not weak in the way the after-hours tape suggested. Revenue rose 28% to $60.8 billion against a consensus near $60.2 billion, and the core ads business delivered $59.3 billion, also a beat, per Meta's second-quarter results release. The problem sat on the bottom line, where EPS printed $6.18 against the $7.22 consensus compiled by CNBC. That dollar-per-share gap is what the market sold.
Most of the shortfall traces back to charges that will not be on the next income statement. Meta booked a $2.4 billion legal charge plus $1.18 billion in severance tied to May's roughly 8,000 AI-pivot layoffs, about $3.6 billion of items that should not repeat next quarter. Reality Labs is a different animal. The unit lost $4.62 billion on $431 million of revenue, a structural drain rather than a charge, and total costs rose 55% year over year. Temporary hits stacked on a permanent money pit turned a strong growth quarter into an earnings miss.
Meta entered the night already carrying the most scrutinized AI budget in the market, a program we profiled in our Meta stock guide. What it needed was a quarter that quieted the spending question. It delivered the opposite.
Meta Raised Its Capex Floor Anyway
On the spending question itself, Meta did not blink. The company raised the floor of its full-year 2026 capex range to $130-145 billion, up from $125-145 billion, per its press release. That is a $5 billion increase to the minimum commitment, announced on a night when the market was punishing anything that looked like unfunded ambition. The signal was deliberate. Management would rather absorb one rough after-hours session than let anyone believe the AI program is negotiable.
Mark Zuckerberg defended the bill directly, saying AI is "accelerating our core business today" and repeating his goal of putting superintelligence "directly into people's hands." The call's defining moment came from the other side of the conversation. CNBC's recap of the analyst mood captured it in one line, "Do we just need to be a bit more patient?" On a night when Microsoft had made patience unnecessary, that question answered itself in the tape.
Same Night, Same Tape, Opposite Verdicts
Neither move was outsized against what derivatives desks expected. Implied-volatility data from Benzinga had Microsoft priced for roughly a 7% post-earnings move and Meta for about 9%, so both stocks roughly filled their expected ranges. The verdict came in the direction of the moves, not their size, and that is what makes the night readable.
The scoreboard reads cleanly across the dimensions that mattered.
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Company
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Result vs consensus
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Capex message
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After-hours move, July 29
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Microsoft
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Beat on revenue, EPS, and every major segment, Azure accelerating
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Quarterly spend landed exactly on the guided plan
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+8.13% to $422.30
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Meta
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Revenue and ads beat, EPS missed by a dollar on one-off charges
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Raised the floor of its full-year range by $5 billion
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Down roughly 8%
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The message under the table is specific. AI capex gets rewarded only when the revenue is already showing up. Microsoft can point at accelerating cloud growth, a contracted backlog, and tens of millions of paid AI seats, so record spending reads as order fulfillment. Meta can point at a fast-growing ads business and a research roadmap, and the roadmap is the expensive part. Its proof lives in the future tense, and the market charged it for the wait. We take Meta's one-off charges apart line by line in today's dedicated Meta breakdown.
Think of the two capex programs as construction loans. Microsoft's towers already have tenants paying rent on signed leases, so the bank happily extends more credit at better terms. Meta's towers are being built for a tenant that has not moved in yet, and on hawkish nights the bank reprices that loan first.
The divergence travels beyond these two names. Spending is not slowing at either company, which is why suppliers keep winning both ways, a dynamic covered in our NVIDIA stock outlook, and why the question of how much AI infrastructure cost sits off balance sheets, explored in our piece on the $662 billion in unseen AI leases, keeps getting more relevant. And the test repeats within 24 hours. Amazon reports tonight with AWS growth as the swing number, a collision we mapped in our Microsoft and Amazon earnings preview.
Frequently Asked Questions
Why did Microsoft stock go up?
Microsoft beat expectations on revenue and earnings, showed its cloud business accelerating rather than slowing, and spent exactly what it said it would on data centers. Traders were braced for a capex overshoot on a hawkish market day, and the on-plan number removed the loudest bear case in a single line item.
Why did Meta stock drop?
Meta missed earnings expectations by about a dollar per share and raised the minimum of its 2026 capital spending range on the same call. Most of the miss came from one-time legal and severance items, but the market treated a higher spending floor without new revenue proof as added risk and repriced the stock immediately.
How much is Meta spending on AI in 2026?
Meta guided full-year 2026 capital expenditures to a $130-145 billion range, and the second quarter alone came in at $31.08 billion. The company also guided third-quarter revenue to $61-64 billion with a 15-17% full-year tax rate, so infrastructure spending is now running near half of quarterly sales.
When does Microsoft's fiscal year end?
Microsoft's fiscal year ends June 30, so the report released on July 29, 2026 was fiscal Q4 FY2026 and covers April through June. That is also why current-quarter guidance carries the fiscal Q1 FY2027 label even though it covers July through September 2026, a quirk that regularly trips up first-time earnings readers.
Bottom Line
The bar for AI capex changed overnight, and it is now a proof-of-revenue bar. If a company shows AI spending converting into sales this quarter, the market funds the next increment, which is what buyers did for Microsoft after the close. If the payoff stays on the roadmap, the same dollar of capex gets repriced as risk, which is what happened to Meta inside an hour. Amazon faces the identical test tonight, with AWS growth deciding which treatment it receives. Watch how much of Microsoft's after-hours gain survives the regular session, because on a tape this hawkish, even the cleanest beat in years has to hold its pop in daylight.
This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency trading involves substantial risk. Always conduct your own research before making trading decisions.
