Earnings Night for Tech Giants: Meta Pledges $135 Billion, Microsoft's Growth Slows, Musk Cuts High-End Models

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After the market closed on January 28, Meta, Microsoft, and Tesla simultaneously released their earnings reports.

The CEOs of all three companies discussed AI on their earnings calls, but the market reactions varied significantly: Meta rose 6.6%, Microsoft fell 6%, and Tesla increased by 1.7%.

Meta's numbers exceeded expectations across the board, and Zuckerberg announced that the 2026 capital expenditure would reach up to $135 billion, nearly doubling,to 'accelerate AI' and catch up with competitors., the market has acknowledged this aggressive bet. Microsoft's revenue and profits also exceeded expectations, but Azure's growth rate slowed from 40% to 39%, and the guidance for the next quarter at 37%-38% just barely met expectations, with profit margin guidance also on the low side — The slowdown in growth, coupled with pressure on profit margins, prompted a poor response from the market.

Tesla is the worst performer among the three companies, with both annual revenue and profits declining, marking the company's first ever drop in annual revenue, butElon Musk announced that production of the Model S and X will be halted, with the production line shifting to Optimus robots, and mentioned that Austin’s Robotaxi service has already started removing safety drivers.

Three companies, three different situations, three distinct strategies. But these three earnings reports also reveal some common signals:

1. Investment in AI infrastructure is still accelerating. Meta’s capital expenditure doubled to $135 billion, Microsoft spent $37.5 billion this quarter, a year-on-year increase of 66%, and Tesla also plans to double its 2026 capital expenditure to $20 billion. Combined, the three companies are expected to pour more than $200 billion into building data centers, buying chips, and expanding production capacity by 2026, indicating that the AI arms race is far from over.

2. The erosion of profit margins due to AI investments is starting to show. Microsoft’s gross margin dropped to 68%, the lowest in three years, because of heavy investment in AI infrastructure. Although Meta promised that operating profits would grow by 2026, their cost guidance stands between $162 billion and $169 billion, an increase of over 20%. Whether high investments can lead to high returns is a question all AI companies will need to answer by 2026.

3. AI is reshaping corporate structures. Zuckerberg said AI allows “one person to do the work of a whole team,” and Reality Labs laid off over a thousand people this month; Elon Musk directly cut two vehicle production lines and replaced them with robotic production lines. Cost reduction and efficiency improvements are no longer slogans, but actual organizational changes that are taking place.

01 Meta: $135 billion bet on 'personal superintelligence'

META's earnings report itself has little to say, surpassing expectations across the board: revenue of $59.9 billion, up 24% year-over-year; EPS of $8.88, versus market expectations of $8.19; advertising revenue of $58.1 billion, accounting for 97%; annual revenue exceeding $200 billion, with 3.58 billion daily active users; Q1 revenue guidance of $53.5 billion to $56.5 billion, also higher than expected.

But Zuckerberg clearly didn't want to talk about these figures during the earnings call, repeatedly emphasizing 'AI acceleration'—Capital expenditure guidance for 2026 is $115 billion to $135 billion, nearly double last year's amount,over $20 billion more than Wall Street expectations, yet the market wasn’t spooked, instead rewarding the company with a 6.6% gain in after-hours trading.

The reason for the sharp increase in capital spending isn’t hard to guess; any investor focused on AI knows Meta has fallen behind in large models. Over the past year, OpenAI, Google, and Anthropic have released new models one after another, while Meta’s Llama has become less prominent. In the middle of the year, Zuckerberg spent $14.3 billion acquiring Scale AI and poached its founder Wang Hao, but after half a year of effort, they still haven’t produced a competitive product.

This $135 billion is essentially buying back lost time.

According to the earnings report, most of this money will be invested into 'Meta Superintelligence Lab and core operations,' which simply means data centers and computing power. CFO Susan Li admitted during the conference call that capacity expansion will be rapid in 2025, but demand growth will outpace it, leaving the company capacity-constrained for most of 2026.

Zuckerberg’s vision is called 'personal superintelligence': when users open Meta applications, they won’t face recommendation algorithms but an AI that understands them; he believes glasses are the ultimate carrier of this vision. However, he himself admitted that the first batch of models are merely decent, with the key being to demonstrate a trajectory of rapid improvement—in other words,there’s nothing impressive to show yet.。

At the same time, AI is already transforming Meta's internal operations. Zuckerberg said that after engineers started using AI tools, their productivity increased by 30%, and for heavy users, it surged by 80%. 'Work that previously required a team can now be done by one person.' This month, Reality Labs laid off over a thousand people. The flip side of improved efficiency is layoffs, which will become the norm by 2026.

Despite capital expenditures doubling, the CFO still expects operating profits in 2026 to exceed those of 2025. However, the real market focus is on whether Meta can deliver a competitive large model to intensify an already fierce competition. If the $135 billion investment does not yield results, the market will not remain so forgiving.

02 Microsoft: Initial cracks in the AI narrative emerge

The situation with Microsoft is relatively more complex.

First, let’s look at the numbers: revenue was $81.27 billion, up 17% year-over-year, surpassing expectations; EPS was $4.14, also exceeding expectations; Intelligent Cloud revenue reached $32.9 billion, growing 29%; the only segment that missed expectations was the personal computer business, but it was not significant; M365 Copilot paid seats exceeded 15 million; commercial bookings grew by 230%. Nadella said that Microsoft’s AI is still in the early diffusion phase.But its scale has already surpassed some of the company’s largest traditional business lines.。

The numbers look great, but shares fell 6.6% in after-hours trading.

The issue is not with the current figures but with future trends. Azure’s growth rate dropped from 40% last quarter to 39%, and the guidance for next quarter further decreased to 37%-38%. The decline may seem small, but two consecutive quarters of slowdown are concerning for a stock trading at over 30 times earnings. The market demands continuous outperformance, not just meeting or falling below expectations.

Pressure on profit margins is more evident, with Microsoft’s gross margin this quarter at 68%, the lowest in three years, while capital expenditures surged by 66% year-over-year to $37.5 billion. Nadella mentioned that nearly 1GW of computing capacity was added this quarter, but CFO Hood noted that demand still outstrips supply, and Azure’s growth is being bottlenecked by capacity constraints.Meanwhile, expanding production continues to eat into profits, and this contradiction has no short-term solution.。

Another figure worth noting is Microsoft's commercial remaining performance obligation (RPO), which reached $625 billion, a year-over-year increase of 110%. However, within this $625 billion,45% comes from a $250 billion cloud services contract signed with OpenAI.OpenAI is still incurring losses, and whether this contract can be fulfilled remains uncertain. Regarding the situation, Hood only clarified during the conference call that the remaining 55% of customers are diversified and in good shape.

But the question is,Investors don't care how healthy or diversified the 55% is.The risk generated by placing 45% on a client who is still losing money will not disappear just because the other clients are high-quality.

Over the past few years, the AI story told by Microsoft and Nadella has been highly successful, with Microsoft’s market value growing from $1 trillion to $3 trillion, and Nadella himself being hailed as 'the most successful CEO of the AI era.' However, this earnings report reveals issues behind the narrative: growth is slowing, profit margins are declining, and their largest client has yet to turn profitable...

AI represents real demand, but it’s still unclear how much Microsoft can earn from it and when they will start making money.

03 Tesla: Elon Musk no longer wants to sell cars.

In Q4, Tesla reported revenue of $24.9 billion, down 3% year-over-year; annual revenue for the full year was $94.8 billion, also down 3%, marking the first annual revenue decline in its history; total deliveries fell 16% year-over-year to 418,000 units; energy storage business deployment reached a record 14.2 GWh, up 29% year-over-year, with energy gross margin hitting an all-time high for the quarter.

Overall, while the automotive business showed signs of decline, the company’s shares rose 3% in after-hours trading before slightly pulling back to a gain of 1.7%.

It must be said that Elon Musk's 'discipline' of the market is spot on, including himself.No one cares about Tesla’s car business performance anymore.At the earnings call, he started by announcing that the company's mission would change from 'Sustainable Abundance' to 'Staggering Abundance,' saying humanity is heading towards a future of 'universal high income'; sustainable energy was no longer mentioned.

'Sustainable Abundance' was the core vision put forward by Elon Musk in Part IV of Tesla's Master Plan. Simply put, it depicts a future society where poverty is eliminated and the living standards of all humanity are greatly improved due to the non-scarcity of energy, labor, and intelligence.

Then came the blockbuster news:Model S and Model X will be discontinued next quarter.“It’s time for the Model S and X to retire with honor because we are moving towards a future centered on autonomous driving,” Musk said. “If you want to buy one, now is the time to place an order.”

These two models once defined Tesla: the Model S, launched in 2012, proved that electric cars could outperform gasoline-powered ones; the Model X, introduced in 2015, remains a highlight at auto shows thanks to its falcon-wing doors. They witnessed Tesla's transformation from a Silicon Valley upstart to a global automaker. Now, their production lines will make way for robots — the Fremont factory will be converted into an Optimus production line, with a target annual capacity of 1 million units.

Musk’s focus has completely shifted.Regarding Robotaxis, driverless vehicles in Austin have started operating without safety drivers, aiming to cover a quarter to half of the United States by the end of the year, expanding to seven cities in the first half; FSD subscription users doubled to 1.1 million, with the buyout option being canceled starting February 14, fully transitioning to a subscription model. The energy business was the only bright spot, with Q4 energy storage deployment reaching a record 14.2 GWh; the CFO described Megapack and Powerwall demand as 'crazy.' Tesla’s capital expenditure for 2026 is projected to reach $20 billion, which may seem small compared to other giants but represents a doubling year-over-year.

Elon Musk concluded by saying, 'The future is more exciting than you can imagine.' He has repeated this statement many times. In 2016, he predicted full self-driving by the end of 2017, and in 2019, he claimed there would be one million Robotaxis on the road by 2020 — neither came true. But this time feels different. Musk isn't making empty promises; he's simplifying — he personally cut the production lines for the Model S and X to make way for robots. This is an irreversible decision. He’s betting Tesla’s future isn’t in selling cars but in Robotaxis and Optimus.

A three percent rise suggests the market remains skeptical, but investors are willing to give Musk some time.

04 Conclusion

Three earnings reports, three different bets, but they all revolve around the same question:Can AI truly generate tangible profits?。

Meta is betting on scale, pouring $135 billion into catching up in the large model competition; Microsoft is betting on its ecosystem — Azure + Copilot + OpenAI — wagering that corporate clients will continue paying for AI tools; Tesla is betting on form, replacing vehicle production lines with robots, wagering that Robotaxis and Optimus will redefine the company.

2025 will be the year of validation. Zuckerberg needs to prove his spending wasn’t in vain, Nadella must demonstrate growth can return, and Musk has to show this isn’t another empty promise.

Among these three, at least one will likely be proven wrong. We'll have to wait and see. $Tesla (TSLA.US)$$Meta Platforms (META.US)$$Microsoft (MSFT.US)$

Disclaimer: This article is intended for learning and communication purposes only and does not constitute investment advice.

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