The unconditional-love phase of Wall Street's AI romance is over.
As Meta Platforms learned Wednesday, and as Alphabet's Google saw last week, investors want better answers if they're going to keep underwriting hundreds of billions of dollars' worth of investments in data centers and development of artificial-intelligence models.
But when they do see evidence of AI spending yielding returns, they're still prepared to be generous. Microsoft, which reported earnings Wednesday, got a 9% boost in after-hours trading after announcing record and accelerating revenue in its Azure cloud business.
Meta shares, meanwhile, shed as much as 10% of their value after hours -- erasing more than $140 billion in market value -- as investors tuned into the company's second-quarter earnings call and waited in vain for Chief Executive Mark Zuckerberg to offer new details on how the company plans to make money selling enterprise AI tools or computing capacity. Nor did they hear the specifics they sought on what capital expenditures might look like next year.
"We were sorta hoping we'd get something on reselling their excess compute capacity but they didn't have anything new there," said Mark Mahaney, managing director at Evercore ISI. "The core of the business is doing great. But because of the scale of the investment cycle, the market wants monetization data points beyond just the core business and they didn't really get them."
It didn't help that Meta disclosed more than $2 billion in liabilities from legal proceedings. The company recently settled a social-media harm lawsuit with a school district in Kentucky and is facing thousands of other suits, with several slated to go to trial this year.
One red line Meta didn't cross -- barely -- was the border into negative free cash flow. Analysts had predicted the company would go there for the first time since 2012, but it managed to eke out $784 million -- a precipitous drop from the previous quarter's $12.4 billion.
It was Google's descent into negative free cash flow and simultaneous adjustment of its 2026 capital-expenditures forecast to a new range extending above $200 billion that sparked a 7% selloff of its shares following its earnings call last week. Chief Financial Officer Anat Ashkenazi amped up the unease by making ominous noises about how long cash flow -- long a pillar of strength for what had been asset-light, high-margin internet giants -- would remain under pressure.
The silver lining for Google investors was the company's cloud unit, which recorded scorching revenue growth of 82%, fueled by insatiable demand for computing capacity for training and running AI models.
Analysts on Meta's earnings call were audibly eager to hear an update from Zuckerberg on his company's vague plans to stand up a cloud service. Zuckerberg has said Meta can afford to be aggressive on building data-center capacity, knowing it can find takers for whatever it has left over after fulfilling its own needs for model development, content optimization, ad targeting and the like.
But on the call, Zuckerberg stuck to generalities.
"We have quite a number of offers at a meaningful premium over what we paid for the compute," he said, but didn't specify who the customers might be or announce a timeline for deals.
Nor did Meta give more visibility into its capital expenditures beyond raising the floor on its 2026 estimated range by $5 billion, to $130 billion. The ceiling stayed put at $145 billion, and finance chief Susan Li declined to answer a question about 2027.
"I think everyone was asking, why don't we have more of a concrete plan?" Brent Thill, a tech analyst at Jefferies, said.
Neither Google nor Microsoft provided a 2027 capex figure, but after Google upped its range for this year to $195 billion to $205 billion, analyst Youssef Squali of Truist Securities predicted it could reach $280 billion, or higher, next year -- what he called "scary territory."
Zuckerberg portrayed Meta's lack of haste in monetizing its capacity as a matter of confidence: The company, he said, thinks it can ultimately do better by refining the raw material of silicon and electrons into the finished product of AI models and apps, including the "personal superintelligence" he has been teasing for the last few quarters. "We believe there will be a higher margin on selling intelligence versus selling compute directly," he said.
Selling too much data-center space now would privilege the short term over the long term, he said -- and the benefit to investors of Zuckerberg's ironclad voting control is supposed to be that he can afford to focus on long horizons.
"I'm actually quite optimistic that we're gonna see meaningful growth in all of these areas," he added. "And I think we will have more to share soon on a number of them."
But maintaining the confidence of markets has its own value. Alphabet was able to add nearly $90 billion to its AI war chest with an equity offering in June. It said it would use the money to build data centers and secure computing capacity. Meta, meanwhile, has been relying on debt to fund new data centers in Louisiana and Texas, and that debt is getting more expensive.
Thill, the Jefferies analyst, summed up the Meta call.
"It's like, well we're not really going to give you a lot of details about the compute business. We're not going to tell you the ROI. We just need more compute, and you know, just trust us."
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