The simple version

Microsoft and Meta reported quarterly results after the close on Wednesday. Both cleared the revenue bar that was supposed to decide the reaction. Microsoft's Azure cloud business grew 43%, faster than the 40% it posted three months earlier. Meta's advertising revenue grew 27% to $59.4 billion.

Then the two diverge. Microsoft's profit rose 31%. Meta's profit fell 14%, from $18.3 billion to $15.8 billion, in a quarter when its revenue grew 28%. Its operating margin went from 43% to 31%.

Revenue growing 28% while profit falls 14% is not a contradiction. It means costs grew faster than sales. For Meta this quarter, that is the entire result, and the company raised its spending plans again on the way out.

The numbers

• Microsoft revenue was $90.0 billion, up 18%, with operating income of $40.6 billion, up 18%, for the quarter ended June 30, 2026 (Microsoft, fiscal fourth quarter 2026)
• Azure and other cloud services revenue increased 43%, up from 40% in the quarter Microsoft reported in April (Microsoft)
• Microsoft Cloud revenue was $59.3 billion, up 27%, and the Intelligent Cloud segment was $39.3 billion, up 32% (Microsoft)
• Microsoft net income was $35.8 billion, up 31% on a GAAP basis, which included a $3.2 billion gain on its investment in Anthropic, partly offset by severance and an impairment charge in Xbox (Microsoft)
• Meta revenue was $60.80 billion, up 28%, against its own April guidance range of $58 billion to $61 billion (Meta, second quarter 2026)
• Meta advertising revenue was $59.36 billion of that total, up 27% (Meta)
• Meta income from operations was $18.78 billion, an operating margin of 31%, down from 43% a year earlier (Meta)
• Meta net income was $15.85 billion, down 14% from $18.34 billion, with diluted earnings per share of $6.18 (Meta)
• Meta capital expenditures including finance leases were $31.08 billion in the quarter (Meta)
• Meta now expects full year 2026 total expenses of $165 billion to $169 billion and capital expenditures of $130 billion to $145 billion, raising the bottom of the capital spending range from $125 billion (Meta)
• Meta ad impressions rose 14% and the average price per ad rose 12%, with 3.60 billion daily active people across its apps in June (Meta)

How revenue rises 28% while profit falls 14%

The arithmetic is simpler than it sounds. Profit is what is left after costs. If revenue grows 28% and costs grow faster than that, the amount left over shrinks even though the top line looks excellent.

Meta's operating margin is the clean way to see it. A 43% margin means the company kept 43 cents of operating profit per dollar of sales. At 31% it keeps 31 cents. Same business, twelve fewer cents on every dollar, because it is paying for data centers, chips, and the people to run them.

The spending is not hidden or accidental. Meta told investors it now expects to spend $165 billion to $169 billion in total this year, and $130 billion to $145 billion on capital projects. It raised the floor of that capital range from $125 billion. The falling margin is the visible cost of a plan the company is stating openly.

Microsoft's contrast is instructive. Its cloud revenue accelerated and its profit grew 31%, though that figure includes a $3.2 billion one-time gain on an investment rather than money earned selling software. Microsoft did not put its next round of spending guidance in the press release; it reserved that for the earnings call, so this article does not report it.

Receipts: how our own call held up

On Wednesday morning we published a piece arguing that each company had one number that would decide the reaction: Azure growth for Microsoft, advertising revenue for Meta. Grading that honestly, it was right about Microsoft and incomplete about Meta.

Azure was the right thing to watch. It accelerated, which is direct evidence that the computing buildout is meeting real demand rather than sitting idle.

For Meta, naming advertising revenue as the deciding number was too narrow. Ad revenue did what a bull would want, growing 27%. The profit line fell anyway, and the expense and capital guidance moved up. The cost side was at least as important as the revenue side, and our framing pointed only at revenue. Recording that here rather than quietly moving on.

The Real Cost lens on a number that is not your number

If you hold a broad index fund, you own pieces of both of these companies. Here is the honest accounting of what these results changed for you.

• Nothing in your account changed when these results landed, because a quarterly report is information, not a transaction
• Both companies are large enough that a broad index fund's value tracks how these reports are received, which you will see as a number moving rather than as a decision to make
• A falling margin at one company is not a signal to sell anything, and a 43% cloud growth rate is not a signal to buy anything. Neither figure says what a share is worth, which depends on the price you would pay for it
• The cost that shows up for most people is not in these results. It is in trading against them, after hours, on a headline, at a price set by people who have read the filing

The durable habit here is reading a margin next to a revenue line. A company can grow sales fast and earn less money doing it, and the only way to notice is to look at both numbers at once. Headlines almost always carry one of them.

What this means

The AI spending question has moved on. A year ago the argument was whether the buildout would produce any revenue. Azure at 43% and Meta's ads at 27% are evidence that it does. The live argument now is about price: how much profit companies will hand over for that growth, and for how long.

Meta has answered plainly for this year, with an expense range of $165 billion to $169 billion and a capital range whose floor it just raised. Whether that is discipline or overreach is not something a single quarter settles, and it is not something this site will tell you. What is worth watching is whether margins keep compressing while revenue growth stays strong, because that combination is the one that eventually forces a choice.

What this is NOT

This is not a recommendation about Microsoft, Meta, any index fund that holds them, or any other security. It is not a view on whether either company's spending is wise, or on whether either share price is high or low.

This is not a forecast of what either company earns next quarter. All figures come from each company's own quarterly disclosures for the period ended June 30, 2026, and are as stated on the day of release. Microsoft's forward guidance was given on its earnings call and is not reported here. This is not investment or financial advice of any kind.

Sources

• Microsoft, FY26 fourth quarter press release: https://www.microsoft.com/en-us/Investor/earnings/FY-2026-Q4/press-release-webcast
• Meta Platforms, second quarter 2026 results, Form 8-K exhibit 99.1: https://www.sec.gov/Archives/edgar/data/1326801/000162828026050596/meta-06302026xexhibit991.htm
• Meta Platforms, investor relations: https://investor.atmeta.com/investor-news/default.aspx
• Microsoft, investor relations: https://www.microsoft.com/en-us/investor