Investors trust Google more than Meta when comes to spending on AI

Meta and Alphabet both beat expectations in their earnings reports on Wednesday, each recording their fastest growth in years. They also lifted their guidance for capital expenditures for the year, telling investors that they’re going to keep pouring money into artificial intelligence infrastructure.

But despite their similarly upbeat results, Wall Street had very different reactions. Alphabet shares popped 7% in extended trading, while Meta’s stock fell 7%.

It’s the continuation of a theme that’s hampered Meta throughout much of the generative AI boom. While Alphabet and fellow hyperscalers Microsoft and Amazon all have massive cloud infrastructure businesses, allowing them to turn their AI investments into revenue, Meta has no such offering.

That makes AI spending a harder sell for Meta CEO Mark Zuckerberg, because the return on investment has to show up elsewhere, and that mostly means increased ad revenue and profitability.

All four tech giants reported quarterly results on Wednesday. Alphabet, Microsoft and Amazon all showed stronger-than-expected growth in their cloud divisions. Meta’s stock is the only one of the four trading lower.

Heading into the earnings reports, Alphabet’s stock price was up 118% over the past year, trouncing Meta’s 21% gain. Amazon is up 40% and Microsoft has risen about 8%.

“Google is outperforming its peers which is well reflected in the current valuation,” analysts at D.A. Davidson wrote in a report after the results, maintaining their neutral rating.

The capex numbers across the board are eyepopping and are only getting bigger, in part because the companies are being forced to spend more on memory, which is facing a global shortage as AI demand skyrockets.

Alphabet on Wednesday updated its 2026 capex guidance range to $180 billion to $190 billion, up from its previous estimate of $175 billion to $185 billion. CFO Anat Ashkenazi said the company’s 2027 capex is expected to “significantly increase” from this year’s figure.

The spending forecast was coupled with revenue growth of 20%, the fastest for any quarter since 2022. Cloud revenue soared 63%, and Alphabet said it has a backlog of $460 billion, nearly double where it was last quarter, because of demand for AI infrastructure.

Meta upped its capex guidance for the year to between $125 billion and $145 billion, from a prior range of $115 billion to $135 billion, a move the company said, “reflects our expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity.”

Similar to when Meta raised its capex forecast in October, Zuckerberg spent time on the earnings call defending the company’s hefty AI spending, pitching it as necessary for future growth while bolstering the core online ad business.

“The trend over the last few years seems clear, that we are seeing an increasing return on the amount that we can improve engagement for people and value for advertisers,” Zuckerberg said. “This encourages us to continue investing heavily in what we expect will provide increasing value over the coming years as well.”

On the revenue side, growth is more impressive than at Google. Sales jumped 33% from a year earlier, marking the strongest period for expansion since 2021.

Zuckerberg said the company is “very focused on increasing the efficiency of our investments,” and is developing custom silicon with Broadcom while investing in a “significant amount of AMD chips to complement the new Nvidia systems that we’re rolling out as well.”

Meta CFO Susan Li told analysts that the company needs to spend big on AI in order to “meet our infrastructure needs and ensure we maximize our strategic flexibility over the coming years.” The company also has to ensure it has enough computing resources to train more AI models, build more products and help its AI agent push for consumers and businesses worldwide, Li said.

She added that Meta’s recent “multi-year cloud deals and our infrastructure purchase agreements” contributed to a $107 billion jump in contractual commitments during the quarter.

Still, investors are waiting to see new revenue streams come to fruition after Zuckerberg spent the past 10 months overhauling his company’s AI strategy and bringing in high-priced talent. Earlier this month, Meta debuted Muse Spark as its first proprietary foundation model.

Alphabet, meanwhile, has been cashing in on its bets, including on homegrown chips called tensor processing units (TPUs), which are increasingly competing with Nvidia’s graphics processing units (GPUs).

CEO Sundar Pichai addressed the momentum in the chip side of the business several times on Wednesday’s call.

“There’s tremendous demand for both AI solutions as well as AI infrastructure, including massive interest in our GPU offerings, as well as TPUs,” he said.

WATCH: Meta shares sliding