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Meta, Microsoft Deliver Blowout Quarters
Q2 2025 (it's actually Q4 for the company's fiscal year) was Microsoft's 50th anniversary. The compa
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META rev gro accel to +21.6% YOY from only +16.1% in 1Q, and sequential +12.3% not shabby. US gro accelerated, Europe gro stayed high, APAC lagged at only +7%.
GM +80bp to 82.1%, a new high going back at last 5 years. OM +500bp to 43%, nearly back to 2020’s Covid-boosted level. No-one cares about Reality Lab losses, just call it part of META’s R&D and move on. No-one cares about massive capex, not today anyway, and yes depreciation was up but less than rev growth.
Can we quibble – yes, year-ago comps in 2Q were signif easier vs 1Q and arguably the 2Q acceleration merely reflects the easier comp, but tech analysts don’t seem to think in “comps” and anyway comps in 3Q get easier again vs 2Q. Comps don’t get incrementally harder until 4Q.
Oh, and lots of superintelligence and AI glasses talk on the call. Guided 3Q well above. Blowout quarter for sure.
The highest and best use of AI today is to generate insipidly compellingly time wasting social media and embedding ads in that social media, and META owns both the AI and the social media so it has the magic formula, for now.
MSFT rev gro +18.1% from +13.3% last qtr, sequential +9%. All segments accelerated, the highlight of course being Azure’s +39% vs last qtr +33% and guid +35%. GM -100bp, OM +180bp. Capex a staggering $24.2BN ($17BN cash, $7BN finance leases so not in cash flow statement), but zero analyst fussbudgetting on call. Most of capex now for long-lived assets (land, buildings, power). Big beat on rev and EPS and everything else. For Sep qtr, guid implies +13-14% rev gro, back down to Mar qtr rate, note comp +80bp harder then sharply easier Dec qtr. Guid GM -200bp, big opex decline sequentially, consistent with big layoffs underway now. Guid implies about $3.61, street went from $3.56 to $3.62. Next year capex will decline and mix shift to short-lived assets (CPU, GPU, networking), so cash capex may not decline. Nadella talks about AI, quantum, AI, Microsoft database/datalayer, and AI. Interestingly, zero information on growth or size of AI revenue; in previous quarters, have given hints so we can triangulate. Azure commentary implies great bulk of growth is in non-AI workloads but AI optionality used in the sales pitch. Boasts 100MM Copilot users but no revenue given. Street gushing like teen fangirls. I think more to quibble about than for META but who cares right now. Party on!