Meta and Microsoft both beat estimates in results released after the bell on Wall Street Wednesday.

All eyes are on AI development costs and investors are keen for clues as to when escalating outlays will start to pay off for America’s tech giants, which are blowing through hundreds of billions in an effort to stay competitive in the arms race.

Last quarter, Mark Zuckerberg spooked markets with an aggressive expense guide which included a reference to “notably larger” capital expenditures in 2026 and “a significantly faster” percentage increase in total expenses. On Wednesday, Meta put some numbers to those quasi-warnings.

Total expenses for 2026 should be between $162-169 billion, the company said. Taking the midpoint, that’d be around 40% higher versus 2025. The midpoint of the 2026 capex guide — $125 billion against estimates for $111 billion — suggests those outlays specifically will rise almost 75% this year.

“The majority of expense growth will be driven by infrastructure costs, which includes third-party cloud spend, higher depreciation and higher infrastructure operating expenses,” Meta said, adding that “despite the meaningful step up in infrastructure investment,” operating income will rise this year versus 2025. (That’s good to hear.)

Revenue in Q4 was $59.89 billion, up 24% and ahead of estimates. Consensus was something like $58.50 billion.

The current quarter sales guide’s $55 billion at the midpoint. That’d be good for a 30% YoY gain. It’s hard to see anyone being mad at that. Analysts were looking for $51.50 billion, so even if sales come in at the low-end of the range, it’d be better than consensus as it stood prior to Wednesday.

Zuckerberg described a strong 2025 and said he’s “looking forward to advancing personal superintelligence for people around the world in 2026.” (I’m not sure “people” are as excited as he is about the prospect of being antiquated and rendered superfluous.)

These results may get the benefit of the doubt from investors. Ad revenue’s growing fast enough to fund some of the AI capex, even as Meta’s newly-established footprint in the IG corporate bond market speaks to the necessity of funding some of the buildout with debt. Free cash flow rose YoY in Q4, and profit was ahead of estimates.

Addressing analysts, Zuckerberg said Meta’s forthcoming AI models will “show the rapid trajectory that we’re on.” Meta, he declared, will “push the frontier” throughout 2026.

Meanwhile, over at Microsoft, total sales rose nearly 17% to $81.27 billion, comfortably beating the $80.30 billion consensus.

Azure growth last quarter was 38% on a constant currency basis, slightly slower than the prior quarter’s YoY rate, and generally in line with consensus.

Here too, the focus was on spending and at $37.5 billion for the quarter, capex rose more than 65%. The overshoot versus consensus wasn’t especially pronounced (analysts were looking for $36 billion), but the combination of “merely in line” Azure growth and higher-than-expected outlays could give markets pause.

Satya Nadella and Amy Hood delivered the usual rosy assessment. “We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises,” Nadella said. “Cloud revenue crossed $50 billion this quarter [and] we exceeded expectations across revenue, operating income and EPS,” Hood added.

That’s all fine and good, but remember: With Microsoft it’s not a question of whether things are going swimmingly. They clearly are. Rather, it’s a matter of whether a given quarter’s results admit of nitpicking, and this quarter they did.

There’s also the “small” matter of concentration risk, which is amplified by the self-referential nature of the AI deal Venn diagram. Customer commitments (i.e., assumed future sales) doubled from the same quarter a year ago, but that seems to be a direct result of what Microsoft in October described as “The next chapter” of the OpenAI tie-up: A promise from OpenAI to buy $250 billion of Azure services. As of December 31, OpenAI’s commitments were nearly half of Microsoft’s backlog.