"Thanks to AI"... MS and Meta Beat Market Expectations in Q3 Results

Market Sales and Earnings Per Share Exceed Expectations
MS Up 15% and Meta Up 67% This Year Based on Closing Prices

Microsoft (MS) and Meta Platforms, the parent company of Facebook, posted third-quarter results that exceeded market expectations, driven by the impact of artificial intelligence (AI).

On the 30th (local time), MS announced third-quarter revenue of $65.59 billion and earnings per share of $3.30 for this year.

[Image source=AFP Yonhap News]

These results surpassed market expectations. According to Wall Street estimates compiled by market research firm LSEG, the expected revenue was $64.51 billion, and earnings per share were $3.10.

Revenue increased by 16% compared to the same period last year, and gross profit rose 11% to $24.67 billion.

The Productivity and Business Processes segment recorded revenue of $28.32 billion, up 12%. This was higher than the Wall Street estimate of $27.99 billion surveyed by market research firm StreetAccount.

The Intelligent Cloud segment, which includes cloud services such as Azure and Windows Server, posted revenue of $24.09 billion, slightly exceeding the Wall Street estimate of $24.02 billion. Notably, Azure's growth rate was 33%, significantly surpassing the StreetAccount estimate of 29.4%. CNBC explained that 12 percentage points of Azure's growth rate came from AI services.

MS stated, "AI is driving Azure's market share growth as we integrate OpenAI's latest AI model 'o1,' capable of answering difficult math, science, and coding problems, into our cloud platform."

Bloomberg evaluated that MS's massive investment in AI is beginning to yield results.

MS shares closed up 0.13% in regular trading on the New York Stock Exchange that day but fell 4.13% in after-hours trading around 6 p.m. Eastern Time. Based on the closing price that day, MS shares have risen about 15% this year. During the same period, the Nasdaq rose 24%.

[Image source=Reuters Yonhap News]

On the same day, Meta reported third-quarter revenue of $40.59 billion and earnings per share of $6.03.

These figures exceeded Wall Street estimates compiled by LSEG, which forecast revenue of $40.29 billion and earnings per share of $5.25.

Revenue increased 19% year-over-year. Meta CEO Mark Zuckerberg stated that AI investments boosted revenue.

Meta's core business segment, Reality Labs, which develops augmented reality and virtual reality technologies, posted revenue of $270 million, up 29% year-over-year. However, this fell short of the market expectation of $310.4 million. Operating losses were recorded at $4.4 billion. Since 2020, losses in the Reality Labs segment have totaled $58 billion. Nevertheless, CEO Zuckerberg raised market expectations by demonstrating the self-developed 'Orion' in September.

Meta forecasted fourth-quarter revenue between $45 billion and $48 billion. The market expects $46 billion.

Meta shares closed down 0.25% in regular trading on the New York Stock Exchange that day and fell 2.87% in after-hours trading around 6:15 p.m. Based on the closing price that day, Meta shares have risen more than 67% this year.