Microsoft, Meta, Tesla & Apple: What this week’s tech earnings tell us about the AI boom
Microsoft, Meta, Tesla and Apple kicked off the tech earnings season this week, giving us snapshot of how spending on AI is shaping the tech sector.
Here’s what we’ve learnt about the AI boom so far.
AI spending shapes the tech sector
This week started with the rise of Chinese startup DeepSeek causing headwinds on Monday, as its new chatbot shocked the market ahead of tech earnings season.
Claiming to operate with less data and at a fraction of the cost of existing rivals such as ChatGPT, the app quickly climbed to the top of the App store.
Its new model erased a total of $1 trillion in cumulative market value amongst leading tech stocks as investors reevaluated their hefty AI spending plans.
The arrival of DeepSeek prompted analysts at Bridgewater, one of the world’s largest hedge funds, to warn tech stocks could be due for a correction.
“DeepSeek’s progress is big news, but not bad news for most of the AI ecosystem”, they said.
Commitment to AI spend
On Wednesday, Microsoft and Meta both reported earnings that surpassed Wall Street expectations.
Both tech titans addressed and defended their substantial investments in AI, despite DeepSeek’s recent rise.
Microsoft reported earnings per share of $3.11 (£2.49) on revenue of $68.78bn (£55.21bn).
This marked growth of 11 per cent overall year on year, the firm’s slowest reported rate of growth since 2023.
Yet, chief executive Satya Nadella justified the firm’s AI spend, with his firm allocating $80bn (£64.33bn) for AI development throughout this financial year,
On DeepSeek, he said: “As AI becomes more efficient and accessible, we will see exponentially more demand”.
Yet, investors want to see where exactly this investment is going.
“We really want to start to see a clear road map to what that monetisation model looks like for all of the capital that’s been invested”, said Brian Mulberry from Zacks Investment Management, which holds shares in the company.
Mark Zuckerberg, Meta’s owner defended his AI spending as the firm’s quarterly numbers were announced.
The tech giant delivered quarterly earnings per share of $8.02 (£6.45), significantly above the expected $6.76.
This growth was driven by strong advertising revenue and a five per cent increase in user numbers, which hit $3.35bn (£2.69bn) in December.
Despite these results, Meta’s shares declined by nearly 4 per cent (3.8) in after hours trading.
Chief executive Mark Zuckerberg reiterated the firm’s dedication to open source AI development, highlighting the strategic importance of being at the forefront of the AI ecosystem.
Meta spent $60-65bn (£48-52bn) in AI development this year alone.
Zuckerberg announced that although DeepSeek has been able to train its AI model at a low cost, investment will be needed to run a software with “a higher level of intelligence and a higher quality of service”.
Russ Mould, investment director at AJ Bell, called Meta’s results “just what the doctor ordered after DeepSeek”.
Tesla’s AI push
Tesla followed on Thursday.
The EV giant’s earnings fell short of Wall Street expectations with revenue coming at $25.71, below the $27.22 anticipated by analysts.
For the year, sales rose $96.8bn (£77.71bn) in 2023 to $97.7bn (£78.43bn).
AJ Bell’s Dan Coatsworth said: “Elon Musk might want to stop spending all his time at the White House looking to elevate his status on the political stage, judging by the disappointing results from Tesla.”
Initially, its shares dropped over three per cent after hours, but it later rebounded by just over three per cent as founder Elon Musk touted the company’s future investments in AI-powered ‘robotaxis’ later this year.
The billionaire pointed to the potential for an ‘epic’ 2026 and a ‘ridiculous 2027’ thanks to the company’s use of AI.
iPhone recovery
Apple also reported its earnings, reporting $124.3bn (£100.1bn) revenue, up 4 per cent from the previous year, largely due to a jump in sales at its services arm.
Chief executive Tim Cook linked the performance of iPhone 16 sales to the availability of Apple Intelligence, the firm’s AI initiative, noting stronger year over year performance in markets where the feature was available.
Its services division – which includes the App store, App music, and Apple TV, drove sales up 14 per cent, to $26.3bn (£21.18bn) in the quarter.
When asked about Chinese-owned chat bot DeepSeek, Cook said: “In general, I think innovation that drives efficiency is a good thing, and, you know, that’s what you see in that model.”
“Our tight integration of silicon and software I think will continue to serve us very well. As you know, we do things on the device and we do things in the private cloud, which mimics from an architectural point of view, what happens on the device”, he added.
Apple’s hybrid model, which is building out its Apple intelligence, whilst integrating ChatGPT, has been praised in the past few days.
The leading phone maker is seen as responsibly investing in AI now that operational costs are set to decline.
Alphabet and Amazon will be releasing their earnings next week, whilst Nvidia’s earnings are set to come out 26 February.