These are strange markets. Exhibiting the most irrational earnings responses in recent memory.
The irrationality is the opportunity for astute investors. Three of the four largest Hyperscalers, the massive companies buildinh and managinh huge data centers to run their own apps and provide global cloud and Ai computing services.
These Hyperscalers, just handed investors phenomenal numbers, only to be met with immediate selling pressure.
Wall Street is treating aggressive spending as a direct threat to profits, missing the reality that these platforms are expanding to capture massive Ai demand.
Meta dropped 10% after hours despite quarterly revenue rising 28% to $60.8 billion. Ad prices jumped 12% and daily users grew to 3.6 billion. The earnings miss came down to $42 billion in total expenses.
It was an accounting-heavy hit, not a fundamental breakdown of core operations.
Microsoft beat expectations across the board and it’s stock is surging over 15% as Azure up 43% to cross $100 billion in revenue for the first time, while commercial commitments jumped 84% to $678 billion.
Management made it clear on the earnings call that Azure growth is currently capped by available compute capacity, not a lack of buyers.
Alphabet showed the clearest disconnect between actual performance and price action. Revenue rose 24% to $119.8 billion, driven by Google Cloud revenue more than doubling to $24.8 billion.
Operating profit for cloud jumped from $2.8 billion to $8.8 billion year over year. The market responded by selling off the stock initially to only rebound days later.
Wall Street is treating heavy capital expenditures as a red flag for overbuilding. The simpler, more logical reality is that these leadership teams are racing to keep up with an accelerating demand curve.
Selling off fast-growing, highly profitable businesses for spending capital to capture real demand creates classic market friction. Over the next four years, Meta, Google, Microsoft, and Amazon are projected to expand their combined free cash flow nearly tenfold to roughly $650 billion.
They are securing the physical Ai compute layer today so they can collect high-margin returns across the entire software ecosystem tomorrow. These are some of the smartest tech operators in the world!
Short-term noise creates long-term entry points. We’re staying positioned through temporary volatility and utilizing it to buy quality companies down as much as 30 – 40% over the past month.
Infrastructure being built today turns into the earnings power of tomorrow.
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This post is for informational purposes only and should not be considered financial or investment advice. Investing involves risk.
Which is your favorite hyperscaler, Microsoft, Google, Meta, or Amazon?