Tech giants paint pretty picture for AI trade with strong results

30 October 2025

If you are covering the financial results of Alphabet, Meta or Microsoft, please find below a comment from Ben Barringer, head of technology research at Quilter Cheviot:

"The results from three of the biggest tech giants - Alphabet, Meta and Microsoft - paint a pretty picture for the AI trade. Spending is going up across the board as demand remains robust, and this is happening at the same time as supply remains constrained. Until those dynamics flip, AI will remain the main game in town. Ultimately this means the big winners of these results are the chipmakers, with Nvidia likely to be the main beneficiary."

Alphabet

"Alphabet produced a strong set of numbers with revenues up 15%, around 2.5% ahead of expectations. Much of this has been delivered by strong search demand, as well as decent growth in the cloud business. In fact, the latter is showing to be a strong business for Alphabet with the backlog also up significantly, highlighting demand looks good into the future.

"Crucially, the company continues to innovate, especially around AI. It looked like it could be on of the big losers from the birth of generative AI, and it certainly faced an innovators dilemma of what directions to take. However, both AI Overview and AI Mode are proving popular and Google in particular has transformed itself into a winner of this tech development.

"YouTube continues to do well and Waymo is rolling out more globally now too, encouraging trends following a difficult couple of years for the group. However, it appears as if it is fully over the DoJ threat and beginning to fire on all cylinders once again. These results are about as solid as it gets, with plenty of opportunity for future growth too.

Meta

"Meta's results, by comparison, were slightly disappointing. It still managed to beat expectations, but two issues came to light that spooked investors after hours. Firstly, costs are going up, both operationally and from a capex perspective. Meta has a history of looking to spend ahead of revenues, and have in the past got it wrong. That history will make investors nervous that lessons haven't necessarily been learned.

"However, the bigger issue was the guidance of 16%-22% revenue growth, which represents a deceleration in growth. This is somewhat of a fly in the ointment, and highlights the need to get the balance between investment and revenue growth right. The company does continue to benefit from a strong digital advertising market and innovating in AI. It has been very successful in the past couple of years in getting those markets right, so it will be hoping to continue to develop and enhance those propositions to help bolster growth."

Microsoft

"While Microsoft only provided a small beat, it continues to execute strongly and show itself to be an innovate yet mature company. Revenues were up 18%, while the cloud business Azure continues to be the standout performer. Indeed, the backlog totals around $400bn which giving the company great visibility of earnings into the future.

"Microsoft continues to increase its capacity where it can, despite those supply constraints. Capex will grow faster next year, showing the business is not done investing in the business and its future operations. Indeed, we see that in the OpenAI agreement announced earlier this week, where Microsoft put forward $250bn of commitments. It is proving that it means business when it comes to AI development.

"CoPilot also continues to roll out well, with strong demand from businesses. Meanwhile, search performed strongly, up 15%, and that growth is slightly ahead of Google's, indicating that Microsoft has taken some market share there.

"Overall, Microsoft is delivering just what it needs to, and with a strong pipeline of demand set in stone, the future remains positive for the tech giant."