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Luke Kawa

Why Meta is ripping higher after earnings while Microsoft craters

Two hyperscalers. Two top- and bottom-line beats. Two different reactions.

When both companies issue capex guidance that’s higher than expected and one goes up and the other goes down, it’s difficult for me to argue that the capex outlook is the key driver of either market reaction.

So here’s a smattering of potential reasons for the divergent paths of Meta and Microsoft since releasing quarterly earnings reports after the close on Wednesday, which has seen the former rally while the latter gets crushed:

  • Microsoft cloud growth is slowing; Meta’s top line is poised to accelerate.

    • Azure revenues were up 38% year on year in constant currency terms, a modest sequential slowdown since Q2 2025, and management’s guidance for growth of 37% to 38% in the current quarter implies this trend is likely to continue.

    • The midpoint of Meta’s guidance for revenues between $53.5 billion and $56.5 billion this quarter would mark an acceleration to sales growth of 30% year on year. Since the AI boom started, its high-water mark for sales growth has been 27%.

  • Customer quality and concentration matters:

    • While Microsoft enjoyed solid ex-OpenAI growth in its remaining performance obligations, that one customer is still responsible for 45% of commercial RPO. Look at Oracle to get a glimpse of what investors think about firms whose AI build-outs use OpenAI demand as scaffolding.

    • Meta’s lack of a cloud business has been an oft-cited negative about the aggressiveness of its build-out. The company arguably has to work harder than other hyperscalers to turn that spending into sales growth. And... that’s happening.

  • Initial conditions matter:

    • There was probably a little more embedded pessimism on Meta than Microsoft heading into these reports. As of Wednesday’s close, it was the only member of the Magnificent 7 to trade lower over the past 12 months.

Cheers to Duncan Weldon, VKMacro, and George Pearkes, whose back-and-forth on Bluesky inspired this post.

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Max Knoblauch

Joby plunges after announcing plans to raise $1 billion in convertible bonds and stock

Shares of air taxi maker Joby Aviation are down more than 14% in premarket trading after the company announced a $1 billion capital raise after the bell Wednesday.

Joby, which in December said it would invest in equipment, facilities, and employees to double its aircraft production output by 2027, is offering convertible senior notes due 2032.

According to reporting by Bloomberg, the notes are being offered with an up to 30% conversion premium. Bloomberg reports that the company is pricing its share offering between $11.35 and $11.75, representing up to a 15% discount on the stock as of Wednesday’s close.

Joby ended its third quarter with $978.1 million in cash and cash equivalents, down slightly from its second quarter. Its shares have risen 62% over the past 12 months, compared to a more than 14% loss for its rival Archer Aviation in the same stretch.

markets
Luke Kawa

Microsoft just delivered a big blow to Michael Burry’s AI bear case

Microsoft’s chief financial officer, Amy Hood, just offered some intel that severely undercuts Michael Burry’s argument against AI stocks, albeit with one big caveat.

If you’ll recall, the hedge fund manager turned Substacker of “The Big Short” fame said that tech companies were understating depreciation charges — that is, how fast GPUs lose their value over time, in a bid to artificially juice profits.

During Microsoft’s conference call on Wednesday, the CFO was asked how the company will be able to capture enough revenue over the six-year useful life of the hardware to justify the outlays. Her response:

“The way to think about that is the majority of the capital that we’re spending today and a lot of the GPUs that we’re buying are already contracted for most of their useful life,” she said. “And so a way to think about that is much of that risk that I think you’re pointing to isn’t there because they’re already sold for the entirety of their useful life.”

The implication here is that not only will these chips make money for as long as tech companies expect they will, but that their useful economic life might actually be longer than that, not shorter.

This tidbit is obviously positive for the hyperscalers, which are spending hundreds of billions on these GPUs. But it’s probably even more of a relief to neoclouds that are even more dependent on these chips being able to generate cash. That’s (mostly) all there is to their businesses, unlike megacap tech giants.

It also corroborates commentary from one such neocloud, CoreWeave, on how well these processors retain value.

“For example, in Q3, we saw our first 10,000-plus H100 contract approaching expiration,” CoreWeave CEO Michael Intrator said after the firm’s most recent earnings report. “Two quarters in advance, the customer proactively recontracted for the infrastructure at a price within 5% of the original agreement.”

And per Silicon Data, H100 rental rates have firmed significantly since the end of November.

However, I’d be remiss not to point out a potential fly in the ointment here: one reason that Microsoft’s GPUs are contracted for most of their useful life is thanks to demand from OpenAI, which accounts for 45% of its commercial remaining performance obligations.

And, if Oracle’s shown us anything, it’s that customer concentration and quality matters.

markets
Claire Yubin Oh

Nvidia, Microsoft, and Amazon reportedly in talks to invest up to $60 billion in OpenAI

OpenAI is bringing in more revenue than ever, but with ambitions to spend north of $1 trillion on its AI infrastructure build-out — cash that it simply does not have to hand — it’s maybe no surprise that the company is almost constantly in fundraising mode.

And its latest discussions could see the company raise as much as $60 billion from three of its biggest suppliers, with The Information reporting that Nvidia, Microsoft, and Amazon may anchor a larger round that could see the ChatGPT maker raise as much as $100 billion.

Per The Information’s sources, existing investor Nvidia is in discussions to invest up to $30 billion, new investor Amazon is considering $10 billion to more than $20 billion, while Microsoft, which is also already heavily invested with a 27% stake, is looking at less than $10 billion.

Separately, reporting from the Financial Times confirms some of the same broader details, like that the three tech companies are indeed close to participating in a larger ~$100 billion round. However, the sources cited by the FT put the combined total investment from the trio of tech titans closer to $40 billion.

While OpenAI is close to receiving term sheets, or an investment commitment, from these companies, according to The Information, their investments could depend on other deals that they are already negotiating with OpenAI separately, including its cloud server rental deal with Amazon.

Earlier this week, reports emerged that SoftBank might plow a further $30 billion into OpenAI as well — presumably as part of this larger round.

Nvidia, Microsoft, Amazon in Talks to Invest Up to $60 Billion in OpenAI

Nvidia, Microsoft, Amazon in Talks to Invest Up to $60 Billion in OpenAI

And its latest discussions could see the company raise as much as $60 billion from three of its biggest suppliers, with The Information reporting that Nvidia, Microsoft, and Amazon may anchor a larger round that could see the ChatGPT maker raise as much as $100 billion.

Per The Information’s sources, existing investor Nvidia is in discussions to invest up to $30 billion, new investor Amazon is considering $10 billion to more than $20 billion, while Microsoft, which is also already heavily invested with a 27% stake, is looking at less than $10 billion.

Separately, reporting from the Financial Times confirms some of the same broader details, like that the three tech companies are indeed close to participating in a larger ~$100 billion round. However, the sources cited by the FT put the combined total investment from the trio of tech titans closer to $40 billion.

While OpenAI is close to receiving term sheets, or an investment commitment, from these companies, according to The Information, their investments could depend on other deals that they are already negotiating with OpenAI separately, including its cloud server rental deal with Amazon.

Earlier this week, reports emerged that SoftBank might plow a further $30 billion into OpenAI as well — presumably as part of this larger round.

markets
Luke Kawa

ServiceNow CEO on the stock’s swoon: “You can give us back the market cap”

Investors have taken billions in market cap away from ServiceNow, and CEO Bill McDermott would very much like for it to be returned.

During the conference call that followed Q4 earnings on Wednesday, McDermott tried to reassure investors that the company’s recent M&A efforts weren’t made to latch onto lines going up in hopes of distracting from any looming deterioration in its core business:

“I wanted to make it very clear to the investors, I hear you, and we did not and never have bought an asset like many others have — and I know that’s probably why it’s on your mind — because we needed the revenue. What we needed is the innovation and the expanded growth opportunity of a great TAM [total addressable market] and a customer base that’s waiting for us. And as it relates to future M&A, we do not have a large scale M&A on the road map...

So, probably it was a little bit what’s going on over there at ServiceNow, and I noticed that we lost about $10 billion in market cap on that because of the worry. So now the worry is gone, you can give us back the market cap. And no, we’re not going after anything large. We now have them in the family and we’re going to grow them like we do everything else.”

McDermott attributed the downdraft in ServiceNow to its recent acquisitiveness. And it’s true that the stock did tumble upon reports that the company was acquiring cybersecurity firm Armis (which came on the heels of its Veza acquisition), then dipped again when the deal was announced at an even higher price than previously rumored.

Interestingly, McDermott was actually understating the pain on the call, or at least has a very generous return policy: the stock shed nearly $21 billion in market cap on December 15, the session it got dumped following reports around the potential Armis acquisition.

NOW has fallen more than twice as much as the iShares Expanded Tech Software ETF since December 12 through Wednesday’s close. More broadly, the software cohort has been branded with the equivalent of a scarlet letter by traders as of late, amid concerns that it’ll be disintermediated by AI tools and agents. In particular, Claude Code’s development of Cowork has been hailed as a “ChatGPT moment repeated” that threatens to disrupt large swaths of the industry.

Wedbush Securities analyst Dan Ives removed ServiceNow from his list of top 30 AI stocks at the start of December, saying that its AI monetization has been slower than anticipated so far.

ServiceNow is lower in premarket trading despite reporting top- and bottom-line Q4 beats in results that were broadly applauded by the analyst community, along with better-than-expected Q1 guidance.

That’ll be even more market cap that McDermott will likely want back.

markets
Matt Phillips

ServiceNow slips despite beating Q4 earnings expectations

Cloud software giant ServiceNow delivered better-than-expected Q4 sales and earnings after the close of trading on Wednesday, though the shares slipped in after-hours trading.  

The company reported:

  • Revenue of $3.57 billion, higher than the $3.53 billion analyst consensus estimate published by FactSet.

  • Adjusted earnings of $0.92 per share vs. the $0.88 analysts expected.

  • Subscription revenue of $3.47 billion vs. the $3.42 billion predicted.

  • Issued guidance for Q1 subscription revenues of between $3.65 billion and 3.655 billion, compared to the $3.58 billion FactSet consensus estimate.

  • Non-GAAP gross margins of 80.5%, a little light compared to the 81.1% FactSet consensus estimate. 

Despite the better-than-expected results, the stock was down after-hours. ServiceNow also announced an expanded AI partnership with Anthropic, in which it will enmesh Anthropic’s Claude models more deeply into its products, alongside its financial results.

Such efforts to more closely associate itself with the AI boom have fizzled so far. ServiceNow shares have plunged 45% over the last year. And investors clearly remain skeptical after the Q4 numbers.

Correction (January 29, 9:16 a.m. ET) : ServiceNow issued Q1 2026 subscription revenue guidance for the first time in its January 28 earnings release. A previous version of this post reported that ServiceNow raised Q1 guidance.

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