🥵 The hot seat

Meta and Microsoft — two of the largest and spendiest companies in the world — are slated to report earnings results after the close today at a time when investors are feeling increasingly queasy about the amounts Big Tech is spending on artificial intelligence. 

Last week, Google’s parent reported capital expenditures above its previous forecast, making for its first cash-flow negative quarter since it went public in 2004. The company said its spending is aimed at meeting a growing backlog of cloud contracts. 

Still, that news dragged down other hyperscalers, including Meta and Microsoft, as well as the broader market. 

Microsoft is expected to keep its free cash flow in the green. Meanwhile, analysts are expecting Meta to report its first free cash-flow negative quarter since 2012. Here is what the two have guided for capex as of their last report: 

• Microsoft — which will be reporting its fiscal Q4 results — said in its last report that it expects to spend $190 billion in capital expenditures this calendar year. 

• Meta (whose fiscal calendar overlaps with the normal calendar year) set its guidance for 2026 capex at between $125 and 145 billion. 

 The Takeaway

I’m old enough to remember when investors were excited about big spending on capex, seeing it as both proof that a company is staying on the cutting edge and as a promise of future demand. 

Now they seem more eager to see money coming in, not out. 

“In our view, investors are becoming less willing to reward higher AI spending on its own and are increasingly looking for progress in earning a return on that investment,” said Brian Therien, a senior analyst at Edward Jones.

Investors have more to look forward to on Thursday: Amazon and Apple, with the latter less exposed to AI anxieties than the former. 

— J. Edward Moreno

• 🚀 SpaceX: Last year, SpaceX launched 165 orbital flights. This year, the market doesn’t really expect them to scale that much higher, with prediction markets assigning a 79% probability that they have over 150 launches in 2026, a 45% chance of more than 160 launches, and a mere 21% chance of more than 170 launches.*  

• 📊 Fed Rates: Heading into today, markets are pricing in an 82% chance of zero rate cuts in 2026. If anything, rate hikes appear to be on the table; markets price in a 74% chance of a rate hike before 2027. 

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

That’s how much foot traffic declined at Taco Bell last week compared to the day-of-week average for the rest of the year, according to PlacerAI, following the recent outbreak of Cyclospora. 

• FOMC interest-rate decision and Fed press conference. 

• Earnings from Microsoft, Meta, Procter & Gamble, Arm Holdings, Qualcomm, UBS, Starbucks, Robinhood.