Microsoft’s latest earnings report sent its stock soaring 15%, creating a striking contrast with fellow Magnificent Seven member Meta, which fell 8.8%.
The divergence highlights a growing question among investors about which AI-heavy spenders are actually delivering returns on their massive capital expenditures.
Motley Fool contributors Tyler Crowe, Matt Frankel, and Lou Whiteman broke down the results on the Hidden Gems Investing podcast, recorded on July 30, 2026.
Matt Frankel pointed out that Microsoft stands apart because it delivered accelerating revenue growth of 43% while also trimming its full-year capital expenditure projection, something virtually no other major AI investor has done.
The capex reduction is largely tied to an accounting change involving the assumed useful life of Microsoft’s AI data centers, but analysts welcomed the move regardless of the technical explanation.
Meta, by contrast, missed profitability estimates, kept its third-quarter revenue guidance flat, and gave investors no indication it would pull back on spending anytime soon.
Lou Whiteman framed the market reaction simply, saying Microsoft did a better job of answering the market’s biggest question than anybody else has.
Where Meta left investors wondering when its AI outlays would produce meaningful revenue growth, Microsoft presented what Whiteman called a diversified business with strong software results and real growth across multiple segments.
Frankel went further, arguing Microsoft may be the most bulletproof business among the Magnificent Seven, citing its enterprise software moat and the absence of high-risk moonshot bets like robotaxis or historically elevated chip pricing.
With shares trading at roughly 25 times trailing earnings before the post-earnings jump, both Frankel and Whiteman identified Microsoft as one of only two Magnificent Seven stocks that genuinely appeal to them right now, with Alphabet being the other.
Crowe noted that prior to this earnings report, Microsoft’s stock had essentially gone nowhere since January 2024, weighed down by ongoing concerns about capital expenditure levels and unclear returns on AI investment.
The podcast also covered a broader earnings lightning round, with Mastercard posting a solid beat on both top and bottom lines, while EMCOR Group surged 19% after raising its full-year guidance and topping expectations for data center construction activity.
Garmin reported a standout quarter with revenue up 11% and earnings up 29% year over year, with the fitness segment alone growing 25% and management raising full-year guidance well above market expectations.
L3Harris fell roughly 10% despite beating estimates, raising full-year guidance, and reporting a record backlog of $42 billion, with investors reacting negatively to the delayed spinoff of its missile solutions unit, now pushed to 2027.
The hosts also tackled a listener question about whether investors should back a single company in a competitive space or spread bets across multiple players, with Frankel suggesting a third path of taking a basket approach while overweighting the highest-conviction pick.
