Big Tech multiples stuck in AI value chain clog

Microsoft on July 29 said its revenue at the company's Azure cloud-computing business rose 43% in its fiscal fourth quarter, compared with analysts' consensus estimate of 40%, according to Visible Alpha.

Microsoft reported contracted backlog of $678 billion in its cloud business at the end of the quarter, up from $627 billion in the prior quarter. The company's investment in property and equipment more than doubled from the same quarter a year ago, to $35.8 billion.

Meta Platforms on July 29 reported free cash flow of $784 million in the second quarter, down from $8.55 billion reported a year earlier. The Facebook parent also expects 2026 capital expenditure to be between $130 billion and $145 billion, compared with its prior forecast of $125 billion to $145 billion.

Meta's revenue for the quarter was $60.8 billion, an increase of 28% from the same period a year ago.

Microsoft and Meta are among the giants spending $700 billion on data centers, roughly matching chipmaker free cash flow. Cloud services grow rapidly, but hardware reaps the benefit of capacity constraints. Investors will fear overinvestment until AI products deliver durable growth.

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