The Magnificent: As Apple, Microsoft, Meta and Tesla reported earnings, markets looked for AI's payoff window

This past week’s earnings round for Apple, Microsoft, Meta and IBM had a common through-line: the AI cycle is no longer a story investors wait for, it’s a story they’re being asked to fund, aggressively.

While management teams have generally begun to point to 2026 as the payoff window, across the four big tech names to report this week, the reaction among in some market watchers suggests slightly more friction than otherwise meets the eye.

Sure, three of the four (Meta, up 8.5%, Apple, up 1.8%, and IBM, up 2.85%) trade in positive territory as the end of the week draws nearer, but, Microsoft - the listed tech company that's arguably one of the most deeply entrenched in AI so far - has given up 6% this week and is down over 10% for the past month.

One take is that the market is less questioning demand but rather is getting twitchy about pace and capital.

How fast can the emergent AI businesses grow?... how much can the older sector stalwart companies pour into them?

How hard do the sector need to deploy capital, and how quickly can the eyewatering investments show up in margins and cash?

These questions are not quite rhetorical, but they are open questions - and they are questions reverberating among many investors in the Magnificent big tech stocks.

So, what was said?

Tim Cook was at Melania Trump's documentary screening in the same week as Apple proved to be making more money in China than Wall Street had predicted.

A slightly less bullish rewording of that is that Apple's quarter was decisively better than feared on both demand and profitability, driven by iPhone sales and an unexpectedly stronger print in China.

It perhaps goes without saying, but the global trading environment is a particularly challenging tightrope for the Apple CEO to walk along at present; nevertheless, this week told a fairly straightforward story in numbers.

Apple's total revenue of $143.76bn (+16% y/y) was ahead of market consensus as well as Apple’s own 10%–12% growth guide; meanwhile, at $85.27bn (+23% y/y) iPhone revenue notably beat expectations.

Jumping off the page was Apple's performance in China, where some $25.53bn of revenue (+38% y/y) was seen as a surprising bonus. Again, this was iPhone-centric and supported by the iPhone 17 upgrade cycle.

Services meanwhile came in at $30.01bn (+14% y/y), broadly in line, while gross margin of 48.2% and operating margin of 35.4% both ran ahead of Street expectations.

The forward-looking section, however, carried a very Apple-ish caveat.

Management guided 13%–16% revenue growth for the March quarter, but also cautioned that iPhone supply constraints persist.

If Apple’s update was about better demand and a strong mix, for Microsoft, it was something like strong demand plus constrained supply.

Assbackwards

Nevertheless, in the ebb of Microsoft's share price, tech stock analysts at Wedbush Securities say investors want “less cap-ex spending and faster cloud/AI monetisation,” but, instead, the Windows firm was coming outwith the opposite.

Microsoft's update messaged that it is prioritising data-centre buildout, into what is described as a multi-year journey.

The numbers from Microsoft showed total revenue of $81.27bn topped consensus, while Azure growth was framed at about 38% y/y in constant currency, and a touch above Street expectations. In other words, it was good but not blow-ya-socks-off good.

Under the hood, commercial RPO - 'remaining performance obligations' i.e. deferred revenue and backlogs - more than doubled year-over-year to reach nearly $625bn. A huge chunk of that, about 45% of it, is money wrapped up in OpenAI.

Elsewhere, the other numbers encouraged. Microsoft Cloud revenue climbed to $51.5bn (+24% y/y CC), and Intelligent Cloud revenue reached $32.91bn (+26% y/y), also beating estimates, while gross margin (68.0%) and operating margin (47.1%) came in ahead of Street models despite the heavy investment cycle.

Guidance was positioned as another marker that 2026 is seen as the 'inflection year' for AI monetisation, with March-quarter revenue guided to $80.65bn–$81.75bn and Azure expected to grow ~37%–38% CC.

Growth > vibes

Meta delivered perhaps the cleanest “growth beats narrative” moment, according to analysts at Wedbush.

The Facebook, Instagram and Whatsapp owner revealed strong core advertising momentum paired with an investment plan that is deemed to be deliberately aggressive.

Running through the numbers, Meta’s quarter featured revenue of $59.9bn (+23.8% y/y), ahead of consensus, and operating income of $24.7bn with a 41.3% margin. The growth drivers were simple and practical: ad impressions were up 18%, prices per ad increased 6%, and active user numbers were up too.

Meta is bullish and optimistic with 1Q revenue growth guided between 26.4% and 33.5% y/y, which was well ahead of Street expectations.

So, 2026 total expenses were guided at $162bn to $169bn and capex was mooted at $115bn to $135bn, which was also above Wall Street predictions by roughly $15bn.

Nevertheless, because Meta presents the narrative that investment is already translating into revenue upside, pointing to AI-infused improvements in ad tools and recommendation systems as tangible contributors.

Perhaps notably - although the Llama LLM exists - the owner of the social media and messaging suite is not bankrolling a core AI play, instead it's embedding AI tools that drive engagement and spend inside the platforms, painting perhaps the straightest line to monetisation growth.

Bubbling along somewhat in the background is commentary around a 'rebalancing' for the Reality Labs unit which groups R&D businesses and hardware including AI glasses and VR.

Tesla's rise of machines

Tesla is beginning to smell more like an AI platform, or at least one in the making, rather than a foundational electric vehicle company.

Arguably, the biggest news of its earnings week was that it would be plowing $2 billion into Elon Musk's xAI. And, not a million miles away from that, the second and third major talking points centred on Tesla's plans for humanoid robot line Optimus, and, back to four wheels, the self-driving 'robotaxis'.

Away from the forward-looking automation stuff, the quarter itself landed slightly ahead of expectations. Tesla posted FY4Q25 revenue of $24.90bn, edging the Street’s $24.77bn, with automotive revenue of $17.69bn a touch below consensus but Energy Generation & Storage at $3.84bn (+25% y/y) beating estimates as deployments hit a combined 14.2 GWh.

Auto gross margin ex-credits came in at 17.9% (well ahead of the Street’s 13.6%), while EPS of $0.50 topped expectations and free cash flow reached $1.42bn versus Wall Street’s ($478m), despite higher capex as the company leans into autonomy.

Tangibly, meanwhile, Tesla disclosed that it now had 1.1 milion active full self-driving (FSD) subscriptions (+38% y/y), and concretely said it expects seven new robotaxi cities in 1H26.

Tesla's ambitions now pitch at a much broader US robotaxi deployment by the of end 2026 (subject to regulatory approvals). The firm also flagged Optimus Gen 3 is now expected to be unveiled in FY1Q26. Tesla meanwhile revealed it will retire the manufacturing of its Model S/X cars next quarter to create space and operational capacity for Optimus.

On capex, Tesla pointed to ~$20bn in 2026 spend across multiple factory and product ramps, and also disclosed an investment of ~$2bn to acquire shares of xAI to bolster AI product development.

Not quite Magnificent, impressive nonetheless...

Computing stalwart IBM is easier to characterise as a steady beneficiary of the AI buildout.

IBM's mainframe, software mix and free cash flow rather than consumer devices or ad targeting. The company's reported total revenue of $19.69bn (+9% y/y CC) ahead of consensus, led by software revenue of $9.03bn (+11% y/y CC) and infrastructure revenue of $5.13bn (+17% y/y CC).

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Margins were mixed, gross margin beat slightly, but pre-tax margin was pressured by workforce rebalancing charges, yet cash generation was strong, with free cash flow of $7.55bn versus $6.20bn a year ago.

The upshot

• Apple is navigating supply constraints and leaning on mix and Services economics.
• Microsoft is scaling data-centre capacity into a demand environment that still outstrips supply.
• Meta is spending through peak investment to accelerate revenue and build optionality around AI-driven ad automation and new products.
• Tesla has less focus on car sales, and is driving the narrative to robots and xAI
• IBM is repositioning around higher-growth software and AI-enabled infrastructure while keeping free cash flow as the scorecard.

The upshot is that week one of Silicon Valley's earnings round was bullish, for most, but as 2026 progresses, the market wants to count deliverability in dollars, not milestones.