Big Tech Proves the Doubters Wrong - Again
Trade tensions. Macro headwinds. Fears about American tech dominance. And yet Big Tech still has the ability to materially surprise market expectations. This earnings season confirms what fundamental long-term investors already know: the sector’s strength is structural, not cyclical.
Meta posted a 16% year-over-year revenue increase to $42.31 billion—19% in constant currency—driven by a 10% rise in ad pricing. This performance reflects continued investment in AI-powered targeting and content recommendations. Operating margins expanded 360 basis points to 41%, as Meta captured greater share from advertisers seeking high-ROI platforms amid economic uncertainty.
Microsoft also outperformed, with third-quarter revenue up 13% to $70.1 billion. Operating margins hit 45.7%, topping the guided 44.6%. Azure grew 35% in constant currency. Partnerships with major players like OpenAI pushed commercial bookings up 17% year-over-year, while remaining performance obligations soared 34% to $315 billion, underscoring deep, long-term visibility. Azure remains capacity-constrained, a testament to demand intensity.
Big Tech is well represented in our global portfolios. We believe companies like Microsoft and Meta are not just riding secular trends; they are defining them. With robust margins, immense cash flows, and relentless reinvestment, we believe their value is still under appreciated.
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