Meta, Microsoft Earnings Signal AI Payoff Matters: ETFs in Focus

Payoff worries in the artificial intelligence (AI) space are back. Big Tech earnings sent a clear warning this week: pour money into AI, but show results soon — or pay the price. Companies that fail to deliver returns are being punished, while those that do are holding steady, per Reuters, as quoted on Yahoo Finance.

The market seems curious and impatient about whether the surge in capital spending will translate into adequate returns. Let’s delve a little deeper.

Meta Delivers Growth: Stock Up 10.4%

Meta Platforms META stood out as a winner. Meta shares surged 10.4% in the key trading session on Jan. 29, 2026. Revenue jumped 24% in the December quarter, driven by stronger online advertising powered by AI-enhanced targeting. Meta beat estimates on both lines in the quarter.

The company also issued a first-quarter revenue forecast that comfortably beat expectations.Meta said it expects first-quarter sales to come in the range of $53.5 billion to $56.5 billion, ahead of analyst estimates of $51.41 billion, as quoted on CNBC.

That outlook helped justify Meta’s aggressive investment plans. Capital expenditures related to AI are expected to be in the range of $115 billion to $135 billion for 2026, ahead of analyst expectations of $110.7 billion for the year. It is also nearly double the value of 2025, which came in at $72.2 billion, as quoted in the same CNBC article. Accelerating sales growth probably led to this lofty goal.

Investors should note that Meta forecast revenue growth of up to 33% in the current quarter, but also warned that total expenses could jump 43% this year to $169 billion. Some of that spending includes rising cloud costs paid to providers like Alphabet’s Google — a plus point for the Alphabet’s upcoming results.

Microsoft Faces Scrutiny Despite Beating Estimates: Stock Down 10%

Microsoft MSFT stock dropped about 10% on Jan. 29, 2026 despite delivering better-than-expected earnings and sales. Investors focused on slowing momentum and rising risks. Azure cloud growth came in only slightly above forecasts. Revenue from Azure and other cloud services grew 39% in the fiscal second quarter, compared with 40% growth in the fiscal first quarter. 

The company’s implied fiscal third-quarter operating margin is 45.1%, below StreetAccount’s 45.5% consensus, as quoted on CNBC. Note that operating expenses include investments in AI computing capacity and talent. The company’s gross margin was the weakest in three years, coming in just over 68%, per the same CNBC article.

A key concern was Microsoft’s disclosure that OpenAI accounts for 45% of its remaining performance obligations (RPO), raising fears that a huge amount of future revenue could be exposed.OpenAI’s ability to pay Oracle, Microsoft and many of the providers, has now become a key question, per Jefferies, as quoted on CNBC.

Tesla Doubles Down on AI Investment: Stock Down 3.2%

Tesla beat quarterly profit and revenue expectations, but gains faded as investors weighed the scale of future spending. Tesla lost 3.2% on Jan. 29. Tesla leaned into the AI spending theme, announcing plans to more than double capital outlays this year to over $20 billion. The investment will target AI, humanoid robots, and fully autonomous vehicles.

Competitive Pressure Rising in the AI Race

OpenAI has reportedly issued an internal “code red” (per Forbes) after Google’s Gemini 3 received strong early reviews. At the same time, Anthropic’s Claude Code has surged to an annualized revenue run rate above $1 billion, intensifying competition. 

ETFs in Focus

Against the above backdrop, investors can simply bet on Meta-heavy ETFs like Fidelity MSCI Communication Services Index ETF FCOM and Vanguard Communication Services ETF VOX. FCOM and VOX gained about 2.8% each, respectively. 

The ones which are heavy on Microsoft are on the back foot currently. These include Roundhill MSFT WeeklyPay ETF MSFW (down 12.2% on Jan. 29) and iShares U.S. Technology ETF IYW (down 1.4% on Jan. 29).

However, overall, the AI and robotics space is likely to stay strong. So, investors can tap ETFs like Global X Artificial Intelligence & Technology ETF AIQ, iShares Future Exponential Technologies ETF XT, Defiance Quantum ETF QTUM, Global X Robotics & Artificial Intelligence ETF BOTZ, ARK Autonomous Technology & Robotics ETF ARKQ and ROBO Global Robotics & Automation Index ETF ROBO.

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This article originally published on Zacks Investment Research (zacks.com).

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